LKQ Corp Profile
LKQ Corporation is a global distributor of vehicle products, including replacement parts, components and systems used in the repair and maintenance of vehicles, and specialty aftermarket products and accessories to improve the performance, functionality and appearance of vehicles.
Buyers of vehicle replacement products have the option to purchase from primarily five sources: new products produced by original equipment manufacturers (OEMs); new products produced by companies other than the OEMs, which are referred to as aftermarket products; recycled products obtained from salvage and total loss vehicles; recycled products that have been refurbished; and recycled products that have been remanufactured. The company distributes a variety of products to collision and mechanical repair shops, including aftermarket collision and mechanical products; recycled collision and mechanical products; refurbished collision products such as wheels, bumper covers and lights; and remanufactured engines and transmissions. Collectively, the company refers to the four sources that are not new OEM products as alternative parts.
The company's Wholesale - North America segment is a leading provider of alternative vehicle collision replacement products, paint and related products, and alternative vehicle mechanical replacement products, with its sales, processing, and distribution facilities reaching most major markets in the United States and Canada. The company's Europe segment is a leading provider of alternative vehicle replacement and maintenance products in Germany, the United Kingdom (U.K.), the Benelux region (Belgium, the Netherlands, and Luxembourg), Italy, Czech Republic, Austria, Slovakia, Poland, and various other European countries. The company's Specialty segment is a leading distributor of specialty vehicle aftermarket equipment and accessories reaching most major markets in the U.S. and Canada. The company's Self Service segment operates self service retail facilities across the U.S. that sell recycled automotive products from end-of-life-vehicles.
Segments
The company operates through four segments: Wholesale - North America; Europe; Specialty; and Self Service.
Wholesale - North America segment
Wholesale - North America segment, which consists of aftermarket and salvage operations, sells five product types (aftermarket, OEM recycled, OEM remanufactured, OEM refurbished and, to a lesser extent, new OEM parts) to professional collision and mechanical vehicle repair businesses, which represents the source of the majority of the revenue generated by the segment.
As the profile and complexity of vehicles being repaired evolves, the company has expanded and continue to expand its offerings to customers. In recent years, the company has begun to offer on-site mobile and remote diagnostics services through its brand known as Elitek Vehicle Services. Additionally, the company began offering proprietary hybrid battery reconditioning and installation services which create a more reliable hybrid battery while also extending the battery's useful life.
Most recently, the company acquired Uni-Select, including Canadian Automotive Group, a leading distributor of automotive parts and accessories serving the Canadian market, providing an entry to the Canadian mechanical parts space; and FinishMaster, a leading distributor of paint and related products and supplies, which expands its existing North American paint business.
Scrap and Other Materials
The company's salvage operations generate scrap metal and other materials that it sells to metals recyclers. Vehicles that have been dismantled for recycled products and crush only end-of-life vehicles acquired from other companies are typically crushed using equipment on site.
Customers
The company sells its products to wholesale customers that include collision and mechanical repair shops and new and used car dealerships, as well as to retail customers. The majority of these customers tend to be individually-owned small businesses, although the number of independent and dealer-operated repair facilities has declined over the last decade as a result of consolidation. While the majority of the company's distribution is done through a two-step model, its Canadian Automotive Group business utilizes a mix of both a two-step (i.e., direct sales to repair shop customers) and three-step model (i.e., sales to distributors who in turn sell to repair shop customers).
Automobile insurance companies affect the demand for its collision products; while insurance companies do not pay for the company's products directly, they ultimately pay for the repair costs of insured vehicles in excess of any deductible amount. As a result, insurance companies often influence the types of products used in a repair. The use of the company's alternative parts instead of new OEM products provides a direct benefit to insurance companies by lowering the cost of repairs, by decreasing the repair time and thus the time the vehicle's owner is without a vehicle, and by providing a replacement product that is of similar quality and comparable performance to the part being replaced.
Distribution
The company's Wholesale - North America segment has the largest distribution network of alternative vehicle parts and accessories for the vehicle collision and mechanical repair market in North America. The company has a distribution network of warehouses and cross dock facilities, which allows it to develop and maintain its service levels with local repair shops while providing industry leading fulfillment rates that are made possible by its nationwide presence. The company's delivery fleet utilizes a third party software provider to optimize delivery routes and to track the progress of delivery vehicles throughout their runs. This third party software connects into each of the company's wholesale systems to allow a single interface for its management team to facilitate a single delivery to its customer, regardless of the product line or operating system. The company's local presence allows it to provide a responsive and predictable experience, delivering daily if required and using consistent drivers each delivery. The company's sales force and local delivery drivers develop and maintain critical personal relationships with the local repair shops, which benefit from access to its wide selection of products that it is able to offer as a result of its regional inventory network.
