By Michael V. Freeze, managing editor, aftermarketNews.com

CHICAGO -- As the Aftermarket eForum addressed the concerns of technology and industry standards a month ago in Chicago, industry executives are back in the windy city to discuss money. The Automotive Aftermarket Industry Association (AAIA) hosted the Aftermarket Financial Symposium at the Chicago Hyatt Regency O'Hare. The two-day event placed the emphasis on, of course, the financial side of the aftermarket industry. The inaugural gathering covered a range of financial-related issues such as mergers and acquisitions, private equity groups and strategic planning.

AutoZone's Executive Vice Present and CFO Michael Archbold started the full day, with his presentation Perspectives on Key Financial Issues From the Operating Side.

At the very beginning, Archbold addressed those issues by stripping it down to their essence.

"We need to be unreasonable thinkers," proclaimed Archbold. "The answers are there; they just need to find a voice."

Archbold covered a wide range of categories from planning to corporate governance. He also emphasized the importance of debt.

"There is no fear of debt. Debt serves a very valid purpose in setting one's capital structure," said Archbold. "It lowers the overall weighted average cost of capital. It can drive value, tremendous value, to the overall organization, as well as the shareholder, the common stock holder."

The next group of speakers was Scott Farber and Mary Ropes. Farber and Ropes are assurance partners with the accounting firm Grant Thornton. The two shed light on the international implications of the U.S. aftermarket.

The group stated that, overall, the US automotive industry is having significant difficulty maintaining profitability, with a few having junk bond status on Wall Street. On the other side of the coin, other countries, such as China, are continuing to thrive with its business model.

The purchasing power of China's middle class, warned Farber, is continually increasing, as well as the amount of U.S. auto parts exported to the country - an increase of $374 million from 2001 to 2004. Also, China's manufacturing labor costs per hour is less than 60 cents compared to more than $20 in the U.S.

"The Chinese are extremely entrepreneurial," said Farber. "The question is not if, but when are we going to China."

Founder of the Capstone Financial Group, Dan Smith, then took the stage and shared his financial expertise of mergers and acquisitions with the symposium's attendees. Smith's equity group specializes in transactions in the aftermarket industry.

Smith gave a list of the strong qualities that attract some private equity groups to invest in the aftermarket industry, some of those such as, having a strong track record of growth and being a recession resistant and highly fragmentized industry.

"Investors are intrigued by three things," said Smith. "Demographics, demographics and demographics."
Smith elaborated further by mentioning the industry's hobbyist culture and enthusiast-driven atmosphere, which both of those qualities belong to the baby boomer and generation "Y" (those born from 1977 to 1995) age group. Both demographics, which together total almost 150 million consumers, also posses great buying power.