Standard Motor Products, Inc.
Standard Motor Products, Inc.
Sales: $606.45 million (2000)
Stock Exchanges: New York
Ticker Symbol: SMP
NAIC: 336312 Gasoline Engine and Engine Parts Manufacturing; 336322 Other Motor Vehicle Electrical and Electronic Parts Manufacturing; 336391 Motor Vehicle Air Conditioning Manufacturing; 44131 Automotive Parts and Accessories
Standard Motor Products, Inc. is the epitome of stability. Founded in 1919, the company grew up with the automobile age, as a manufacturer and distributor of an ever widening inventory of automotive replacement parts, which it sells primarily to big warehouse distributors and leading auto-parts retail chains. Solidly and consistently profitable, the family-controlled company makes no waves and very little news. Sales have increased in almost every year (but fell in 2000). Standard Motor Products was directed by the same two men for over 40 years.
Standard Motor Products to 1972
Standard Motor Products was founded in 1919 by Elias Fife and Ralph Van Allen. The partnership opened its doors in New York City’s borough of Manhattan with ten employees, selling automotive replacement parts to repair shops. Piston rings, ignition parts, and starter and generator brushes were the company’s first products, followed soon after by battery cables and clamps. From the beginning, ignition switch keys were its most popular product. Standard Motor Products moved its headquarters in 1921 to Long Island City, an industrial neighborhood in New York’s borough of Queens. Van Allen moved to Seattle in 1920 to open a Standard Motor Products branch, and the partnership was dissolved in 1925, with Fife as sole proprietor until the following year, when the firm was incorporated. Van Allen operated a separate company in Los Angeles under the same name and logo until 1936, when he sold it to Fife.
Standard Motor Products introduced its Blue Streak line of premium-quality ignition products in the 1930s. After acquiring Hygrade Products Co. in 1947, it expanded its product line to include carburetor repair parts, fuel pumps, shock-absorber parts, and speedometer cables, and in 1950 it introduced the“Hygrade System” of simplified carburetor kits for tune-ups and light overhauls. In 1959 Fife retired from active management. His son Bernard became president and treasurer, and his son-in-law Nathaniel Sills became vice-president and secretary.
Standard Motor Products made its initial public offering in 1960. The company had warehouses in Chicago, Los Angeles, Montreal, Seattle, and Toronto. Net sales came to $12.93 million that year (about double the 1955 figure) and net income to $769,978. The sale of Class A stock at $15 a share raised nearly $4.5 million. Members of the Sills and Fife families retained 21 percent of this class of stock and all of the Class B, which assured them a voting majority.
Standard Motor Products was, at this time, selling all of its output to the replacement market, through automotive-parts distributors, for use by repair shops, service stations, and related customers. Parts were being manufactured for all domestic models and about 90 percent of imported ones. This output consisted of ignition systems (75 percent); carburetor parts (15 percent); and cables and wires (10 percent), with the majority of items priced under $3. The ignition parts were being sold under the Standard and premium Blue Streak names, carburetor parts under the Hygrade trademark, and cables and wire under the Ektron name. One product in the Hygrade line developed by the company, the“Jiffy Kit,” offered repair personnel all the basic items needed to tune up a carburetor. A Canadian subsidiary was responsible for distribution in that country and also performed some manufacturing and assembling of ignition contact sets.
In 1963 Standard Motor Products established the Marathon Parts division as a wholesale distributor of automotive parts. Management entered this line out of concern that innovations might replace the conventional components of the internal combustion engine that it was manufacturing. By 1970 there were 32 outlets in Connecticut, New York, Ohio, and Pennsylvania. Marathon wholesalers carried parts made by all automotive manufacturers, and less than 5 percent of its sales came from products made by Standard Motor Products. Marathon was contributing about half of Standard’s sales and 30 percent of its net income at the end of the 1960s.
Standard Motor Products’ sales grew rapidly but profits remained flat until 1967, when net earnings passed the $1 million market for good, reflecting greater manufacturing efficiency and streamlining of the warehouse facilities. Net sales came to $55.05 million and net earnings to $2.95 million in 1971. By then Standard Motor Products had added a subsidiary in Rio Grande, Puerto Rico. The parent company’s full-time sales force of more than 130 was one of the largest in the industry. In 1972 the company acquired Universal Automobile Parts Distributors, Inc. of Miami, adding its warehouse to the Marathon Parts division. Also that year, the company purchased Champ Items, Inc., a St. Louis-based manufacturer of a broad line of functional replacements and general-service parts to the wholesale market. This company became a separate division, selling its products under the“Champ” name.
Continuing to Grow in the 1970s and 1980s
Standard Motor Products’ sales and earnings grew consistently through the 1970s. Manufacturing was accounting for about 70 percent of sales, and distribution for about 30 percent in 1978. In 1978-79 the company purchased two manufacturers of replacement automotive air-conditioning parts and began selling them under the Four Seasons name. Net sales came to $125.88 million in 1980 and net earnings to $3.29 million (compared to a record $6.15 million in 1978). During this year ignition parts accounted for 56 percent of sales, battery cables and wires for 16 percent, and carburetor parts for 11 percent. In 1981 the manufacture of air-conditioning parts was consolidated in a plant in Grapevine, Texas, and in 1983 this operation became profitable for the first time on nearly $20 million in revenues. The Champ division moved to Edwardsville, Kansas, in 1981.
