ANDERSON, IN -- Jay Pittas is president for the Electrical Aftermarket business of Remy International. Pittas joined Remy in 2006 from Eagle-Picher Automotive where he served as president of the Wolverine Specialty Materials business. Prior to joining EaglePicher, Pittas held progressive positions with Honeywell, ARI Technologies and UOP. Pittas has nearly 30 years of manufacturing experience, holding management positions in customer service, sales, technical support and process engineering. He has been responsible for leading business expansion through new customer and international market development, implemented Six Sigma and other productivity programs and organized teams to meet competitive challenges. Pittas completed the chemical engineering program at the University of Notre Dame and the engineering management program at Hamilton University.
Join us as Pittas shares with aftermarketNews the latest details on Remy's Prepackaged Plan of Reorginzation as well as the company's plans this week at AAPEX.
Remy recently announced that shareholders have overwhelmingly accepted the company’s prepackaged plan of reorganization. How quickly does the company expect to fully emerge from Chapter 11? Why did the company opt for a prepackaged plan of reorganization, and how does the prepackaged plan differ from a ‘straightforward’ plan of reorganization? (Editor’s Note: Remy officially filed its Prepackaged Plan of Reorganization on Oct. 9.)
Unfortunately, the automotive industry has become very well versed in the challenges and implications of a financial restructuring. Remy, like many of its compatriots, was forced by the current challenging economic and market conditions to address its overextended balance sheet.
Our filing is a special type of bankruptcy described as “prepackaged,” which differs from traditional Chapter 11 proceedings in that the agreements concerning creditors are negotiated prior to filing. By reaching agreements with our creditors beforehand, we have been able to greatly reduce the amount of time the company will remain in bankruptcy and eliminate uncertainty for our customers, suppliers and employees. We expect the proceedings to last only 45 to 60 days and should emerge from Chapter 11 by late fourth quarter of 2007.
We are very encouraged by the overwhelming support of our plan of reorganization from our primary creditors. The filing is the next step in Remy’s strategy to restructure its debt and create a capital structure that will provide an adequate foundation for future profitability. Once the restructuring is completed, we will have a dramatically improved capital structure with new owners interested in building the company and the resources to do it.
I should emphasize that it continues to be ‘business as usual’ while Remy completes this process. Our suppliers will be paid 100 percent in full so there will be no impact to our supply chain. All Remy plants and facilities worldwide continue to operate, manufacturing and shipping the quality products our customers expect. We continue to make prudent investments to support key customer initiatives, from new hybrid technology to increased technical support for our aftermarket commercial customers.
Nearly the entire aftermarket industry is converging upon Las Vegas this week for the annual AAPEX show. What does Remy International have planned for this week and what are your primary goals for AAPEX this year?
Industry Week, with its alphabet soup of sponsors, is a big deal for all aftermarket companies. Remy will be an active participant in many areas associated with APRA, AWDA, AAPEX and SEMA. The industry-wide convergence represents the most important aftermarket event of the year for Remy and provides a truly unique and valuable opportunity for all our participants to meet, network and learn. We have a large contingent of attendees to support our meetings and interactions with customers, suppliers and sales representatives. As always, we plan to enjoy the social networking opportunities throughout week. On Tuesday evening, we sponsored a Remy customer appreciation reception.
Our primary goal is to meet and support the many current and potential customers who attend the show or participate in the one-on-one meetings. As a manufacturer, we use the show to give our factory representatives more exposure to current and potential partners to improve our products and operations. For the first time this year, we will be jointly demonstrating our products and capabilities at SEMA. Another focus area for me personally will be our sales representatives and sales agents, many of whom have been with us for some time and have been instrumental to our growth and success. We use this event as a common point to meet and discuss current challenges and opportunities. I look forward to seeing them and to personally thank them for their continued efforts. Additionally, we have expanded our participation in the educational and professional development offerings this year.
Remy (Delco Remy) is a well-known brand with a long history, dating back to the early 1900s. What are the keys to keeping a brand with such a strong heritage fresh and contemporary?
A strong brand emphasizes the key benefits and attributes for its customers. To remain fresh, it must evolve as customer needs and values change. The Delco Remy name reflects the heritage, innovation, quality and durability built by the company over the past 100 years.
The company started as a home wiring business in 1896 and grew with the emergence of the "horseless carriage" and its need for electrical components. The reliable Remy Magneto was positioned at the top of manufacturer supplier lists and, by 1910, magneto production reached 50,000 units per year.
In 1916, United Motors Corporation purchased the Dayton Engineering Laboratories Company (DELCO) and Remy Electric Company and two years later merged with General Motors. The product line had expanded to included “innovative” automatic starters, electric windshield wipers, generators and distributors. Delco-Remy, operating as a division of GM, developed advanced technologies and provided the industry with automotive, heavy-duty and U.S. military products, proven on the road and on the battlefield, for nearly 76 years.
Product lines have expanded from starters and alternators to hybrid transmissions, fuel systems and remanufacturing operations located on four continents. Throughout its heritage, Remy has constantly provided innovative solutions with highly reliable and durable products which consistently address our ever-changing customer expectations.
