Gordon Auto Body Parts Sees Promise in Aftermarket Sales

The Gordon Auto Body Parts Co., one of Taiwan' s top three manufacturers of aftermarket (AM) sheet-metal auto body parts, expects substantial sales improvement in North America and Europe this year.

Gordon already enjoys a large share of sales to North American auto insurers, and is confident of further growth in the future. The company' s vice president, Sonny Pan, says that the State Farm Insurance Co. in the U.S. is expected to resume the use of AM replacement parts to repair insured vehicles within a few months. State Farm, however, has not confirmed this.

State Farm stopped using AM parts after it was slapped with a US$1 billion judgment in a class-action lawsuit in 1999, Pan explains. That decision was reversed by the Illinois Supreme Court, however, last August. In that latter decision, the court ruled that the use of AM parts did not breach State Farm' s contracts with its policyholders. This opens up the use of AM parts as a cost-saving alternative for auto insurance firms when purchasing replacement parts.

"This is important for us and other major Taiwanese AM parts makers, " Pan asserts, "since State Farm accounted for 22% of all AM parts procurement by auto insurance companies in North America before it stopped using AM products."

Gordon is making ready for the expected boom in orders by stepping up efforts to get its parts okayed by the Certified Automotive Parts Association (CAPA), and is targeting certification of 120 parts per year. Such certification is a key to good sales in the North American Market.

Gordon' s sales in Europe increased rapidly following the implementation of the New Automotive block Exemption Regulation (BER) 1400/2002/EC there in late 2003, and that continent now accounts for about 5% of the company' s total revenue (compared with just 1% before BER). The new regulation is designed to encourage more competition in auto sales, service, and parts sales by allowing drivers to have their automobiles repaired and maintained at a shop of their choice.

More Competition, More Sales

"The new BER directive provides a fair-competition mechanism for Europe, " Pan comments. "The biggest AM parts buyers will be auto-insurance companies, which want to cut costs and increase competitiveness by using more AM parts. The parts that they use, however, will first have to be certified for safety and quality. Gordon already has 30 Thatcham-certified parts items, and we' re aggressively expanding that number. The core competitiveness of AM parts suppliers will be the number of their products that are certified by mainstream European standards organizations, including Thatcham in the United Kingdom and Certo Zaragoza in Spain."

A more recent legal case involving Taiwanese AM parts suppliers, following the Illinois court decision, is a complaint that the Ford Motor Co. recently filed with the U.S. International Trade Commission (ITC) accusing Keystone Automotive Industries, a major distributor of aftermarket collision replacement parts in North America, of importing and selling certain parts for the Ford F-150 truck that infringe on Ford' s design patents.

The suit named three Taiwanese AM parts makers in addition to Gordon: TYC Brothers Industrial Co. (a maker of auto lamps), Depo Auto Parts Ind. Co. (auto lamps), and YCC Parts Mfg Co. (plastic body parts).

The dispute centers around 14 design patents for the 2004 F-150, including grilles, headlamps, bumpers, bumper lower valances, hoods, fenders, side-view mirrors, and tail lamps. According to a press release issued by Keystone, Ford is seeking a general exclusion order banning the importation of the listed parts into the U.S.

Pan says that according to Keystone president and CEO Richard Keister, "This legal initiative represents an ongoing campaign by OE (original equipment) manufacturers to deny consumers an alternative product for automotive collision repair. This case could have far-reaching consequences beyond just the automotive industry, and Keystone intends to vigorously defend our right to distribute AM parts."

A decision on the case by an ITC administrative law judge is expected by the end of the year. "We' re optimistic about a favorable judgment for us, and for all AM parts suppliers, " Pan says, "because the right to choose what parts to be used in repairing vehicles should belong to car owners, not automakers." Meanwhile, Gordon is continuing to ship F-150 parts as usual.

To accommodate the capacity expansion it will need over the next three to five years, Gordon recently bought an 8, 000 ping (one ping equals 36 square feet of 3.3 square yards) plot of land adjacent to its second plant in Luchu, northern Taiwan, and plans to build its third plant there. (Feb. 2006)