FARMINGTON HILLS, MICH — Every other week, aftermarketNews.com offers an interview with high-profile individuals in the automotive aftermarket. We give executives free rein 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.

Our latest Executive Interview features Michael Scheiven, director, Aftermarket Channel, Philips Automotive Lighting North America. Just about two years ago, Scheiven joined Philips after a long and successful career with General Motors (GM). Scheiven spent 19 years at GM, serving as director of AC Delco Aftermarket Operations with General Motors Brazil, International Marketing Manager with GM Service Parts Operations US, Commercial Director for GM Service Parts Operations-Mexico and South America Sales Manager for General Motors Corp.

It was precisely this background that led Philips to recruit Scheiven, as the company sought to revitalitize its aftermarket business. Scheiven recently spoke with aftermarketNews.com about Philips’ Automotive Lighting business and the changes in this market segment.

Please provide our readers with some background on the aftermarket channel of Philips Automotive Lighting.

Philips began as a lighting company, more than 100 years ago, and we’ve been in North America for almost that long. Today, Philips Electronics is a $35 billion-plus global company with products ranging from consumer electronics and medical systems to semiconductors and automotive lighting.

Philips Automotive Lighting serves both the OEMs and Aftermarket. In terms of worldwide market share, we are either number-one or number-two; depending on which market and country you’re looking at. When we talk about automotive lighting technology, there is no question – Philips is the leader. We’ve pioneered more innovations than any other company, including the development of HID. Being at the forefront of technology is a key factor in our success.

While we have built an excellent position on the OE side in North America, our aftermarket position had not recently been in step with our success in most other markets around the world. Now we are revitalizing our position in the aftermarket. About 18 months ago, I came to Philips from General Motors to help with this effort. I was first responsible for reestablishing our marketing efforts and then, about six months later, took on running the aftermarket division completely.

How does your customer base break down in the aftermarket channel?

Today, we operate in traditional wholesale distribution and specialty retail, as well as in the mass merchandise channel. We are approximately 60 percent retail and 40 percent traditional aftermarket. We’re proud to say that as of August of last year, we are now a supplier to AutoZone.

We continue to look for good, quality distribution, both on the retail and traditional sides. I’ve been in the aftermarket business about 20 years, and I remember very well about 10 years ago when everyone was saying the traditional wholesaler would soon be dead. If you look at the statistics, that has not happened. I think the market has maintained a balanced mix, and it’s important for us to be wherever customers look for our products.

We’ve noticed OE service business has increased quite a bit in the last few years. Have you noticed this among your OE customers?

Most definitely. About 10 years ago, OEMs began to focus more on service income as a means to survive through years with poor sales of new vehicles. As competition has continued to intensify over recent years, service income has become even more critical to the retail car dealers’ operations. Dealers have become more competitive, and consumers understand that dealers can provide a good quality, competitively priced service. As a result, there has been a definite move back to dealership service among consumers, but I don’t think it’s significantly outpaced the growth of the overall market.

Many reports indicate that the general public is putting off some of its regular preventative maintenance due to high gas prices and general concerns about the economy. Is this affecting the lighting segment, and if so, what can be done to better promote lighting replacement and upgrades during the routine service visit?

I don’t think it’s affecting the lighting business in a significant way. Prior to higher gas prices and the other economic factors that are causing consumers to cut back on preventative maintenance, drivers may have been quicker to buy our upgrade products on an impulse basis. Now customers may think twice about doing that.

That said, the industry could do more to promote periodic replacement of worn bulbs. Today, the majority of consumers don’t look at lighting as a regular maintenance item. Other than those who purchase premium upgrade products, consumers basically wait until a bulb burns out to replace it.

When a customer comes in for something as simple as an oil change, what do all of the quick lube places do? They’ll offer the 8-, 10-, 12-, 14-point inspections. One of the things they don’t tend to have is, at least in the programs I’ve reviewed, is to make one of those inspections a check of all the light bulbs. Our industry needs to educate consumers that light bulbs will start to put out less light after a certain period of time. Because of electro-chemical reactions, climatic conditions, and moisture, bulbs will deliver less light output as they age and should be replaced periodically for maximum safety.

That could certainly be a selling point at the service bays….

Exactly. Both from a comfort perspective, because we all know what strain it puts on our eyes when we drive at night, and from a safety perspective, whether it’s head lighting, signal lights or side markers. Concerns about comfort and safety offer a merchandising opportunity in the service bay and at retail.

You mentioned the tuner market. Is the youth performance and tuner market impacting your business at all?