The company continues to market starters and heavy-duty alternators for original equipment and aftermarket customers under the Delco Remy brand name. The company added the Remy trademark to its brand portfolio for a variety of automotive products in addition to using Remy International, Inc. as the new corporate name. W e sell our products worldwide primarily under "Delco Remy" (first used in 1918) and Remy brand names, the "World Wide Automotive" brand name (first used in 1986), and our customers' widely recognized private label brand names.
What are the advantages to being both a manufacturer and a remanufacturer as opposed to one or the other? Do you foresee a strong future for remanufacturing?
More important for us are the advantages of being both an OEM and aftermarket supplier. We are able to afford more extensive engineering and application expertise to support our entire business with our OE backbone. We share the complete value chain of product knowledge, detailed specifications, tooling and application history, a truly unique Remy advantage. For our Heavy Duty (Delco Remy) and Light Duty (Remy) product lines, releasing our newest OEM products into the aftermarket almost simultaneous with the OEM release is a key advantage, especially with our commercial customers. Giving our customers the improved features of increased output, high temperature resistance, reduced SKUs and longer service life really separates our OEM-driven aftermarket designs from the non-OEM suppliers . Being able to offer the aftermarket both OEM new and reman, built to similar specifications, gives our customers the wonderful choice of both a great quality product and an attractive price point without asking the customer to sacrifice reliability.
New unit sales have been growing but we do not believe it will ever replace the reman position in our category. The price advantage for remanufactured units coupled with the “green benefits” of recycling will continue to drive demand. This continues in North America despite the absence of any EU ELV (end-of-life) regulations. APRA suggests remanufactured units require less than 15 percent of the energy and 12 percent of the material required for a new unit. The automotive aftermarket should be very proud of the environmental contribution of its remanufacturers versus other manufacturing sectors. We see a very strong future and continue to invest in our remanufacturing operations worldwide.
How’s business in the rotating electrical segment today? What are new the technologies or advancements in the starters and alternators market that we should look out for in the future?
The market drivers for our category are a mixed bag. The age and breadth of the vehicle population continues to grow with the large sales years after 2001 entering prime time for the aftermarket. The products are becoming more sophisticated which drives higher priced units. Both these trends are driving our continued sales growth which is good news. However, the quality of OE units has dramatically improved which has significantly reduced the number of replacements per life of vehicle. Our data suggests current replacement rates are roughly half the rate experienced just 5 years ago which is very good for the end consumer but not so good for the aftermarket. I have been unsuccessful in getting our OE engineers to back off slightly.
The explosion of on-board electronics demands more powerful and sophisticated alternators and new engine designs require improved performance-to-weight ratio in the starters. For light duty applications, the trend is for higher efficiency with multiple performance ranges. The growth in hybrid vehicles will dramatically change the demand for generators and batteries. For Heavy Duty applications, we are seeing tremendous increases in underhood temperatures, vehicle electrical demands and increased starter power required to support the new EPA emission standards for diesel engines. We are likely to see additional demand for these three key requirements as we approach the next emissions change in 2010 & 2011.
Tell us about the company’s global operations. Are their plans to increase the company’s presence in the global marketplace?
Remy currently operates 35 manufacturing facilities in 12 countries, including the United States, Mexico, Brazil, Poland, Hungary, South Korea, China and India, to support light duty and heavy duty, OE and aftermarket applications worldwide. This expansion was necessary to support our global customer demand and helped establish a more competitive cost position. Remy sells products primarily in North America, South America, Europe and Asia. We believe Remy is currently well positioned to support our global supply chain.
What is your opinion on the growing trend of North American manufacturers moving manufacturing operations overseas to lower cost countries like China and India?
The automotive aftermarket is truly a global marketplace and requires us all to operate much differently to survive. Global sourcing is not just a potential option but rather a necessity to compete. Imported products have become commonplace and have effectively depressed sell price, for automotive or retail products. Labor intensive operations in the US have a significant disadvantage vs. low cost countries. I fully understand the strategic need for a low cost sourcing or manufacturing strategy. But I also see the market moving more toward quality and away from making buying decisions solely based on price for relatively sophisticated products. Suppliers that can effectively manage the quality, logistics, packaging and regulatory challenges will be highly valued in our marketplace.
The automotive industry is coming down from a tumultuous couple of years, with many companies – yours included – going through financial restructuring of some sort. As the dust begins to settle, what in our opinion will be the major issues the industry will grapple with in the next few years?
We certainly live in interesting times. There may be more consolidation and financial restructuring on the supply side of our business, but should be a reduced rate. There may be more consolidation on the demand side of our business, especially the competing and overlapping distribution channels for the aftermarket.
The battle between OE form, fit and function vs. SKU proliferation will continue to escalate. The economic and technical challenges for suppliers and distribution continue to create more problems for installers. The increased products sourced overseas will certainly be a continuing trend, especially with the weak dollar, which creates even greater quality and compatibility issues. The technical challenges and demands for the mechanic continue to grow exponentially but the number of qualified technicians declines every year.
The good news is the ever-increasing vehicle population within the aftermarket “sweet spot” provides a great upside opportunity. Aftermarket suppliers will always be challenged to provide the right part, at the right place, at the right time and at a competitive price. The suppliers who can efficiently control the supply chain, provide high quality product and effective technical support will be the ultimate winners. We believe Remy is uniquely qualified to do just that.
