Mike Lambert is the president of the Automotive Distribution Network and was president of Parts Plus for nine years prior to its merger with IAPA. The Automotive Distribution Network is one of the leading automotive aftermarket groups in the country, with 36 Parts Plus and IAPA members, 68 Auto Pride Members and 200 CMB members. Upon graduation from the University of Southwestern Louisiana, Lambert started his automotive career at NAPA as a field classification representative in New Orleans. He then became the purchasing manager for Borden-Aicklen, which was the first warehouse to join the newly founded CARQUEST Program. He became sales manager after five years. A.I. Automotive, a Kuwait firm, acquired Borden-Aicklen. Lambert held several positions at the company. He started A.I. Automotive’s import division, Resource Automotive, and was vice president of purchasing for its New York corporate office and also general manager of its Chemical and Accessory Division. In 1989, Lambert joined the Parts Plus Headquarters staff as vice president of product and marketing, and was named president 
In this exclusive Executive Interview, Lambert talks about some significant changes that have taken place at the Network in recent months, including the addition of Auto Pride and CMB to the group. He also shares his thoughts on what’s ahead for the distribution segment.
This has been a year of some significant changes for the Automotive Distribution Network. In January, it was announced that Uni-Select would leave the Network after 20 years of membership. In the press statement about the change, you noted that the separation was on a mutual basis – was it representative of some change in strategy for the Network?
Certainly, I did not want Uni-Select to leave. They were a long-serving member and we enjoyed a lot of mutual benefits together, but I will say it was not necessarily surprising. While they are a publicly traded company, they tend not to publicly announce things, but you can read [into] some of the actions they were taking that this was inevitable. When they joined us 20 years ago, I think they were maybe a $250 million to $300 million company. Today, they are a $1.5 billion company, so they have grown extensively. In that growth pattern, they have developed a number of brands – brands they have introduced to the United States – so you could certainly see the direction they were taking. It wasn’t a matter of if they were going to leave, it was just a matter of when. The timing is never good. You never want someone of that size to go away, but when it happens you try to part as friends and move on. You make your plans and they make their plans.
And certainly you can feel good knowing they had such success as a part of the group …
They did. If imitation is the best form of flattery, I will say a number of the programs they are doing kind of mirror some of ours. Even looking at the name they are marketing under – we’re Parts Plus, they’re Auto Plus. Is that just a sheer coincidence? Is it a form of flattery? Maybe it is.
Just prior to Uni-Select’s departure, it was announced that AutoPride would merge with the Network – another major change to ADN’s landscape. How did the loss of Uni-Select and the addition of Auto Pride impact the Network, in terms of size and footprint?
Well, let me take you back even a bit further in time. Back in June [2009}, we acquired the CMB group. That was the beginning of some things changing — us getting out of the box and changing our distribution pattern. On the heels of that, we looked around for what other opportunities we might have. We came in contact with IWD, which was the parent of Auto Pride and Truck Pride, and we recognized that this is a group somewhat in transition. They had some needs and they had some issues. The automotive and truck segments, while both part of the transportation business, are a little more apples and oranges. So, they were looking to do something different.
We actually approached both sides of that equation trying to bring them in. The truck people were more disposed to do something on their own, which was fine with us. So then we proceeded with the automotive side.
As I told my membership recently, taking a step back, if I thought Uni-Select was going to take some actions at some time in the future to go away, I needed to mitigate some of that. It was difficult for me to discuss this with my membership in advance because it was just a perception of mine based on a sense of what’s going on in the industry. I couldn’t draw on specific occurrences so in discussions with my board I emphasized that we needed to cover our bases and take advantage of some opportunities that existed in the marketplace. So that is what we did with both CMB and Auto Pride.
Some of the things we did with Auto Pride in particular were to try and preserve their culture. So, instead of a typical merger where you mesh everybody together and there’s a winner and there’s a loser and the loser almost goes away, we’ve kind of made them a division of the Network, preserving their culture and maintaining their own board, while at the same time utilizing a lot of the programs and benefits that the Network offers. Some of the tools we have in the Network toolbox we also will utilize for them, and that is where the synergies will come from.
