Genuine Parts Company

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Genuine Parts Company

2999 Circle 75 Parkway
Atlanta, Georgia 30330
U.S.A.
(404) 953-1700
Fax: (404) 956-2212

Public Company
Incorporated: 1928
Employees: 19,700
Sales: $4.02 billion
Stock Exchanges: New York
SICs: 5015 Motor Vehicle Parts—Used; 5085 Industrial Supplies; 5112 Stationary & Office Supplies; 5021 Furniture

Genuine Parts Company is the largest automobile parts supplier in the United States, providing parts to more than 6,000 retailers across the country and in areas of Canada. The company maintains close ties with the National Auto Parts Association (NAPA), owning approximately 75 percent of the trade association’s member distribution centers. After selling only auto parts for almost 50 years, Genuine diversified into industrial replacement parts and office supplies in the mid-1970s. Although supplying auto parts remains the company’s focus, a significant portion of Genuine’s business comes from the sale of industrial parts and office products.

Genuine Parts was founded by Carlyle Fraser in 1928 when Fraser bought a small auto parts store in Atlanta. The store had six employees and capital of $40,000 when he acquired it. Sales reached $75,000 the first year, although the store lost about $2,500. Independent garages for car repair were spreading with incredible rapidity, providing Genuine with a swiftly growing market for its parts. Genuine bought auto parts from manufacturers like Tenneco and sold them to parts stores, called jobbing houses, that sold them to the independent garages. From the beginning, Genuine pushed swift, reliable service as a way to outflank the competition. The firm also used its relationship with the NAPA, the trade association co-founded by Fraser. NAPA set standards and sold parts to jobbers.

Genuine’s business was in some respects helped by the Great Depression. Many people could not afford to buy new cars, so they held onto aging automobiles and bought the replacement parts needed to repair them when they broke down. In 1936, about $2 was spent on parts for the average one-year-old car, whereas a three-year-old car required $10 in parts. During the 1930s, company sales went from $339,000 to $3.18 million.

Genuine continued to grow during World War II. Consumers again held onto their older cars, sometimes having little choice because auto makers were devoting much of their capacity to the war effort. By the same token, the War Production Board only allocated resources to parts manufacturers to build “functional” parts for cars. This restriction meant, for instance, no fenders or door hardware were available to sell to those needing them. With auto sales slacking, the average vehicle was 7.28 years old in 1946, compared with 4.77 years old in 1941 before the United States entered the war. As a result, $19 in parts were bought for the average car in 1945. In the year of its 20th anniversary in 1948, the company had $20 million in sales.

With the prosperity of the 1950s and the increasing number of families with two cars, Genuine expanded at a tremendous pace. It opened NAPA operations in Boston in 1950, in Omaha in 1955, in Jacksonville and Miami in 1956, in Denver in 1957, and in Minneapolis in 1959. By 1962 the firm owned 97 retail stores and 12 warehouses along the east coast and in the South and had annual sales of about $80 million. Rebuilt parts accounted for 15 percent of sales. Although it still bought parts from manufacturers, Genuine did some parts rebuilding itself, including clutches, brake shoes, and pumps. To increase its slice of that business, in 1968 the firm acquired Atlanta-based John Rogers Co., a rebuilder of auto engines. In 1969 Genuine diversified out of the auto business for the first time, buying Beck & Gregg Hardware Co., a 103-year-old distributor of home appliances, building goods, and sports products.

By the late 1960s, Genuine was a nationwide distributor, supplying 2,500 independent jobbers and owning 33 of the 55 NAPA distribution centers, which then served 4,000 jobbers throughout the United States. Its first parts under its own brand name were introduced in 1966. Genuine also supplied parts for trucks, tractors, power boats, and power tools.

The OPEC oil embargo in 1973 played havoc with the auto parts market. With the rise in gasoline prices, consumers drove less and needed fewer auto parts in the short term. However, the oil shortage also led to recession in 1973 and 1974. Car owners held onto their older cars, driving up sales and prices of auto parts in the longer term. Nearly 90 million cars were being driven in the United States, and approximately 60 percent of them were over three years old, making them likely candidates for car parts. An increasing number of these vehicles were small cars, whose parts tended to wear out faster than those of bigger cars. Although cars were being driven for fewer total miles than ever before, more of those miles were in urban areas, resulting in greater wear on the parts. Do-it-yourself sales soared, and mass marketers like Sears Roebuck and J.C. Penney began increasing parts orders from distributors. Genuine’s sales reached $500 million in 1973, twice as much as its nearest competitor, APS; however, that figure represented just two percent of the fragmented auto parts market.

Auto parts were becoming more elaborate and expensive as a result of technology advances and stricter pollution standards. In 1975, attempting to diversify, Genuine picked up a wholesale office supplies firm, S.P. Richards Co. In 1976, under the leadership of CEO Wilton Looney, Genuine also expanded into the industrial parts business. Looney believed that industrial parts would be recession-proof in the same way that auto parts were: during recessions industrial firms would buy replacement parts for existing machinery rather than replacing it with new equipment. In 1979 the firm bought a Michigan-based industrial parts distributor to expand that part of its business.