Standard Motor Products’ net earnings reached $21.07 million in 1983, a mark not exceeded for more than a decade. This prosperity was not reflected in its Long Island City quarters, where the elevator to the executive offices also moved freight, and the top-floor reception room faced one side of the factory, but the company had doubled its market share in its main manufactured-product categories, to 25 percent, since 1977.“Many competitors have become parts of conglomerates and lost their entrepreneurial drive,” Fife told a Business Week reporter in 1984.“By staying independent, we have gained share from them.” During the 1980-82 recession Standard Motor Products kept fully stocked, built a new distribution center, and expanded its sales force to 350. Because many of the 2,000 warehouse distributors to whom the company sold products lacked their own sales forces, Standard Motor Products promoted its wares directly to the auto-supply centers and service stations that were their customers.
In 1986 Standard Motor Products purchased the EIS brake parts division of Parker-Hannifin Corp. and an electronic-ignition assembly plant in Hong Kong from Fairchild Semiconductor Corporation. With carburetors seemingly on the way out, it introduced a line of fuel-injection parts the following year. By this time Standard Motor Products had added plants in Manila, Arkansas; Gardenia, California; Berlin and Middleton, Connecticut; Rural Retreat, Virginia; and West Bend, Wisconsin, plus the Hong Kong facility.
Sills’s son Lawrence became president of the company in 1986, but his father and Fife, now described as co-chairmen and chief executive officers, continued in charge. In 1989 Wall Street Transcript gave the two its bronze award in the auto parts/replacement industry category for their restructuring program and aggressive marketing effort. The publication quoted an investment advisor, who said, “Frankly, its been a very difficult time for the industry.…A manufacturer has to adapt to the changes in the distribution end, because this is not a consumer market. This is a market that is difficult to influence. So I think Standard Motor Products deserves recognition for its aggressive posture in trying to shift operations in low-cost areas, in terms of making acquisitions into a very different product line, in trying to grow its businesses by taking the short-term lumps.”
Standard Motor Products introduced a second line of wire and cable products in 1989. This line was steadily expanded to include import coverage and was reintroduced in 1995 under the Tru-Tech brand name. In 1992 the company became the first aftermarket supplier, other than original-equipment manufacturers, to produce mass air flow (MAF) sensors, through a Canadian joint venture.
- Standard Motor Products is founded as a partnership in Manhattan.
- Partnership is dissolved.
- Cofounder Elias Fife incorporates the business.
- Bernard Fife and Nathaniel Sills assume management of the company.
- Standard Motor Products offers stock to the public for the first time.
- The company begins distributing as well as manufacturing automotive parts.
- Standard Motor Products begins manufacturing air-conditioning parts.
- The company enters the European auto-parts replacement market.
Further Expansion: 1990-2000
Standard Motor Products’ sales passed the half-billion mark in 1990, with about a quarter of its merchandise being sold to retail outlets in the do-it-yourself marketplace. Ignition parts accounted for 33.5 percent; brake parts, 23 percent; temperature control systems, 16.5 percent; wire and cables, 11.2 percent; fuel-system parts, 10.3 percent; and the Champ service line, 5.5 percent. Sales and earnings were stagnant during the ensuing recession, but the company cut its marketing costs, eliminated departments such as maintenance and engineering, and turned over quality control from independent inspectors to its own production workers. After a survey of its Long Island City workers revealed that they thought too much inventory was on hand, the company began establishing“manufacturing cells” in which all of the machines producing a part were grouped together so that unfinished work was not spread around the plant. After the economy improved and sales surged, net earnings reached a new record of $23.67 million in 1994.
Standard Motor Products did not rest on its laurels but continued to expand its manufacturing capacity. In 1995, for example, it acquired two companies—Automotive Dryers, Inc. and Air Parts, Inc.—making and distributing climate control system parts in Cumming, Georgia. Standard Motor Products was now the largest automotive aftermarket producer of air-conditioning replacement parts; climate control systems accounted for 20 percent of its sales.
Also in 1995, Standard Motor Products added an electronic-ignition operation in Herzliya, Israel, and a brake systems plant in Mississauga, Ontario. In addition, it formed part of a joint venture producing brake systems in Ontario, California; added Pik-A-Nut Corp. of Huntington, Indiana, to the Service Line division; and, through its Hong Kong subsidiary, entered into a joint venture in China to produce ignition modules for use in Chinese original-equipment applications. In 1996 the company acquired a firm assembling and distributing ignition wire sets and battery cables in Dallas; purchased a manufacturer of fan clutches and oil coolers; and opened an electric-motor manufacturing and assembly facility in Canada. Standard Motor Products closed its Manila plant in 1995 and no longer retained the one in Gardenia.
