In this week’s Executive Interview, we hear from Lee Murray, general manager for Dana’s Clevite Engine Parts Division. Murray assumed this role in April 2006 and has responsibility for all functions associated with the Clevite, Perfect Circle and Victor Reinz brands. He originally came to Clevite in 2004 as vice-president of marketing.
Murray started with Dana in 1974. Prior to joining Clevite he served in numerous sales and marketing positions of increasing responsibility, of which the vast majority of have been dedicated to the aftermarket.
Murray’s industry involvement includes several AWDA committees, customer advisory councils, National Engine Parts Manufacturer Association and the Automotive Sales Council. He is a graduate of Miami University and an U.S. Air Force veteran. Lee and his wife, Laurel, reside in Toledo, OH.
Join us as Murray talks about the sale of Dana’s Engine Parts division to MAHLE, the general health of the engine business and more.
Can you fill us in briefly on the Clevite Engine Parts division, how you became a part of the organization and what you’re proudest of in terms of Clevite accomplishments?
Sure. Clevite is Dana’s aftermarket arm for supplying engine system products to WD’s, engine parts specialists, production engine rebuilders, co-manufacturers and export customers. Our core products include Clevite 77 Engine Bearings, Perfect Circle Piston Rings and Victor Reinz Sealing Products. In addition, we supply a full range of other internal engine parts and kits under the Clevite brand. We’re also the proud supplier of CARQUEST branded gaskets. For all brands and customers we are responsible for sourcing, purchasing, inventorying, distributing, cataloging and marketing of these products.
Except for a brief stint on the OE side of the business all my 32 plus years have been associated with the various Dana divisions servicing the aftermarket. I came to Clevite late in 2004 as vice president, marketing. I guess you could say that I’m an “aftermarket brat” in that my dad and his brother worked for Perfect Circle/Dana for 45 years each. In April 2006, I was named as general manager following Terry Shively’s retirement from Dana.
In regards to the Clevite accomplishments that I’m proudest of, wow, that’s really hard to capture in the time we have. First and foremost are our people. The past 15 months, as a result of Dana’s announced divestiture of the Engine Parts business and subsequent Chapter 11 filing, have been pretty difficult; however, throughout this period our people have stayed above the fray and focused on our customers. I can’t even begin to tell you how many compliments I get from customers pertaining to our distribution, customer service, sales, product and purchasing people. Their professionalism, enthusiasm and dedication are second to none. I also want to mention that our customers have been overall very supportive of our efforts as we transition to a new owner. Another area that I’m very proud of, and to which I’ll discuss more in a few minutes, is our e-commerce offerings. Finally, I’m also very proud of our training efforts. We have dedicated people who spend a considerable amount of time in the field conducting technical clinics, product meetings and even machine shop process improvements.
The Internet is playing an increasingly important role in communicating with customers today, and Clevite is very proactive in reaching out to its customer base. Tell us about what you’re doing that benefits both the customer and the company.
You’re correct about the Internet playing an increasingly important role. There isn’t a week goes by that we’re not improving our many web-based communication vehicles. We truly feel that we are the industry leader in utilizing the web.
We utilize the Internet to meet two of our key business drivers. First is speed to market. It’s our priority to be first to market with new part numbers and products. Second is speed of communication. This is important because more of our customers today have their own sales forces and the Internet is often the most effective way to communicate with them. We also do a large amount of business that’s motorsports related and we need to communicate to customers and motorsport enthusiasts with the latest product and technical information of which the web provides the perfect tool.
Our Engineparts.com website includes all catalogs, technical information such as our “Sealing Solutions” bulletins and eLearning courses on bearings, piston rings, gaskets and heavy duty products and 24/7 tech support with a commitment for same day response.
From our website you can also link to Motorheadheaven.com, which is designed to provide performance engine builders the technical, product and educational support they need to build winning engines and provide information for enthusiasts and racers as well. The site is free of charge and also provides updates to our renowned Clevite Engine Builder Showdown series. In conjunction we recently launched our Gearheadgab chat-room that provides an avenue for enthusiasts to share knowledge and experiences.
More and more of our distributors are utilizing cleviteorder.com, the most flexible online, real-time ordering system available today. Features include seeing real-time inventory, competitor and OE interchanges, choice of shipping points, freight calculator and invoice viewing.
We also recently updated our Clevite Electronic Engine Kit (CEEK) program both for Light and Heavy Vehicles. The customer response has been outstanding.
Finally, last year we released our eParts Finder CD-rom based, light duty catalog. It even includes product photos and can be easily updated via the internet. Even with all these outstanding web-based features we are planning for even more improvements early in 2007 so stay tuned for some really exciting updates.
We read and hear a lot about the health of our industry, especially the engine side of the business. What’s your take on business today?
Well, I wish I could say that the engine parts’ market is booming. However, it’s no secret that the quality improvement of OE engines over the last decade or so has been remarkable and consequentially softened the aftermarket growth.
