Echlin Inc. History

Address:

100 Double Beach Road
Branford, Connecticut 06405-4906
U.S.A.

Telephone: (203) 481-5751
Fax: (203) 488-0370

Public Company
Incorporated: 1959
Employees: 20,600
Sales: $2.22 billion
Stock Exchanges: New York
SICs: 3714 Motor Vehicle Parts and Accessories; 3315 Steel Wire and Related Products

Company History:

Echlin Inc., founded by the Echlin brothers in 1924, is a leading manufacturer of automotive replacement parts, including brake parts, engine parts, and transmissions. The company made numerous acquisitions after 1964, establishing subsidiaries across the United States and in eight foreign countries. Despite the corporate trend to diversify, most of Echlin's expansions have been within the low-profile and often volatile automotive parts business.

Jack and Earl Echlin founded Echlin and Echlin in San Francisco in 1924. They made pistons, piston pins, and similar parts at first but then turned to manufacturing replacement parts such as ignitor gears and oil pump gears. Eventually, they bought the ignition business of another company and went on to become one of the leading U.S. ignition manufacturers.

While Earl established a small machine shop, Jack appointed himself salesman of the firm and attended a night class to learn the rudiments of his job. Soon thereafter, he devised a one-evening sales clinic for salesmen of auto parts stores whose training had been largely neglected. Salesmen from out of town began asking for the class, and soon Jack was traveling to cities across the country conducting his one-evening workshop. Jack Echlin expanded his class into a technical as well as a sales clinic, in which students were taught the value of replacement parts. His workshop and his company thus achieved a national reputation, and his classes became the cornerstone of Echlin's marketing program.

In 1928, the company signed a contract to supply oil pump and ignition gears to the National Automotive Parts Association (NAPA) which, in turn, distributed those parts to garages across the country. The contract proved lucrative, and soon Echlin began supplying ignition parts as well. The company and the association, which continued to work together into the 1990s, grew faster than the industry as a whole, and NAPA became recognized as one of the most efficient distributors in the automotive parts market.

Continuing to demonstrate their understanding of the industry's needs, the Echlin brothers commenced publication of an ignition catalogue in 1929. It was the first time an entire list of ignition parts was listed within a single Car Guide and proved to be a boon to mechanics. The brothers followed this innovation with another--the Echlin Visumatic Business System, a specially designed cabinet in which a mechanic could organize a small inventory of popular replacement parts. This device (in effect, an inventory management system) moved automotive parts into the repair facility, where the mechanic had immediate access to them. The cabinet was used by Echlin ever since and was the model for parts cabinets made by other manufacturers.

Echlin struggled through the Depression, an era when many people decided that buying replacement parts for their car was less expensive than acquiring a new one. But the high costs of operating in San Francisco forced the company to move to New Haven, Connecticut, in 1939.

During World War II, the company profited by manufacturing parts for aircraft automatic pilots. Jack Echlin served on the advisory boards of the War Production Board and the Office of Price Stabilization. When the war ended, sales rose dramatically after the years of parts shortages.

Jack Echlin remained as head of the company until 1969. He established a consistent annual sales growth rate of 15 percent, while adhering to a policy that kept the firm from expanding into unrelated areas. But within the field of automotive parts, Echlin made a number of acquisitions and developed new product lines. The most important of these were hydraulic brake parts, which became the second largest product line of the company, with sales in 1985 of $308.6 million. Management next added fuel systems parts, thus providing a more efficient service for its customers.

Echlin acquired Ace Electric Company in 1970, a manufacturer of components for alternators, generators, and starters. Soon the company was producing electronic voltage regulators, the first electronic product to appear in automobiles. Despite warnings to stay out of the voltage regulator business because the new units would supposedly have a very long life, Echlin continued to produce replacement units. It was a wise decision since the original voltage regulators did not prove to be as durable as some had anticipated. Echlin then introduced replacement parts for electronic ignition systems, which were standardized by all car manufacturers in 1975.

Echlin's acquisition in 1971 of the Berg Manufacturing Sales Company, a small producer of air brakes for trucks, also paid off handsomely. Initially, it allowed Echlin to broaden its base in the truck and trailer service industry. Then, in the mid-1970s, the federal government imposed safety regulations mandating stopping distance and straight line braking requirements on heavy-duty trucks and truck trailer rigs. Those stopping requirements could only be met through the use of advanced, electronically controlled anti-skid systems. A joint venture between Berg and Italy's Fiat led to the development of an anti-skid system that became standard equipment on a number of truck trailers.

Another successful acquisition was that of Lift Parts Manufacturing, a producer and distributor of parts for industrial lift trucks. This acquisition provided the company with a foothold in the off-road equipment and construction markets.

Echlin remedied its neglect of high-performance ignition systems with a program started in the 1970s. Racing quality ignition parts were marketed under the brand name ACCEL which, despite fierce competition, soon became the leading name in its field. Echlin backed up its ignition parts business with high performance clutches and a turbocharger for both car and truck engines. The popular turbocharger, first marketed for just $700, provided extra horsepower and improved efficiency.

Echlin recognized the importance of foreign markets and, beginning in 1969, established subsidiaries in West Germany, England, Australia, Canada, South Africa, Brazil, Venezuela, and the Virgin Islands. In 1986, Echlin agreed to a joint venture with Lucas Girling of Birmingham, England, to manufacture and distribute brake parts for heavy-duty applications in Europe. Management had remained mindful of what Joe Scott, a president of Echlin, had said in 1976: "The growth in both passenger car and truck registrations outside the United States is about three times the rate of growth in North America. We view our international operations as money in the bank, ready to bring us increasing returns as our markets expand well beyond those of 1975."