Would you say this is similar to the way things worked out with the IAPA acquisition some years ago?
IAPA was a little different. At that time we were a little new at this. While we had two different names (Parts Plus/IAPA), over time Parts Plus has become more of a brand than a name and a lot of our marketing programs have transitioned to Parts Plus. We only have five IAPA members left. So, everybody is Part Plus except for five remaining IAPA members and there’s a unique story behind every one of those, as to why they can’t or don’t want to be Parts Plus.
With CMB, Auto Pride and the rest of the Network, we have a pathway. We can attract any type of customer now in the industry and find a place for them under the Network umbrella. Not everybody is big. Some are niche players that may not fit the typical pattern. When some of these smaller members grow, we have a pathway so they don’t have to leave the Network umbrella. They can stay within the Network and grow and we’ll provide programs for them all the way, as they grow and achieve the goals they want to achieve.
In the past, people would join the group and if they wanted to do something different, they had to change groups. Well, we’re trying to keep them within the family the whole way. We’re going to provide ways for them to grow within their own brand. They wouldn’t have to leave Auto Pride and join Parts Plus. We’re going to provide those tools along the whole way, and that is something that I think is different and unique. We have a place for almost any customer out there.
What are your goals for growth of the Network going forward – are there certain regions of the country you’d like to focus on? Hearing your comments a moment ago, it sounds as though you are trying to create a menu of options to support your members rather than cover a specific region.
Look, we’re aware that size matters with the vendors, and going back to your first question – yes, Uni-Select went away – so part of what I’m trying to do is mitigate that, part of what I want to do is grow the Network. It’s important that we have all the tools in place.
You know, NAPA is a publicly traded company, CARQUEST is a self-contained company, and then you have the retailers. But, when you are dealing in the public companies that are part of the various program groups, that’s the world we concentrate in. I’m not going to be a publicly traded company; I’m not going to be a singly owned company, like a CARQUEST or an ESOP. But, in the independent world we have all the tools that anybody could have, plus some. We have a very extensive national account program that I think exceeds any of those other groups.
Part of what we were able to do with the Auto Pride was we were able to fill in with some of those members. So it’s a mutual benefit. We want to preserve the relationships we have with the people who have serviced our national accounts for 20 years – I’m not going to take it away from them. But, there are other places that I can better serve those national accounts because I was void in those markets or because there was too much distance there. Again, some of the synergies and benefits we can bring to both the Auto Pride members and some of the Parts Plus/IAPA members are to benefit those national accounts by being a better provider and by having a better footprint for them.
The Network also made a number of executive appointments in the past several months. Again, is this part of a bigger strategy, ramping up for more growth in 2010?
Yes and no. Partly, I wanted to recognize a lot of people who have worked for the company for a long time. Also, in bringing in these other divisions, these people all have added responsibilities, and I wanted to put their titles on par with their peers. Also, all of my staff here has been given more work since bringing on these other companies. A lot of things don’t happen without a lot of sweat equity. When you bring in 70 Auto Pride members, you don’t integrate them into any of the things we do without a lot of effort, so it’s kind of a three-fold reason for those changes.
Several of the new appointments were in the area of technology – is this an important element for the Network to strengthen?
Yes, it is. It’s one of those areas we were behind on. We are launching a whole new business intelligence program, and it’s something we’re going to use across the family. Tom Frey is heading up that, and we’ve brought in some other people to shore up that area, which is an important area that will benefit all the Network family.
It is paramount to have those tools. I’m happy to say this is now a part of our offering that will pay good dividends and financial rewards for our members in a way that is more than just parts for a price.
What are your overall thoughts on the future of the distribution segment? Do you expect to see more consolidation?