In spite of this there are some positive trends that I’d like to point out. First, the number of registered vehicles continues to grow at a rate of nearly 2.5 percent per year which means about 5.5 million more vehicles are added to the count annually. And, the fastest growing segment of the vehicle population is the 10 years and older segment which is growing at about 3.5 percent per year. Second, the average age of light vehicles has grown to over 10 years. Third, the average miles being driven have increased every year since 1970.
Today’s new vehicles are expected to get at least 200,000 miles of life. There’s still going to be engine work to be done, it’s just going to be at a later milepost than it was previously. We also have to remember a couple of things. One is there’s a growing group of Americans who either cannot or choose not to purchase a new vehicle. They continue to repair engines in high-mileage vehicles rather than purchase new. The second thing to remember is there’s a sizable commercial vehicle population that sees far in excess of 200,000 miles and continues to repair and rebuild engines.
We also need to speak to the performance side of the engine parts market. This segment is growing and is one in which we take a leading role. We’ve built brand awareness and value with enthusiasts via the designated NASCAR Performance License for all our brands, the NASCAR Contingency program which includes our renowned Engine Builder of the Year award and Engine Builder Showdown competition, our NHRA and IHRA Nitro Club, dedicated performance catalogs and the web-based services I talked about a few minutes ago. Professional race engine builders rely on our products and technical assistance. There is no doubt that we are recognized as one of the major suppliers of aftermarket performance products and have a huge and very loyal customer following. So, in spite of some negative market conditions, we are not sitting around feeling sorry for ourselves. We are very confident of our capabilities and customer loyalty to ensure our long term growth.
In your opinion, what is the biggest issue the aftermarket will face in the next five to ten years?
It’s not easy to name only one but, in my opinion, the one that stands tallest is the Right to Repair issue. We can all commiserate on parts proliferation, consolidation, China, supplier health, industry standards, growing OE market share, price compression, etc. but if the independent technician does not have the information available to perform diagnosis, make repair or re-program then all those other issues are not really major ones.
For Clevite, this issue is very close to home due to the highly technical engines in today’s vehicles. Technician training goes hand-in-hand with the Right-to-Repair issue. That’s why we invest considerable time and money to provide the most informative and complete training that we possibly can. The aftermarket must continue to stand up for the professional technicians to ensure access to appropriate information by supporting H.R. 2048 and to provide continuous, up-to-date technical training.
We’ve learned late last year that you are being replaced as a supplier to NAPA on all products. What can you tell us about this situation?
You are correct. We learned in October of NAPA’s decision to move the business to Federal-Mogul. I can say for sure that in no way was the decision based on the performance of Clevite programs, people or services. In fact, we’ve been recognized by NAPA, as well as by several other major customers, several years in a row for outstanding service and support levels. There’s no hiding the fact that anytime you lose an account like NAPA it causes pain throughout the organization. It hurts, but my style is such that when you get knocked down you just get back up and come out fighting and that’s exactly what the entire Clevite organization is doing. We’ll overcome this loss and come out of it a tougher competitor and better supplier.
Finally, let’s talk about the recent announcement that Dana and MAHLE entered into a stock and asset purchase agreement for the sale of Dana’s engine hard parts’ business. How will this affect Clevite and your customers?
The engine hard parts business includes the Clevite division along with 39 facilities that manufacture piston rings, engine bearings, cylinder liners, and camshafts under the Perfect Circle, Clevite, Clevite 77 and Glacier Vandervell brands. This announcement is part of Dana’s reorganization initiative to focus on its core products such as axles, driveshafts, structural, sealing and thermal products. It is strategic in nature as the intention to divest this business was announced in October 2005, prior to the company’s 2006 Chapter 11 filing.
As a result of Dana’s Chapter 11 status there are several steps which must take place before the sale can be finalized, the first of which is the approval of the Bankruptcy Court which was granted on December 19. As a result of this approval, a bidding process began which provides other parties the opportunity to make a qualified bid up until Feb. 7. If there are no other qualified bidders, MAHLE will be designated as the successful bidder. On the other hand, if there are other qualified bids, an auction will take place on Feb. 12. Shortly thereafter, the Bankruptcy Judge will conduct a hearing in which he will consider approval of the sales transaction to the successful bidder and announce the buyer. If MAHLE is ultimately awarded the business, we see it as a good fit since they are focused on the engine parts business, which would strengthen our brands and product offerings.
I’d like to take a minute to clarify one important aspect of the divestiture regardless of whom becomes the new owner. Part of the sale includes a distribution agreement relating to Victor Reinz branded sealing products. Contrary to some information being erroneously circulated, Clevite is not getting out of the aftermarket gasket business. We will continue, as we do today, to identify, source, purchase, inventory, catalog, price, market and distribute gaskets as we’ve always done. Our customers will continue to deal with the vast majority of the same Clevite people they’ve always dealt with.
