This industry classification includes establishments primarily engaged in the installation, repair, or sale and installation of automotive exhaust systems. The sale of mufflers, tailpipes, and catalytic converters is considered to be incidental to the installation of these products.
811112 (Automotive Exhaust System Repair)
This industry covers exhaust system repair which primarily involves the sale, installation, and repair of mufflers, tailpipes, and catalytic converters. It is distinct from businesses engaged in the overall repair of automobiles. Such businesses are primarily categorized in SIC 7532: Top, Body, and Upholstery Repair Shops and Paint Shops and SIC 7538: General Automotive Repair Shops. Businesses engaged in specialized automotive repair, such as fuel service, brake repair, wheel alignments etc., are classified in SIC 7539: Automotive Repair Shops, Not Elsewhere Classified.
Car exhaust system service is typically provided by dealership garages and auto exhaust repair shops. Besides the existence of numerous "mom and pop" auto service businesses, the industry was led by a few relatively well-known repair shop chains. Among them were Monro, Meineke, and Speedy International, Inc. No single company has dominated the industry.
According to the U.S. Census Bureau, the auto exhaust repair industry consisted of 6,237 establishments in 1998, up from 6,071 in 1997. Employment figures showed that 28,800 people were employed in the industry in 1998. Revenues totaled $2.63 billion. In the same year, the industry had a $665.5 million payroll.
Exhaust Systems. The exhaust system of every modern automobile requires frequent care and repair. Condensation in the typical exhaust flow, coupled with ordinary wear, will often result in the necessary replacement of the car's muffler and exhaust pipes. The result is a vehicle with minimal engine noise and an exhaust system that more effectively funnels toxic fumes produced by the vehicle away from the car's interior. When owners determine that their exhaust systems may need repair, they typically avoid do-it-yourself (DIY) replacements and seek the services of exhaust system repair shops. These repairs are also necessary for the owner to maintain car emissions that meet Environmental Protection Agency (EPA) standards. Auto exhaust repair shops install, Repair, and inspect the proper pollution control devices.
A car's exhaust system consists mainly of an exhaust pipe, a muffler, and a tailpipe. The exhaust pipe collects the exhaust of a car through a series of exhaust ports in the internal manifold of a car engine. This exhaust is funneled to a downstream pipe and moved through the muffler. The tailpipe discharges the car's exhaust into the atmosphere after it has passed through the muffler.
The muffler is the main component of the exhaust system. It is basically a device that reduces the noise produced by the movement of gas and internal combustion of the car's engine. The typical shell of an automobile muffler is shaped like an oval that measures roughly 20 inches long, 10 inches wide, and 6 inches high. Its internal architecture is comprised of perforated steel tubes and a number of chambers separated by steel partitions. This combination of filters and tubes acts as a honeycomb that acoustically filters the exhaust sound. The typical muffler can reduce the sound pressure of a car's exhaust from 90 to 60 decibels, a 1,000-fold decrease. More expensive dual exhaust systems have four or more mufflers.
Federal regulations require that motor vehicles be fitted with emissions control devices. Therefore, a mechanism such as a catalytic converter has become an addition to a car's exhaust system. Since their initial requirement in 1975, catalytic converters have served to reduce harmful exhaust. Improved emissions allow the owner to comply with standards mandated by the Environmental Protection Agency.
Legislation to control automobile pollution is in the Clean Air Act, which was passed in 1956 with significant amendments in 1970 and 1977. Regulation of mobile pollution sources was considered controversial. In fact, an EPA study in 1979 attested to the difficulty involved with getting automobile owners to comply with state and federal standards requiring the installment and maintenance of properly functioning pollution control equipment, specifically the catalytic converter. The converter cleans up the car's exhaust gases to meet those standards created by the EPA. Today's converters are made of a honeycomb-like material that is lightly coated with palladium and platinum. These two elements, when in the presence of oxygen, aid in the reduction of hydrocarbons and carbon monoxide.
The emissions control system of a car does not become the responsibility of the owner until the manufacturer's warranty expires. At that point, problems with the catalytic converter usually lead the car owner to an auto exhaust repair shop that provides emissions control work. The most common difficulties with the converter are clogging and melt down. These two problems typically occur in high-mileage engines and result in exhaust problems. Converter failures can also be symptomatic of other problems.
The technicians at auto exhaust repair shops who are faced with converter problems have a number of options for diagnosis of the converter and accompanying emissions systems. Technicians may begin with a visual examination of the mechanism to discover any evident rust destruction, leaks, or broken connections. More complicated methods of testing the system include thump, temperature, and back pressure tests. These tests detect difficulties of the converter caused by circumstances such as build-up of phosphorous on the surface of the converter due to burning oil, foreign matter plugging the interior of the converter, excessive sulfur content in the fuel, anti-freeze leaks into the engine which pollute the converter, or broken or ineffective exhaust air pumps.
Overall, the industry expanded its sales throughout the late 1990s. In 1998, auto exhaust repair shops earned $2.62 billion, up slightly from 1997's $2.57 billion.
The industry outlook for auto exhaust repair shops was quite promising in the late 1990s. Advancing technology (particularly in the area of mufflers and catalytic converters) and increased automobile emissions regulations promised to create more work for exhaust repair shops. Also, an increase in the number of older cars on the road (mainly the result of high car prices and a prolonged recession) meant that more car owners were maintaining and repairing their cars rather than simply replacing them. Because most gas stations began exiting the repair industry in the mid to late 1980s, and many new specialty shops did not perform exhaust repair, there appeared to be a shortage of exhaust repair service providers in the mid 1990s. In fact, since 1975, a 70 percent decline in the number of repair outlets resulted in remaining repair shops increasing their average number of repair jobs per year from 398 in 1980 to 460 in 1988.