The success of Echlin's policies were amply demonstrated by its revenues. Income climbed from $204.5 million in 1976 to $771.4 million in 1985. Profits over the same period rose from $13.2 million to $45.6 million.

The company relied on sales of its products to warehouse distributors; its other major customers were mass merchandisers, oil companies, truck and trailer manufacturers, and other auto parts replacement manufacturers. Its broad product line during the mid-1980s was divided into four categories: engine systems, brake parts, hard parts, and non-automotive parts. Engine systems included condensers, distributors and distributor caps, ignition coils, rotors, carburetor and emission control parts, fuel pumps, catalytic converters, and other items. The brake parts category comprised hydraulic brake master cylinders, items for both drum and disc brake systems, hoses and controllers for electrical brakes, and a variety of parts for the heavy-duty brake market. Hard parts consisted of clutches, transmission parts, and water pumps. In the nonautomotive category, Echlin produced small engine parts, fork lift truck replacement parts, security access control products, and industrial wire and cable products.

Entering the 1990s, Echlin faced an assortment of challenges, none more difficult than an economic recession that depressed U.S. automotive aftermarket sales and sent the economies of numerous foreign countries in which Echlin operated into a tailspin. Exacerbating matters, retailing in the United States was undergoing dramatic changes, as large, nationally-operated wholesale outlets forced smaller retail outlets out of business, squeezing Echlin's profit margins. The decline of fully equipped service stations, which began in the 1970s and proceeded into the 1990s, was part of this trend, but their disappearance was trailed slowly by consolidation among jobbers and warehouse distributors, leading to what many industry pundits perceived as excess capacity at the auto parts distributor level.

In response to the changing conditions in the 1990s automotive aftermarket, Echlin slowed its pace of acquiring companies and consolidated its existing operations in an effort to increase profits margins and heighten efficiency. Vera Imported Parts, a U.S. importer and distributor of replacement parts for imported cars, was merged into the company's Beck/Arnley Worldparts, a move that compressed seven distribution facilities into four, and additional consolidations were effected in Europe. Net income slipped in 1991, falling from $47.2 million recorded the year before to $41.6 million on essentially flat sales, but the decline represented the worst the recession had to offer, and net income grew prodigiously over the next two years, more than doubling to $93.5 million.

This growth was attributable to several factors, including a recovery of the U.S. economy that spurred consumer confidence and increased industrial output, which led to more goods being hauled and, consequently, to more heavy trucks requiring maintenance, as well as the increasing age of the average car on the road. Encouraged by the company's financial growth, but mindful of the need to continue consolidating operations, Echlin's management pursued further growth, acquiring several companies as earnings climbed. In September 1992, Echlin acquired Sprague Devices, Inc., then in 1993 concluded the purchase of three additional properties, Mr. Gasket Company in May, Frictiontech Inc. in June, and the German hydraulic brake and clutch division of FAG Kugelfischer in October. The first three acquisitions, each of which generated between $20 million to $50 million in annual sales, strengthened the company's U.S. position, while the purchase of FAG Kugelfischer's division, a $135 million producer in annual sales, represented a significant move toward fueling Echlin's growth in Europe.

As Echlin entered the mid-1990s, U.S. sales continued to climb, but its international business, spread across six continents and conducted through 42 subsidiaries and divisions, continued to falter. The economic downturn that hobbled the U.S. economy in the early 1990s continued to depress Echlin's foreign markets in the mid-1990s, particularly in Germany, France, and Italy, where industrial output flagged and automotive replacement part sales dipped. Adding to the company's international financial woes were declining sales in Australia and Mexico, but a resurgence of sales in South America and a slowly recovering economy in the United Kingdom did provide a spark of hope. In Europe, where roughly 20 percent of the company's sales were generated, the vehicle population was growing three times as fast as in North America, suggesting robust growth once the overseas economic picture brightened. With established facilities in Europe poised to take advantage of a revitalized European economy and a growing presence in Eastern Europe, where the company opened the first Western-style auto parts store in Moscow in early 1994, adding to the geographic scope of its operations, Echlin stood well-positioned for growth throughout the 1990s.

Principal Subsidiaries: Ace Electric Company, Inc.; Automotive Controls Corp.; Automotive Brake Company Inc.; Blackstone Manufacturing Co., Inc.; Brake Parts, Inc.; BWD Automotive Corp.; Echlin International, V.I., Inc.; Echlin-Ponce, Inc.; The Echlin Sales Company; Pacer Industries, Inc.; Midland Brake, Inc.; Ristance Corp.; Sierra International Inc.; Tekonsha Engineering Company; Beck/Arnley Worldparts Corp.; BWD Automotive of Puerto Rico (70%); Distex Industries Inc.; EAP Automotive Products, Inc.; Echlin Argentina SA; Echlin Asset Funding Corp.; Echlin Australia (Pty.) Ltd.; Echlin Ltd. (Bermuda; 99%); Echlin Canada Inc.; Echlin Europe Ltd.; Echlin Holding Deutschland Gmbh (Germany); Frictiontech Inc.; Echlin Mexicana; Mr. Gasket, Inc.; Sprague Devices, Inc.; United Brake Systems Inc.; W.M. Holding Co., Inc.; Windsor Products Company, Inc.

Echlin Inc. History

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