There is no question about that. Tuners like the look and performance of High Intensity Discharge (HID) lighting. But, HID lighting retrofits are extremely expensive and very few kits meet Department of Transportation (DOT) requirements.

However, this creates the opportunity for lighting products that produce an HID look. We offer two products for this segment, BlueVision and CrystalVision. Depending on the retailer, these will sell anywhere from $20 to $40 a set. BlueVision is our price point product and CrystalVision is our top technology product. Its output is as close to HID as you can get, while staying legal, and that’s a key factor.

There are very specific legal regulations from the DOT for headlamps. Our CrystalVision is tuned to the upper limit of these, to get as close to HID as legally possible. There are HID-look products in the marketplace that are not DOT compliant. In some cases, the products are marked as though they meet DOT standards, when in fact, they do not. Some products are sold as “Off-Road Only,” but of course once you stick it on your vehicle and drive it on the road, it’s totally illegal. These non-compliant products open up real issues of liability both for the retailer and the consumer. While importers can sell a couple of containers of illegal product and then disappear, we’re an OE supplier and know we must always stay within the DOT guidelines.

Another problem with the non-compliant HID-look products is that they can create a great deal of glare for oncoming drivers, with beams that are higher or broader than they should be. We believe they’re causing a lot more of the HID glare issues than the true OE HID. If you look at studies in Europe where HID has been around longer, with much deeper market penetration, it’s not the good quality HID that is creating the glare problem, rather it’s low-quality aftermarket retrofits and non-approved bulbs that are causing problems.

Automotive lighting has historically been seen as an under-promoted product category. What kind of role can the automotive lighting sector play in the independent service industry looking for new ways to compete against the OE dealership for maintenance?

In addition to promoting replacement on a regular maintenance basis, and feeding into the Performance/Tuner segment, the biggest opportunity to add service dollars through lighting is in the ‘safety’ segment. As we grow older, we all lose some functionality in our eyes. It’s been shown that the 60-year-old eye needs about twice as much light to be able to see at the same level as the 18-year-old eye.

Our Philips VisionPlus product is a Halogen bulb that delivers a beam that’s up to 50 feet longer than a standard bulb. An extra 50 feet obviously gives you more time to react to road conditions and avoid sudden hazards. There are a lot of products that add 25 to 30 percent more light, but there is no other company with a product that also extends the beam up to 50 feet.

We talk a lot about safety as a segment, about seat belts, anti-lock brakes, anti-skid, all of these great systems, but if you think about it, all of those systems are reactionary. Better lighting is really a proactive safety feature that can keep us out of situations where we have to depend on the other safety systems. I think that promoting this as a concept will give us an advantage when competing with OE service.

Is creating a safety segment then a new channel through which to sell products or a new way to market and promote lighting products?

I wouldn’t call it a new channel but rather a new segment that we need to create in the mind of the consumer. In the retail store, this means having brochures and displays that talk about lighting from the perspective of aging and weather conditions. As an example, for our VisionPlus product we have point-of-purchase displays that show side-by-side what a standard headlight looks like versus what a VisionPlus headlight looks like. It clearly shows the customer the benefit it provides. Inexpensive merchandising tools like these can really help retailers to up-sell into the safety concept.

Does Philips offer products at the so-called ‘good, better, best’ levels?

Yes, that would be one way of looking at it. We consider our Standard product line to be our ‘good’ product. All of our Standard line products are OE quality. We do not have separate product lines for OE and aftermarket, so the aftermarket 9006 headlight bulb is the same 9006 headlight bulb that went into OE. Rather than calling our next step up ‘better’ we call it ‘value for money’ and that includes our LongerLife product range. The 30 to 40 percent more that it costs the consumer for a LongerLife product is justified by the much longer service they get out of the product. At the ‘better’ level, we also have BlueVision, our value-priced HID-look product and Hi-Visibility, our value-priced safety product. Then you get into our ‘best’ with our CrystalVision and VisionPlus lines.

Any last thoughts you would like to leave our readers with?

I want to end with the philosophy of Philips. I’m sure you’ve seen the recent TV advertising for Philips, which ends with the “Sense and Simplicity” tagline. What we are looking to do in all our businesses, including automotive lighting, is to infuse our products with advanced technology that’s easy for the consumer to experience. That’s a bit easier with lighting than some of the other Philips products, but still, we want to be certain that consumers will really feel the benefit of the product.

On the business side, beyond being one of the innovation leaders with top quality, we want to be known for our service. I think if you ask our customers, they would say we are a world-class service provider. We really pride ourselves on that.

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