Standard Motor Products sold its Service Line division, including the Champ and Pik-A-Nut operations, to P&B Inc., in 1998-99. The company got out of the brake replacement business in 1998, exchanging it for the temperature control business of Moog Automotive, Inc., a subsidiary of Cooper Industries Inc., and converting the Mississauga plant to the manufacture of ignition, wire, and temperature control components. As a result, temperature control accounted for 49.7 percent of Standard Motor sales in 1999. In 2000, however, temperature control sales dropped to 44 percent of the total, which the company attributed to the loss of a major retail customer and cool and wet summer weather in the northeastern and midwestern states.
Between 1996 and 1999 Standard Motors Products acquired majority stakes in three British-based companies supplying ignition and fuel-systems components and rebuilt engine computers to buyers throughout western Europe. The European replacement market was forecast to increase at a rate more than twice that of the United States. A joint venture was begun in 1997 with Valeo, S.A., to remanufacture air-conditioning compressors for this market. Standard Motor Products also acquired, in 1999, Lemark Auto Accessories Ltd., a British-based supplier of wire sets, and a Texas-based unit of Mark IV Industries, Inc. that was manufacturing and distributing fan clutches and oil coolers. In 2000 it completed the purchase of Vehicle Air Condition Parts, a British distributor, and Automotive Heater Exchange SRL, an Italian company.
Of Standard Motor Products’ net sales of $606.45 million in 2000, the Engine Management segment accounted for 49.1 percent and the Temperature Control segment for 44 percent. Products of the former included ignition and electrical parts, emission and engine controls, onboard computers, sensors, ignition wires, battery cables, and carburetors and fuel-system parts. Ignition and emission parts accounted for 37.4 percent of the company’s net sales, and wires and cables, 10.1 percent. The Temperature Control segment consisted primarily of air-conditioning compressors, clutches, accumulators, filter/driers, blower motors, heater valves and cores, evaporators, condensers, hoses, and fittings. Compressors accounted for 20.1 percent of company sales and other air-conditioning parts for 21.9 percent.
Standard Motors Products’ operating profit was $30.66 million in 2000. Engine Management’s profit of $37.96 million was more than three times as high as Temperature Control’s $11.54 million. All other segments of the company, consisting of items pertaining to corporate headquarters and Canadian and European business units that did not meet the criteria of a reportable operating segment, lost a combined $18.84 million. The United States accounted for 87 percent of company sales; Canada, for 4 percent; and other foreign countries, for 9 percent. Net earnings came to $9.73 million. The company’s long-term debt was $150.02 million at the end of 2000.
In 1999 Standard Motor Products relocated two of its wire and cable operations, one in Dallas and the other in Bradenton, Florida, to a new facility in Reynosa, Mexico, which focused on assembly and packaging of the economic wire sets, while the premium line continued to be manufactured in Edwardsville. By this time the company had added plants in Orlando, Florida, and Wilson, North Carolina, for ignition manufacturing, and Corona, California; Fort Worth, Texas; and Elk Grove Village, Illinois, for temperature control. The Puerto Rican manufacturing operation was now in Fajardo, and European manufacturing was in Nottingham, England. The company no longer maintained an Israeli plant. The two Connecticut plants no longer belonged to the company, and the Rural Retreat one had been vacated and subleased.
Fife died in 1997. Three years later, Lawrence Sills succeeded his father as chief executive officer, but Nathaniel Sills, by that time 92, continued as chairman of the board. Members of the Sills and Fife families (by birth or marriage) owned about one-third of the common stock. GAMCO Investors, Inc. held another one-fifth.
Four Seasons Europe S.A.R.L. (France); Marathon Auto Parts and Products, Inc.; Motortronics, Inc.; SMP Motor Products Limited (Canada); Standard Motor Products Holdings Limited (England and Wales; 80%); Standard Motor Products (Hong Kong) Limited; Standard Motor Products de Mexico, S. de R.L. de C.V.
Engine Management; Temperature Control.
Dana Corporation; Federal-Mogul Corporation.
“An Auto Parts Company Running in High Gear,” Business Week, April 16, 1984, p. 112.
“Corporate Critics Confidential: Auto Parts/Replacement,” Wall Street Transcript, December 4, 1989, pp. 95,603, 95,619.
Corwin, Philip, “Standard Motor Products Results In High Gear As Demand Warms Up,” Barron’s, Jun 1, 1970, p. 28.
Malanga, Steve, “Productivity Paradox,” Grain’s New York Business, August 2, 1993, p. 23.
Mirabella, Alan, “Standard’s Stock Is Out of Neutral,” Crain’s New York Business, May 17, 1993, p. 31.
Robertshaw, Nicky, “Auto-Parts Maker Fine-Tunes Profits,” Crain’s New York Business, March 25, 1991, p. 35.
“Standard Motor Products, Inc.,” Wall Street Transcript, December 18, 1972, pp. 31,150–31,151.
“Standard Motor Products On Route to Higher Net,” Barron’s, February 22, 1961, pp. 25–26.
Welling, Kathryn M., “He Won’t Pay Up,” Barron’s, August 28,1995, p. 22.