Europe segment
Europe segment operates in over 20 countries and was built up through a series of acquisitions. The company's businesses consist primarily of aftermarket operations, but it has begun expanding into wholesale recycling operations through the acquisition of businesses with salvage and vehicle repair facilities in Sweden and Norway in 2014, remanufacturing in Tunisia in 2018, and salvage in the Netherlands and Poland in 2023.
1 LKQ Europe
The company's European strategy, facilitated through its 1 LKQ Europe plan, is to leverage the strengths of acquired businesses, reduce procurement costs by consolidating and streamlining its product offerings, and combine into an integrated organization driving for functional excellence with the necessary technology linking its business processes with its customers and suppliers. As part of its 1 LKQ Europe plan, the company is integrating its European operations in order to optimize purchasing, warehousing, systems, logistics and back-office functions, and aligning its private label products across the segment. This integration includes product line rationalization, and the company has phased out or replaced more than 150 product lines in recent years. The company is reorganizing its non-customer-facing teams and support systems through various projects including the implementation of a common Enterprise Resource Planning (ERP) platform, changes to ways of working, further rationalization of its product portfolio, and creation of European headquarters and central back offices. The company completed the organizational design and implementation projects in June 2021, with the remaining projects scheduled to be completed by the end of 2027. The company's key strategic private labels are Optimal, ERA and MPM Oils.
Customers
The company primarily operates a two-step (i.e., direct sales to repair shop customers) distribution model in Europe, although certain businesses located in Italy, the Netherlands, Germany, Switzerland, and Hungary operate partially a three-step (i.e., sales to distributors who in turn sell to repair shop customers) distribution model. In its two-step operations, the company sells the majority of its products to commercial customers primarily consisting of professional repairers, including both independent mechanical repair shops and collision repair shops. In its three-step operations, the company sells products to wholesale distributors or jobbers. In addition to its sales to repair shops and wholesale distributors, the company generates a portion of its revenue through sales to retail customers from e-commerce platforms and from point of sale transactions at branch locations.
Distribution
The company has operations in over 20 different European countries, which represents the broadest and largest footprint in the aftermarket industry in Europe. The company's European operations employ a distribution model in which inventory is stored at national or international distribution centers or regional hubs, with fast moving product stored at branch locations. Product is moved through the distribution network on the company's trucks, vans or via common carriers. In 2021, the company finished building a new central distribution center in Berkel en Rodenrijs, the Netherlands, similar to its central distribution centers in Tamworth, England and Sulzbach-Rosenberg, Germany, that is allowing the company to consolidate multiple regional distribution centers.
Specialty segment
Specialty segment is a leading distributor and marketer of specialty vehicle aftermarket products and accessories in North America. The company has subsequently expanded through acquisitions within the core business and adjacent markets, including high performance vehicle equipment and electrical marine products. The company's Specialty operations reach most major markets in the U.S. and Canada and serve the following seven product segments: RV; truck and off-road; towing; speed and performance; wheels, tires and performance handling; marine; and miscellaneous accessories. The company's top selling products are RV appliances and air conditioners, towing hitches, truck bed covers, vehicle protection products, marine electronics, cargo management products, and wheels, tires, and suspension products.
Customers
Overall, the specialty vehicle aftermarket parts and accessories market serves a fragmented customer base composed of RV, marine, and specialty automotive dealers, installers, jobbers, builders, parts chains, and mail-order businesses. The company's customers are principally small, independent businesses. These customers depend on the company to provide a broad range of products, rapid delivery, marketing support and technical assistance. In addition to traditional customers, the company sells to several large parts and accessory online retailers. The company's Specialty segment also operates retail stores in northeast Pennsylvania.
The company promotes its products to customers through marketing programs, which include catalogs, advertising, sponsorships and promotional activities, product level marketing and merchandising support, and online and digital marketing initiatives. The company stages in-person and/or virtual trade shows across the U.S., which provide an opportunity to improve sales through the showcasing of new and innovative products from its vendors to its customers.
Online sales, which represent the majority of the company's sales, of its Specialty products take place primarily through its ekeystone.com, viantp.com, and SeaWideB2B.com sites and its mobile app. These sites provide customers the ability to match products with the make and model of vehicle thus allowing the customer to order the correct part, product information (e.g., pictures, attributes) available for review and the convenience of searching inventory availability and ordering the product on the site. Additionally, these sites can provide sales opportunities by suggesting other parts to purchase based on an inquiry submitted by the customer.
