Executive Interview with Hytec Automotive, a DeBartolo Company - aftermarketNews

Executive Interview with Hytec Automotive, a DeBartolo Company

This week, we hear from two top executives charged with leading the direction of Hytec Automotive, a DeBartolo Company. Hytec, based in Columbus, OH, has manufacturing facilities in China . Prior to this foray into the automotive aftermarket, DeBartolo was best known for its involvement in development, real estate, retail and professional sports. Hytec made its industry debut last year at AAPEX. Tim Zahler, founder and president of Hytec Automotive, along with Jerry DeNicholas, president and CEO of DeBartolo Holdings, recently gave us an update on the new company’s progress.

COLUMBUS , OH This week, we hear from two top executives charged with leading the direction of Hytec Automotive, a Debartolo Company. Hytec, based in Columbus, OH, has manufacturing facilities in China . Prior to this foray into the automotive aftermarket, DeBartolo was best known for its involvement in development, real estate, retail and professional sports.

Hytec made its industry debut last year at AAPEX. Tim Zahler, founder and president of Hytec Automotive, along with Jerry DeNicholas, president and CEO of DeBartolo Holdings, recently gave us an update on the new company’s progress.

Q: Hytec made its debut during Automotive Aftermarket Industry Week (AAIW) last year in Las Vegas . What has the company been up to since then?

TZ: Since industry week [2005], Hytec has continued to improve infrastructure and sales materials. We recently published a paper catalog and set up an electronic catalog for customers through Wrenchead and Activant. We’re growing the company internally by adding additional management and operational people, as well as continuing to improve our services while continuing the process of tooling and manufacturing new water pumps.

Q: What has the partnership with DeBartolo Holdings meant for Hytec in terms of sales and promotion in your target markets?

TZ: The relationship with DeBartolo has been extremely important for the growth of our business. DeBartolo’s reputation of quality and excellence in the business community has given our current and new customers a whole new comfort level. It says that we are financially sound and that we can provide the quality product that we have advertised.

Q: What single aspect of your business has contributed most to the company’s success in the past two years? People? Products? Distribution?

TZ: [It’s a] combination of our relationship with DeBartolo, our people, our quality products and our ability to fill orders in a timely manner. Those things are fueling our sales growth. All are important in our industry and that is why our company is growing.

Q: The company recently announced it earned the prestigious TS 16949 certification. What went into earning this certification and what does it mean for the company?

TZ: Attaining this certification was a huge milestone for Hytec. There is no certification more important in our industry, period. The process of qualifying was a team effort requiring company-wide support. What this means for Hytec and DeBartolo is that we have proven that Hytec can produce OEM-quality products in order to earn OEM opportunities, but more importantly is shows that the automotive aftermarket can produce OEM-quality products for our aftermarket customers.

Q: Hytec also recently announced that Auto Pride will distribute the company’s water pumps. Do you have more distribution partnerships in the works?

TZ: Absolutely, Hytec will continue to seek out aftermarket group partnerships, gaining their trust and confidence, and allowing Hytec to service their members.

Q: Tell us about the future expansion plans for Hytec Automotive, both domestically and abroad.

TZ: Hytec manufacturing was built to be a global supplier of automotive parts. So, we intend to continue to expand our business. Therefore, we just established a distribution center on the West Coast and are exploring possibly adding another Asian location. In addition to water pumps, Hytec intends to bring additional key products of OEM-quality to our customers worldwide.

Q: What separates Hytec Automotive apart from its competitors in the automotive aftermarket?

TZ: It’s difficult for me to speak for my competitors, but Hytec offers a full range of applications not only for passenger-car and light-truck markets, but also heavy duty, marine and industrial applications. All of our products meet or exceed OEM-quality for look, fit and function.

Q: Since DeBartolo has a history in sports and real estate, it would appear that the automotive aftermarket is somewhat of a diversification. What made the company explore the aftermarket as a new industry to get involved in?

JD: The choice came from the convergence of an opportunity we discovered in Ohio and from our private equity activities, which are always looking for sound investments across many industry lines. We looked at the company and the industry and found both to be very attractive. Choosing to enter the automotive aftermarket industry was ultimately a private equity diversification play because we have such a heavy investment and heavy concentration in real estate.

Q: DeBartolo has made an effort to keep its name closely associated with Hytec. Why does DeBartolo choose to do so? Is it a signal of more aftermarket investments to come?

JD: The DeBartolo brand name has always been associated with its success. It has a winning tradition in the sports and business community. To many, it defines financial strength. Hytec needed capital and business relationships to become a real player in the industry. That’s why we associate the DeBartolo brand name so closely with Hytec. We want to show the business community that a very strong player is behind this particular company.

I think our investment will come in two forms in the aftermarket: 1) We will look for opportunities to acquire additional products to enhance our current offering of water pumps, specifically which different automotive components remain to be seen; 2) We will be making investments in the infrastructure of our joint venture manufacturing plant in China in an effort, again, to expand our offerings produced in China.

Q: Does DeBartolo have a specific acquisition model and what would you look for in a candidate?

JD: We look at clear and compelling value proposition and a sustainable and unique competitive advantage, a track record of strong operating and financial performance and a trustworthy management team. Port that kind of information over to the industry and look at how attractive the industry is. We first focus on the individual investment, then how attractive the industry is. It’s a two-step process.

Q: What have been the residual benefits for DeBartolo Holdings as they pertain to your partnership with Hytec Automotive?

JD: The largest residual benefit has been the introduction of DeBartolo to the Chinese market through our venture partner. Additionally, we have been introduced to other investment opportunities in the automotive aftermarket that we currently have under consideration.

Q: Why has Hytec Automotive concentrated on the automotive “aftermarket?” Will it also penetrate the OE market?

JD: It’s a $250 billion-plus market. U.S. light vehicle sales exceeded 17 million cars in both 2000 and 2001, the highest in the last 10 years. These vehicles are all coming out of warranty and provide considerable opportunity for aftermarket replacement parts. In addition, we have a measurable competitive advantage as the market is somewhat fragmented because it is serviced by warehouse and retail distributors. That type of fragmentation is very attractive because there is not that much dependence on one type of customer. With Hytec’s TS 16949 certification, we are now able to pursue OEM and OES markets.

Q: Given that many customers like “one-stop” shopping, will Hytec consider adding additional compatible product lines such as oil pumps and fuel pumps?

JD: Yes, at the appropriate time. We have some of those under consideration right now.

Q: While many North American aftermarket suppliers are today looking to grow their footprints in Asia , Hytec established itself as a North American supplier exclusively manufacturing product in China . Tell us about the decision to establish your plants in China rather than the U.S.

JD: The plant was already in existence, producing OE-quality products and had excess capacity. We became aware of this opportunity and were able to successfully negotiate a joint venture agreement. As a part of that agreement, we had to negotiate price points to purchase water pumps manufactured in China and the relationship of the price points with the quality of the product resulted in a competitive advantage for us here in North America .

Q: Has the partnership with Hytec China met your expectations?

JD: Yes. For the two years we’ve been partners, it has exceeded our expectations. But it is still new to operations. So we expect bigger things. As part of the agreement, we potentially can share in manufacturing processes that will service China . The global market for services off-shore has nearly tripled since 2001 and thus providers have captured only about 10 percent of a $300 billion opportunity. This could become a huge opportunity for us. But right now we’re concentrating on North America .

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