Ford Motor Company (NYSE:F) wants to give you a reason to get your car fixed at a Ford dealer -- even if it's not a Ford.
Ford said on Tuesday that it's launching a new line of replacement parts for non-Ford vehicles. The new Omnicraft parts line will be available through Ford dealers, enabling Ford's dealers to offer service to owners of all makes of vehicles.
What's this about?
What Ford said about the new line of parts
Ford said that the Omnicraft line of parts includes 1,500 of the most commonly requested parts -- things like brake pads and rotors, air and oil filters, and alternators -- to fit "all makes of non-Ford vehicles."
The Omnicraft line will eventually grow to 10,000 available parts in 30 different categories, said Frederiek Toney, the president of Ford's customer service division. "Omnicraft is a significant benefit to any vehicle owner who needs parts or to have their vehicle serviced," Toney said. "Now, owners of non-Ford vehicles have access to quality parts at a competitive price, backed by Ford and installed by Ford's world-class certified technicians."
Why is Ford doing this?
First and foremost, the Blue Oval probably sees a big opportunity in this number: The average age of a vehicle on American roads is well over 11 years -- and slowly rising.
Cars last longer than they used to, thanks to broad industrywide improvements in quality and durability. That means that people are keeping their cars for longer periods of time, and that suggests that demand for replacement parts and repair services will rise over time.
Billionaire investor Carl Icahn appears to have been eyeing the same opportunity. His Icahn Enterprises owns the Pep Boys and Auto Plus parts-store chains and just completed the acquisition of auto-industry supplier Federal-Mogul, which produces several popular lines of replacement parts.
Ford has long sold a line of replacement parts for its own vehicles under the Motorcraft brand name, which owns roughly a quarter of the market for replacement parts for Ford and Lincoln vehicles. That's a profitable business, and now Omnicraft gives Ford an opportunity to use its existing parts infrastructure to expand its sales of parts beyond its own vehicles.
Significantly, the Omnicraft line also gives Ford's dealers a couple of opportunities. Dealer profits on new-car sales are thin; many dealerships rely on a combination of service work and used-car sales for the bulk of their profits. Omnicraft gives Ford's dealers the ability to expand their profitable service businesses beyond Ford and Lincoln vehicles. It will also give the dealers opportunities to sell new Fords or Lincolns to a new audience of service customers who currently drive other makes.
Part of CEO Mark Fields' larger vision for Ford
Last fall, Ford rolled out a revamped business strategy in a daylong presentation to investors. In a nutshell, Ford is fortifying what it calls its "pillars of profitability" while it boosts underperforming parts of the business and expands into new technology-enabled "mobility" opportunities.
As Fields explained during that presentation, Ford's customer service division is one of Ford's profitability "pillars":
Our Ford Customer Service Division doesn't get a lot of attention. But this is a very important profit pillar for our company, and it's growing. To give you an example of that, our Quick Lane tire and auto centers, we have about 1,000 stores today. That's going to be growing by about 25% this year alone, and a lot of that growth is going to be in Europe and in Asia Pacific.
Given that framing, it's not a surprise that Ford's leadership spent some time looking at ways to boost the customer service division's business. And given the opportunity afforded by the aging U.S. vehicle fleet, it's not too surprising that Ford is rolling out the Omnicraft program.
How much will it add to Ford's bottom line? We'll have to wait and see, but it's likely that Fields will tell us more about Ford's expectations for Omnicraft during the Blue Oval's earnings call on Thursday.