Auto parts supplier shutting DCs

by Array

BOUCHERVILLE, Quebec—Automotive parts supplier Uni-Select Inc is restructuring its US operations by eliminating about 600 jobs and closing dozens of stores and more than one-third of its distribution centres.

“Once it is fully implemented, we will be a stronger player in the automotive aftermarket distribution activities and generate a substantial growth in earnings,'” said CEO Richard Roy .

The Quebec-based company, which employs 6,100 people in its 58 distribution centres and 450 corporate stores, said it will cut 400 more positions on top of 214 already eliminated in recent weeks.

So far Uni-Select has shut 11 of the 48 stores it plans to close, along with one of the 12 distribution centres which have been slated for the chopping block. It plans to close an additional 30 stores and a second distribution centre in the third quarter of the year, with the rest of the reorganization to be completed by the end of the year.

The moves are a result of a slowdown in the aftermarket business that prompted a review of strategic alternatives that considered all options, including a sale of the US business. The goal is to save US$30 million a year in costs.

Roy declined to elaborate on the type of interest it received to purchase the US operations, but said the reorganization was deemed the best course over both the short- and long-term.

“The revised design of our distribution network will provide improved availability of products to our customers while being more efficient cost-wise and also asset-wise,” he told analysts.

The company said it remains committed to the US and Canadian automotive aftermarkets and expects to grow its presence in both the mechanical and collision repair sectors. Uni-Select also said the initiatives will help to reduce its debt by $40 million this year, increase market share and make acquisitions. Roy added that he expects to announce a new president of its US automotive business shortly.

The changes are in addition to a network optimization plan launched last August that realized US$20 million in annual cost savings. However, those benefits were offset by lower sales.

Uni-Select’s presence in the United States has grown over the past decade through more than 70 acquisitions.

The company will focus on select large distribution centres by opening two regional centres as it closes 12 smaller locations. It has already moved its national distribution centre from New Jersey to Tennessee.

The changes will leave the company with 21 parts distribution centres, including nine regional centres and 12 smaller centres that provide daily service to urban markets. It also has four distribution centres for its FinishMaster paint and Beck/Arnley engine and brake businesses.

It will also invest US$8 million to improve the efficiency of a dozen distribution centres.

About US$10 million of the annual cost savings will be realized this year, an additional US$15 million in 2014 and the remaining US$5 million in 2015. The changes are expected to reduce annual sales by US$70 million and result in US$45 million in one-time costs. Restructuring charges totalling about US$36 million will be recorded in the second quarter, with the rest being booked as they are incurred.