Distribution
The company's Specialty segment operations employ a hub-and-spoke distribution model that enables it to transport products from its primary distribution centers to its non-inventory stocking cross docks, some of which are co-located with its Wholesale - North America operations and provide distribution points to key regional markets and synergies with its existing infrastructure. The company uses its delivery routes to provide delivery and returns of its products directly to and from its customers in all 48 continental U.S. states and 9 Canadian provinces, and it ships globally to customers in other countries. The company's delivery fleet utilizes a third party software provider to optimize delivery routes, and to track the progress of delivery vehicles.
Self Service segment
Self Service segment consists of retail operations, most of which operate under the name LKQ Pick Your Part, and allows consumers to come directly to the yard to pick parts off of salvage vehicles. The company also sells scrap metal and other materials to recyclers from cars that are no longer available for customers in the yard. In addition to revenue from the sale of parts, cores, scrap steel and other metals, the company charges a nominal admission fee to access the property.
Scrap and Other Materials
The company's self service operations generate scrap metal, alloys and other materials that it sells to recyclers. Vehicles that the company no longer makes available to the public and "crush only" vehicles acquired from other companies, including OEMs, are typically crushed using equipment on site. Damaged and unusable wheel cores are melted in the company's aluminum furnace and sold to consumers of aluminum ingots and sows for the production of various automotive products. The company also extracts and sells the precious metals contained in certain of its recycled parts such as catalytic converters.
Customers
The customers of the company's self service yards are frequently do-it-yourself mechanics, small independent repair shops servicing older vehicles, auto rebuilders, and resellers.
Strategy
In its Europe segment, the company is implementing a multi-year business transformation by establishing a Pan-European organization and operating model. This plan will leverage the full potential of the company's leading European scale position as a single entity in areas such as procurement, logistics, product strategy, revenue optimization, digitization, and value-added services for its customers.
The company has four primary strategic pillars to build economic value: growing its diversified product and service offerings; expanding its geographic footprint; adapting to evolving technology; and rationalizing its asset base. The company's extensive distribution network, with a deep and broad inventory of quality collision and mechanical repair products and specialty vehicle aftermarket products, high fulfillment rates, delivery reliability, and superior customer service, provide it with competitive advantages. In order to expand its distribution network, the company may seek to enter new markets through geographic expansion, organic development, or acquisitions that target high synergies and/or add critical capabilities. The breadth and depth of its inventory across its operating segments reinforces the company's ability to provide a one-stop solution for its customers' alternative parts, specialty vehicle products and vehicle services needs. The company has developed business relationships with key constituents, including customers, vehicle insurance companies, multiple-location vehicle collision and mechanical repair operations, vendor partners and other industry participants in North America, Europe, and Asia. The company focuses on technology development to expand its competitive advantage. The company is committed to monitoring and adapting its business to the technological changes in the vehicle industry.
Intellectual Property
The company owns and has the right to use various intellectual property, including intellectual property acquired as a result of past acquisitions, such as intellectual property related to winches manufactured by Warn. In addition to trade names, trademarks and patents, the company has technology-based intellectual property that has been both internally developed and obtained through license agreements and acquisitions.
Seasonality
The company's operating results are subject to quarterly (year ended December 31, 2023) variations based on a variety of factors, including but not limited to, seasonal weather patterns. For its Wholesale - North America segment, the company tends to see higher demand for its collision related products during periods of cold inclement weather, which creates a higher likelihood of increased collision frequency. For its Europe segment, many of its aftermarket service-related products are impacted by weather patterns. For example, during periods of extreme cold, the company's Europe segment historically witnesses an increase in battery demand. The company's Specialty segment sells parts for RV and marine products, and as a result, it tends to see higher demand for its products during periods of warmer weather due to an increased level of outdoor leisure activity.
Acquisitions
In 2023, the company acquired Uni-Select Inc. (Uni-Select), a leading distributor of automotive refinish and industrial coatings and related products in North America through its FinishMaster business and a leading distributor of automotive parts and accessories serving the Canadian market through its Canadian Automotive Group business. This acquisition complements the company's existing North American paint distribution operations and provides a scaled position in the Canadian mechanical parts space, with opportunity for future consolidation and growth.
History
LKQ Corporation was founded in 1998. The company was incorporated in 1998.
