Bob McKenna, President and CEO, MEMA

RESEARCH TRIANGLE PARK, NC– Every other week, aftermarketNews offers an interview with high-profile individuals in the automotive aftermarket. We give executives free reign to express their views on anything from the state of their corporations to recent legislative news to future trends in their niche markets. Here you see what matters to the newsmakers themselves.

This week we catch up with Bob McKenna, president and CEO of the Motor & Equipment Manufacturers Association (MEMA). McKenna came to MEMA in Sept. 2005, after 35 years with Atlanta-based Genuine Parts Company (GPC). At GPC, he served as group vice president and chairman of the board for the National Automotive Parts Association (NAPA). Under his leadership, NAPA strengthened its position as a leading distributor in the traditional automotive aftermarket.

It’s been just over a year now you joined MEMA. How’s it going so far?

I think it’s going quite well. We’ve done a lot. I won’t go into all the details because they would be pretty boring to your readers. It’s a lot of behind-the-scenes work such as some organizational changes to create more value for our members and rewriting some of our bylaws, for example.

Our members work in various market segments within the industry: original equipment (OE), aftermarket and heavy-duty, so we have been busy growing our three market segment associations. So, when we address an aftermarket issue, you’ll be hearing from the Automotive Aftermarket Suppliers Association (AASA). When it’s a heavy-duty issue, you’ll hear from the Heavy Duty Manufacturers Association (HDMA). And, when it’s an OE issue, you’ll hear from the Original Equipment Suppliers Association (OESA). We’ve really strengthened our position in that regard. MEMA is the overall parent company and oversees these three segment associations.

However, in Washington, D.C., our position comes from MEMA. There, we really want to have one voice because of the strength of the voice of the supplier industry.

We’ve also had a lot of internal changes. Chris Gardner, who previously worked for MISG, has been our technical go-to person in the industry, but he was not doing that full-time. Now he’s dedicated full-time to technology and some new projects we’re working on. In our market research department, Frank Hampshire is one of the better market researchers in the business. He now reports directly to me and we’re going to be doing some more things in market research and reinventing that division.

On a personal basis, how has this first year been for you?

It’s been a busy year, trying to learn and get up to speed and understand how an association works. It’s a little different than operating a regular business.

I’ve been spending a lot of time getting to know the original equipment business both heavy-duty and light-duty, as well as the international supplier industry. I know the aftermarket pretty well. I don’t mean to sound like I’m bragging, but after 34 years at NAPA, I hope I have learned something. I knew the heavy-duty segment fairly well also, but not the OE side. The whole dynamic of what’s going on in this industry globally is pretty important right now. I spent a lot of time during this past year trying to get up to speed on those issues.

Our involvement in Washington, D.C. has also been a big part of that learning process. That’s another area that I hadn’t spent a lot of my career in. Trying to make contacts and understand how the whole process works there has been interesting. We’ve really put a lot of effort into our Washington, D.C. office. We have a great staff in Washington and we’ve spent a lot of time and effort getting the right people in place.

As a 36-year veteran of the industry, you certainly bring many experiences to the job. Which of these experiences has served you best in your new role at MEMA?

I think the thing that has served me best is that I worked for an excellent company [Genuine Parts Co.] and they trained us very well. If you worked there and survived, you were able to learn how to run a business and that was very helpful. The contacts are another valuable tool that have served me well. When you’ve been involved in an industry a long time, it helps to know people and maintain good relationships.

Now that you are able to see the industry from a somewhat broader perspective, what surprises you about the industry? What have you learned as a result of being in this new role?

The automobile industry is really going through a metamorphosis of sorts. I’m reading a book that everybody has been talking about – “The World is Flat,” by Thomas Friedman. It talks about the fact that we are becoming a global economy very, very quickly. It’s happening in geometric progression now and it’s been evolving for many years.

When the author says the world is flat, what he’s actually saying is that the playing field is leveling. The world economy is becoming flat. In other words, anyone can compete with anybody, anywhere at any time. That’s really what the news coming out of Detroit and Washington every day is about – pension costs, healthcare – all that stuff is what’s really wrong. But the reason it’s wrong is because the way we in the U.S. operate and compete doesn’t make a lot of difference. Over the last 10-15 years the competition has become wider.