Let’s look at what has happened just in the past nine months: we had CMB come into the Network, we’ve had Auto Pride come into the Network, you had AIM go into the Uni-Select program and there are rumors of Truck Pride teaming with one of the other heavy duty groups. There has been a lot of consolidation. Putting NAPA and CARQUEST aside, when you look at the groups that are remaining, you’ve got us, you’ve got the Alliance, you’ve got Pronto, Federated, APA, TruStar … and there has been some group consolidation that happened as well. As we get closer to fewer numbers, it gets a little more difficult, but I think in the past nine months there has been a remarkable amount of consolidation, more than has happened in any other period.
Yes, the consolidation has happened. Is it going to continue? Only the future will tell, I guess.
How have influences such as online parts ordering and the increased commercial focus of big box retailers changed the distribution landscape, in your opinion?
It’s kind of a two-fold question because they are not completely related. When you talk about online parts ordering, that is a quiet occurrence. It is probably more for the guy who’s a little more knowledgeable in what he’s doing and doesn’t need the benefit of a store. The people who are doing that — like Rock Auto and Amazon.com — who’s filling their orders? They don’t have warehouses. They are using traditional guys like us and our competitors to fill those. So, some of that fulfillment, while not directly labeled with our name, is coming back to some of the traditional distributors.
There are also some of my members, both mine and others, who quietly have [parts ordering] websites that I think are doing a pretty good business, more so than most of us would give them credit for. So, that business is consuming some parts, but again, I think it tends to be for someone who is a little more skilled. It makes pricing a little more transparent because you can go out there and see the price, but I think it is more the skilled consumer, probably not the shop or the professional guy who is using it.
To answer your other question dealing with the increased commercial focus of the big box retailers – for the DIY market, while I’m amazed it continues to grow, the cars are becoming more complicated. It is becoming tougher for DIYers to work on them, so I’m amazed at what the consuming public is able to do. Sometimes, with the economy, it’s the mother of necessity. For the retailers, I’m not sure how fast-growing that segment is, so obviously they need to see where else parts are sold.
The commercial side is very appealing to Wall Street so I think they [the retailers] tout their commercial side, but in dealing with the commercial side comes additional skills and additional inventory and additional costs that are involved. They have a certain tolerance level for what level of commercial business they want to take, to a certain point.
NAPA is seen as a master at commercial business. Now, they are not viewed as a retailer per say — the way they go to market is different from a retailer because you can’t be, as everyone has said in the past, all things to all people. So certainly I understand the retailers reason – it plays well on Wall Street, they are going after the low-hanging fruit and they have a tolerance level because of the cost involved, whether that’s in manpower or trucks or carrying receivables or carrying inventory. They will go after it – to a certain level – whereas traditional WDs like ourselves and our competitors, that’s more of what we’re about, so we’ve structured our companies to have the inventories, the trucks, the counter people, etc. and we want to carry that wholesale/commercial business to the "nth" degree.
It’s not surprising that they are doing it. I wouldn’t expect them to do anything less, but they have to develop a tolerance they are willing to accept to get to whatever level in that trade that they want. By the sheer proximity of their locations they’re going to get some of that business.
What are your primary goals for the Network and its membership in 2010?
Certainly, we want to continue to grow the Network and provide all those tools we discussed earlier that will make us the absolute premiere distribution group in the industry. I think we have all of the elements in place and I’m very excited about that. I’m very excited about some of the people and some of the changes we’ve made in that area.
Speaking of people, I’ll go back to some of the executive appointments you mentioned … one of those recent announcements was the appointment of Steve Tucker as vice president of Auto Pride. In this case, we specifically placed a high-level executive to deal with that group of customers. I wanted someone whose sole purpose in life was to make that the best group it could possibly be. I want to utilize the people and tools that we have developed, or are developing, for the entire Network family and I want to be able to grow the Network family wherever those aftermarket entities fit within the group.
Editor’s Note: Since our interview, the Automotive Distribution Network has added Coimatic Auto Parts and Industrial Supply (Maui, Hawaii) and Lowe Automotive Warehouse (St. Louis, Mo.) as new Parts Plus members.
