Inside the Chrysler-LKQ Transaction – FenderBender

Posted: Friday, June 30, 2017

In March, FCA granted LKQ permission to sell certain Mopar parts numbers directly, rather than going through its franchise dealership parts network, according to multiple industry sources. Word of the transaction created ripples throughout the dealership world, as many Chrysler parts sellers found the decision baffling and even considered it a detriment to the industry.

“The Mopar Masters Guild (MMG) has been firmly and vehemently against them allowing this to happen and have expressed this to them,” says Marvin Windham, parts director at Benchmark Chrysler Dodge Jeep Ram in Birmingham, Ala., and a member of the MMG executive council. Benchmark CDJR is the country’s ninth-largest parts department in overall purchases through Chrysler.

When reached by FenderBender, a Chrysler representative stated that the company, by policy, does not comment on transactions. According to MMG representatives, the agreement with LKQ consisted of roughly 1,100 parts numbers, including 164 for current model vehicles.

It remains to be seen whether this type of transaction will become a larger industry trend—and how such moves by automakers will affect the collision repair industry, particularly how and from whom shops purchase parts.

 

Breaking Down the Issue

Upon hearing of the decision, the MMG was granted a meeting with Chrysler brass in Detroit in late March. The guild didn’t receive the news nor explanation it desired.

Windham says that Chrysler called the transaction a “business decision.”

“For their justification, they said market share was down significantly on these numbers and they felt like dealers weren’t doing enough to make these sales,” he says.

Ultimately, Windham says, Chrysler felt dealers weren’t doing enough to make the sales on those parts number, and the automaker saw an opportunity to kickstart growth.

Windham says that he feels the agreement weakens all FCA franchised dealerships, as LKQ is a direct competitor. Chrysler franchisees were told that LKQ wouldn’t receive any parts numbers for current vehicles, but Windham says those parts numbers were already listed on the LKQ website.

Chrysler isn’t the only OEM to follow this trajectory. Ford, among others, has made a similar move in the past, says Elissa Larremore, owner of CBS Collision in Shreveport, La., and a member of the Automotive Service Association’s collision operations committee.

 

The Collision Repair Impact

Darrell Amberson, president of operations at LaMettry’s Collision, a multi-shop operation in the Minneapolis metro area, says Chrysler selling directly to LKQ could potentially spell a loss of profits for independent collision shops.

Despite only hearing murmurings of other franchises carrying out similar actions, Amberson says this continues a trend of parts becoming the focus of competing dealers, ultimately expanding the region from where independent shops seek to purchase parts.

As a result of the relationship between parts sellers and collision shops being impacted by the shop’s volume of sales and return rates, shops could see a loss in dealership discounts from this shift, Amberson says.

“If all of a sudden, you’re not buying as much from the [dealer], you’re not going to get good pricing,” he says.

Questions remain to determine if Chrysler’s actions are good or bad, Amberson says. In particular, he says he would like confirmation that the parts are really the same, and has concerns that LKQ can be as prompt and efficient in delivery as dealerships are.

“Timeliness is a critical part of the equation,” Amberson says. “When we preorder parts when a car is coming in, we want parts here as quickly as possible.”

From Larremore’s perspective, however, it all comes down to quality, rather than from where she orders the part.  

“As a shop owner, I am concerned with the quality of the parts, integrity, finish, fit, etc.,” Larremore says. “If it’s a good quality part, I don’t see a difference.”

Larremore says the Chrysler oversight could help improve aftermarket parts that don’t compare to an OE standard of quality. For her, she sees this agreement as Chrysler looking to ensure customer loyalty by keeping the customer as happy as possible.

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