State of the aftermarket

Oct. 1, 2003
PENT-UP DEMAND for parts and service may finally put an end to the lethargy that has plagued the trailer industry in recent years, according Dennis Martineau,

PENT-UP DEMAND for parts and service may finally put an end to the lethargy that has plagued the trailer industry in recent years, according Dennis Martineau, president of Trailmobile Parts & Service Corporation.

Speaking this past May to the largest meeting of Trailmobile parts managers the company has ever conducted, Martineau pointed to signs that better times may be ahead.

“Most fleets buy at the same time,” Martineau said in an opening address to the parts managers. “We are looking for the lead times for new trailers to stretch out. As they do, that should help parts and service sales.”

With more than three million trailers on the road and an average life cycle of 7-10 years, the annual need for trailers is substantial. While customers met that need with the trailers they bought in 1999 and to a lesser extent in 2000, sales in 2001 and 2002 were well below what are needed to replace the trailers that have reached the end of their service life. This year's pace, at which approximately 140,000 will be sold, also is below the rate at which trailers wear out.

All of which points to improving demand for parts sales. But as Martineau pointed out, this past downturn has had some atypical factors that have made the past few years something other than a routine recession.

“Fleets have lengthened their trade cycles now that programs that guarantee residual trade-in values have ended,” he said.

After pointing out that the aftermarket is less cyclical and less prone to the sales extremes that characterize the original equipment market, Martineau observed that the glut of used trailers during this downturn caused a huge number of trailers to be parked. Parts do not wear out very fast when the trailers are parked against the fence.

A look behind

Martineau recapped the factors that have created what he described as “a tough three years.” Those factors, which affected the entire trailer industry, included:

  • Weak gross national product

  • Decline in the manufacturing sector

  • Weak freight volumes

  • Spikes in the price of fuel

  • High insurance costs for motor carriers

  • Tight credit

  • A record number of trucking business failures in the United States and Canada in 2001 and 2002.

  • The war in Iraq, which generally is considered to have slowed some purchasing plans.

From a company perspective, Trailmobile Parts & Service Corporation also felt the impact when its sister company, Trailmobile Trailer LLC, closed its trailer manufacturing plants in the United States. The remaining trailer production capacity of Trailmobile is at Trailmobile Canada Ltd, a sister company not affected by the bankruptcy.

With the bankruptcy of Trailmobile Trailer LLC, the market began to question the viability of Trailmobile Parts & Service.

“The first 90-120 days were tough,” Martineau said. “Our dealer network took on alternative suppliers, and our vendor network tightened our credit line.”

Even so, Martineau said the company retained 100% of its parts dealers, signed 24 new parts dealers, and retained the support of all of its critical vendors. He attributed this in part to effort the company made to communicate with its dealers and vendors, including personal visits, and he cited the support the company received from its vendors during the meeting. The trade show, held in conjunction with the meeting in Erlanger, Kentucky, had 50 different exhibits.

A look ahead

Trailmobile Parts & Service remains committed to the aftermarket, which Martineau estimates at $2 billion annually. He cited a list of initiatives that the company has taken to make itself more competitive and attractive to its dealers.

Among the actions the company has taken:

  • Use of the Internet. The company has developed an electronic catalog and enhanced its ability to conduct e-commerce.

  • Improving the fill rate to the company's parts distribution center to 95%, with faster delivery and increased accuracy.

  • Product diversification. Trailmobile Parts & Service Corporation is now stocking more products and offering direct-ship programs.

  • Additional field support through regional managers, improved customer service, and market-competitive pricing, Martineau said.

“Our industry has faced some difficult problems in recent years,” Martineau said. “The true measure of success, though, is not whether you have tough problems, but whether you are still dealing with the same problems as last year.”