If you look at labor rates, I think France and Germany are the most expensive in the world, but we’re ranked close behind them. Then you get into Mexico, Thailand, Taiwan, China and India and Malaysia are considered to be the cheapest. If you’ve got something that has a lot of labor put into it, it’s probably not going to be made in the U.S. or Europe. It will be made in Eastern Europe or Southeast Asia or one of the places with a lower labor rate. The same thing is true with technology. We all know about the outsourcing to India of customer service systems. I think there is something like 450,000 people in India today who work for U.S. companies handling service calls.

I think what I’ve learned is a much different perspective. Rather than thinking just about the 50 U.S. states, Canada and Mexico, there is a whole world out there and it’s going to impact the automotive industry in the future. It’s already doing so. The global footprint that car and truck companies and parts suppliers are going to have is going to be staggering. It’s changing the whole dynamic of what goes on in this industry.

You mentioned earlier that you are trying to create more clear-cut roles for MEMA’s three different segments. At the same time, is there one thing that you would say is a unifying element among them?

Basically, we, the Motor & Equipment Manufacturing Association, are an association of manufacturers. The common thing that is true in all of our segments is that all of our 750-some members are manufacturing something. We focus a lot on that.

Yes, we’re involved in three very big, dynamic industries and we’ve got to be sensitive to the marketing and distribution issues that come from those three very different segments, but the common element to all of them is how you manufacture product – things you can do with manufacturing processes, logistics, human resources, raw material sourcing, pricing strategies. We are a horizontally integrated association, not vertical. We’re focused on being a trade association exclusively for parts manufacturers.

What, in your opinion, is the single biggest challenge to your members and our industry today?

I think the biggest challenge today is management of margins. By that I mean, a combination of what your production and input costs are and what you can sell the product for. I don’t care what business you are in. If you can’t make a margin or make a profit, you’re not going to be in business long-term. I think parts manufacturers all over the world have the same issue: How do you make money in this extremely competitive industry of selling cars and trucks with constantly rising costs of raw materials, and labor and healthcare and pensions? I think that’s the biggest issue. Not that we are going to tell them how to make money, but we work with our members to help them as much as we can in figuring out strategies and business plans.

The second biggest issue is government regulation and legislation. We are trying to serve as an industry watchdog of sorts – to keep issues that are important to this industry from being lost as well as working to prevent passage of legislation that just doesn’t make any sense and in the long run may harm the industry, the economy and the American consumer.

MEMA has done a fantastic job this past year championing the issue of anti-counterfeiting legislation. You must be really thrilled with the recent passage of the STOP Act.

Yes, and there are a few other things we are working on that may not be as sexy but are certainly important.

For example, the International Trade Commission’s review process is creating real problems in the industry and most people don’t know about it. We have countervailing duties on more than 180 steel products. Here we are talking about a competitive, global market and we’ve got a very protectionist attitude about steel and it’s causing American manufacturers to pay more for steel than they should. So we’re trying to change the process and at least level the playing field so that the consumer of products that get duties put on them have a voice at the table. Right now, they don’t. It’s a strange system.

Now that you’ve settled in to your role leading MEMA, what lies ahead? What goals and plans do you have for the future of the association?

A big thing going on right now in the heavy-duty sector is the first annual Heavy Duty Aftermarket Week. We’ve worked with Automotive Aftermarket Industry Association and about 10 other associations in the heavy-duty industry on this event which will take place January 23-27 at The Mirage in Las Vegas. It will become the largest event in the heavy-duty aftermarket industry.

There was some misunderstanding about the event at first. It’s the first time it’s ever been done and it’s a complicated issue. Many manufacturers are committed to the trade show and we’ve got educational seminars, training sessions, one-on-one business meetings, networking events and all kinds of other things planned. We think this will be to the heavy-duty industry what AAPEX is to the aftermarket.

We’re also getting very involved with China and Europe, in supporting our suppliers in those countries. We have forums that meet on a quarterly basis. The issues in China and in Europe are a lot different than they are here. A lot of our members are selling into those markets, so we’ve been very active helping them in those areas too, even though we’re not an international association.

I think you will continue to see us evolve as we try to strengthen the voice of the parts suppliers in all three of our market segments. I think, without being critical, we’ve not let our voice be heard in the past as much as we’d like. So, part of our effort going forward is to raise the voice of the automotive suppliers in the automotive industry.