In 1978 Genuine installed a computerized point-of-sale system for billing customers, tracking inventories, and automatically ordering replacements for parts that were sold. The system, developed with Data General Corp., cost $24,000 to $30,000 per complete system, and grew to include 900 jobbers by 1982. This system gave Genuine an important advantage over competitors, because no other independent distributor could match the services Genuine could offer.

Genuine’s sales reached $1.6 billion in 1981, of which 63 percent came from the distribution of parts, 22 percent came from industrial replacement parts, and 8 percent from office-supply products. The firm had 55 U.S. distribution centers for auto parts and four in western Canada, selling to about 5,200 jobbers, of which it owned about 350. Genuine ran six distribution centers and 160 branches for industrial parts, selling to 50,000 customers. Office supplies were being sold to over 5,000 retailers in 15 states. Genuine’s leading item overall was spray paint used for touch-ups, which accounted for eight percent of sales. Exhaust products, filters, hoses and belts, and batteries accounted for between three and six percent of sales each.

The number of vehicles in the United States continued to rise, reaching 160 million by the end of 1981, with an average age of 6.5 years. Parts for imported cars accounted for only about ten percent of inventory, despite rapidly growing import sales in the United States. Since the imported parts broadened inventory, the trend to buy imports was seen as increasing Genuine’s advantage against smaller, less-well-financed competitors.

In 1982 Genuine bought General Automotive Parts Corp. of Dallas in a stock swap valued at about $250 million. General Auto had stores in 12 states in the southwest, north, and central regions of the United States. Genuine was also opening about five outlets a year, most in major cities. To better supply them, it opened NAPA distribution centers in Dallas, Houston, and San Antonio in 1983, and Portland, Maine, in 1984.

A recession hit the United States in 1982 and hurt Genuine’s supposedly recession-proof industrial parts business. The recession was severe enough to temporarily shut down some factories, and closed factories do not buy parts. As a result of its diversification, about 35 percent of Genuine’s sales came from operations other than auto parts, up from ten percent ten years earlier.

NAPA was an increasingly important part of Genuine’s business. NAPA’s 72 distribution centers sold parts to 5,200 NAPA jobbers, who sold parts to local mechanics. Genuine owned 55 of the distribution centers, and 350 of the 5,200 jobbing sites. Genuine therefore had 85 percent of NAPA’s sales, although that accounted for only five percent of the nationwide market for replacement parts. About 85 percent of Genuine’s 100,000 auto and truck parts bore the NAPA brand name. Genuine used its NAPA connection to give it leverage over the 5,200 NAPA jobbers. If a jobber began buying less than 85 percent or so of its parts from Genuine, the firm might open another NAPA shop in the same area. If jobbers kept Genuine happy, they would find little direct competition and excellent service. Genuine delivered parts overnight to most of its customers, enabling them to keep their inventories, and thus costs, low. Genuine began refurbishing its image in the mid-1980s, raising awareness of the NAPA brand name and redesigning its stores. Most of the firm’s nearly 500 stores installed brighter lighting, updated the layout of sales floors, and added a blue and yellow color scheme that drew attention to the NAPA logo.

Replacement part sales sagged in mid-1980s, barely keeping pace with inflation. Car and truck sales had slumped in 1982 and 1983, meaning fewer cars needed parts several years later. Cars were being built better and generally started to need replacement parts after four years rather than three. Customers increasingly brought their cars back to their dealers for repairs, and the dealers got parts directly from the manufacturers. As Japanese cars steadily acquired U.S. market share, parts suppliers were slow to begin carrying them in sufficient numbers. Warm winters in 1988 and 1989 were partly to blame for the drop in sales as well because alternators, batteries, and other parts tended to fail during very cold weather. At the same time, Genuine’s competition was heating up. Specialty shops like Midas and Jiffy Lube were expanding rapidly, and retail chains were increasing their automotive operations.

To help compensate, Genuine tried to increase its efficiency and started a new marketing campaign. Genuine signed agreements with Midas, Montgomery Ward, and others to supply some of their auto parts. To make jobbers aware that it carried foreign parts, Genuine put out a catalogue focusing on imported car parts. By 1990 most of the 6,000 retailers who bought parts from Genuine were connected by computer to one of the firm’s 64 NAPA distribution warehouses. In addition to getting parts to jobbers quickly, Genuine used the computer system to keep track of who was selling how many parts and why.

Changes in the auto industry did have some benefits: if cars needed parts less often, the parts continued to increase in cost, with some costing twice what they had 20 years earlier. At the same time, Genuine’s other businesses continued to grow at higher rates. Sales for the industrial group were $547 million in 1988, with profits of $35.7 million. Office product sales came to $450 million, with profits of $36.7 million. Nevertheless, the auto parts industry was in many ways traditional. Genuine remained strictly a distributor, avoiding the retail market for fear of alienating its customers by competing with them.

In late 1993 Genuine strengthened its industrial parts business by acquiring Berry Bearing Company for about $300 million worth of stock. Bearings were seen as a stable seller in a recessionary economy as firms delayed purchases of new equipment. With the U.S. auto market in constant flux, Genuine could take nothing for granted. However, its size and savvy in the still unconsolidated auto parts industry would continue to make it a formidable competitor.

Principal Subsidiaries

Balkamp Inc.; Davis & Wilmar Inc.; Motion Industries, Inc.; S.P. Richards Company; Genuine Parts Holdings Ltd. (Canada); Oliver Industrial Supplies; Berry Bearing Company