September 2021

SEPTEMBER 2021 AFTERMARKET 21 www.aftermarketonline.net best assets in the industry in Europe, but they were all independent companies when we bought them, and there was no reason that they should have been doing things exactly the same way in the same manner and they all had their complete build out of their teams in order to run independent businesses. “We were operating in 20 countries, we had 20 different purchasing managers buying the same spark plugs from Bosch which was made no sense. At the end of the day this is a local business, the garages that we sell to what they care about is we can service their needs in a local marketplace. The garage in Birmingham, England could care less that we're the market leader in Brussels or Berlin or Budapest or Bucharest, what they care about is we can service their needs and bring them in. All the customer facing activities are staying local, but the things that the customers don't see, we have an ability to centralize that and gain real efficiencies and gain purchasing power and we identified an ability to create 300 to 350 basis points of margin improvement just by getting rid of a lot of the duplication that we had going on across the platform. The customers are never going to see the difference, they're still going to get best in class service, they're still going to get the broadest array of parts available in the marketplace with great delivery times.” Pricing Internal efficiencies will only get you so far though, and in a rapidly changing world, it’s hard to keep your prices down if you have to pay more for the products yourself. Commenting on changing prices, Arnd said: “We see the highest cost pressure at the moment is on oil- based products, so any lubricants or any chemicals that are oil-based, there is certainly a higher pressure coming from the availability of base oils. Also, on the aluminum and steel based components, we have a lot of pressure and also on the plastic components. If you asked me, I could say that on oil-based products things could go up by a double digit percentage, whether whereas in the more mechanical parts we could see a lower single digit impact. of course, things vary depending by market and depending how the competitive environment is reacting to the inflationary pressures.” Growth The growth of LKQ in Europe has been one of the striking success stories of the last decade, and why 1LKQ was so necessary. Asked if the strategy is set to continue as we travel through the 2020s, Dominick said: “Will we continue to make acquisitions in Europe? Absolutely yes. Since starting in October of 2011 we've made about 70 different acquisitions across the European landscape. It can be a very effective way of gaining entry into a new market or to fortify your position in an existing market. We look for companies that can help us create value that help us better serve our customers and so we will continue to do that.” Arnd joined in at this point: “Just a few weeks ago, we have announced the establishment of our European innovation and service center in Katowice, Poland. We expect to have around two to three hundred people there. What we had discussed with the city administration is that our intention is to put there a lot of talent that will be very instrumental and key to our digital strategy.” Staying with digital, Arnd covered LKQ’s stake in multi- brand vehicle data resource CARUSO: “LKQ is a key shareholder in CARUSO. We are strongly supporting CARUSO, even in the past development phases, to make sure that independent operators across Europe will have access to connectivity data from the vehicles, preferably to through a neutral server or trusted server concept and preferably also directly from the vehicle without monitoring through the OEMs, for example. That's really a key element of our strategy. As the largest player in the independent aftermarket in Europe. LKQ has to be also a frontline player on those industry initiatives.” Aligned Lastly, when asked about the impact of Brexit specifically on the UK and any particular challenges for supplies into Britain going forward, Arnd added “We've created a massive amount of inventory to protect our customers from availability. Going forward, it all depends on how strongly British regulation will get aligned with the European regulation. The signals that we're seeing at the moment is that it will stay pretty close to things that we have in the European legal landscape including the Block Exemption regulation including access to data and emission regulations. Of course, if that changes the data question has to be answered specifically for Britain at the moment, I believe our view is what we will be able to accomplish on data in Europe can evenly be accomplished for Britain.” He concluded: “In many areas, Britain is ahead of other countries with connection between the vehicle registration plate and vehicle data and in parts catalogues, which is not the case in many other of the European markets. Things will not be exactly the same, but I think overall we should be in reasonable shape.” www.aftermarketonline.net In many areas, Britain is ahead of other countries with connection between the vehicle registration plate and vehicle data and in parts catalogues ”