Although there was some fluctuation in exhaust Repair business from year to year — largely a result of weather (salt on snowy and icy roads causes corrosion) and the amount of technological change — the overall market for automotive aftermarket repair was large, fragmented, and growing. Acting as factors in favor of the industry were the declining ability of car owners to perform their own repairs because of more complex vehicles (particularly the dramatic increase in electronic components), less leisure time, and increasingly stringent emissions regulations that made more exhaust system inspections necessary. Likewise, the increase in vehicles on the road, vehicle miles driven, and the average age of cars contributed to the strength of the industry.
The greatest threat posed to industry participants going into the mid 1990s was new entrants. In 1992, General Motors entered the auto exhaust repair industry by offering such repair work to its dealers' service and parts operations. General Motors dealers began the Goodwrench Exhaust Program, which provided them with mufflers, resonators, pipes, accessories, and service tools necessary for exhaust system repair. Dealers were allowed to decide the extent of the inventory they would maintain (from $3,000 to $40,000), while stocking racks and service tools were provided free. The new program was General Motors' attempt to muscle in on a growing and lucrative industry. The program was backed by substantial marketing and advertising efforts. The automaker's move threatened the current leaders in the industry and forced them to develop better marketing and service programs.
One of the most successful competitors in the early 1990s was Monro Muffler Brake Inc., which began as a Midas International Corp. franchise in the 1950s. Founder Chuck August added brake shops and took the company public in 1991. In 1984, a group led by Wall Street executive Peter J. Solomon bought a controlling interest in the company; the group owned about 20 percent of the company in 1996.
Between 1987 and 1992, the company more than doubled its sales. Since the early 1990s, the company aggressively opened new shops. In 1992, the company had 167 shops in eight states, predominantly in the Northeast. Overall, Monro's rapid expansion has added 15 percent to square footage every year. Substantial growth occurred between 1991 and 1996, when sales climbed from $21.5 million to $117 million. By 1996, the company owned and operated 274 muffler and brake repair shops. Monro also came close to doubling its number of stores again in 1997. In 1999, Monro achieved sales of $154.3 million and employed 2,138 people.
Monro's management strategy relied on advanced inventory control systems and exceptional customer service. The focus on customer service gave the company an advantage over its larger franchise competitors. The strategy manifested itself even in chairman Jack Gallagher's policy of personally replying to all customers' letters. This strategy tended to create a focus on customer satisfaction even at the shop level. The end result was a 77 percent repeat customer rate in the mid 1990s. This approach appeared to be successful as business continued to grow in the late 1990s.
The typical Monro outlet and repair shop had six service bays and 4,500 square feet. Monro organized its stores around one key outlet, which carried a larger inventory and acted in a support role for smaller satellite shops. Monro improved its overall service ability when it implemented measures designed to result in more effective inventory management. Since the 1989 installment of a point of sale (POS) inventory tracking system, the company dramatically increased its ability to meet customer needs with on-hand inventory. This system improved customer satisfaction and increased gross margins, and allowed Monro to react more efficiently and effectively.
Monro repair shops were staffed by four to six mechanics who reported to a store manager. The company retained its quality mechanics by providing them with career growth opportunities. In fact, most regional and store managers began their careers with the company as service technicians. Also, the company paid a premium hourly wage to its mechanics who received an Automobile Service Excellence award. This emphasized the company's desire to insure quality service and acted as an incentive for employees to become certified mechanics.
A standard Monro repair shop broke even after only its first year of operations. This required achieving an average in first year sales of $300,000. Nearly all stores opened in the mid 1990s met this goal. The success attested to Monro's strategy of placing shops in high-visibility and well-traveled locations.
Besides Monro, significant players in the industry included Toronto-based Speedy International, Inc., which not only replaces and repairs mufflers but also provides tire, suspension, oil, and alignment services. Founded in 1956 by Fred Karp, Speedy became a private, multinational company with operations in Canada and the United States (through CarX Muffler and Brake). Although he sold it to Tenneco Inc. in 1968, Karp bought the chain back in 1988 when Tenneco underwent a major restructuring. In 1999, Speedy posted third quarter revenues of $41.3 million, 76.3 percent lower than the same period in 1998. This dramatic decline resulted from Speedy's sale of its European operations in early January, 1999, and the sale of its stores operating under the Speedy brand in the United States in September, 1998.
Technological threats to the exhaust repair industry have occasionally appeared in the form of improved components that require less repair. For example, in the late 1980s a stainless steel muffler was introduced that promised less erosion. Many of these advances acted to improve business. In 1992, the EPA proposed tougher rules for checking vehicle emissions. The change was expected to cost Americans $1 billion, much of which would go to repair shops required to perform the work. The proposed rules subjected 100 million cars to the tougher, costlier testing.
Advancements in muffler and converter technology have taken the shape of improved efficiency. Researchers at the Noise Cancellation Technology Labs in Connecticut invented a new electronic muffler that utilized computer generated "anti-noise" to further muffle engine noise. The new muffler, which can be produced for the same cost as conventional mufflers, improves engine power and fuel efficiency. Meanwhile, Corning Inc. developed a catalytic converter that would not require a car to warm up before operating effectively. These and similar developments for improvement to automobile exhaust systems did not appear to threaten the industry's steady increase in size and revenues.
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Speedy Auto Service. "Speedy Announces Third Quarter Results." Toronto: 1999. Available from http://www.speedy.com/ .
Templeton, Fleur. "Corning Cooks Up Cleaner Catalytic Converters." Business Week, 16 March 1992.
U.S. Census Bureau. "Service Annual Survey." Washington, D.C.: GPO, 1995. Available from http://www.census.gov/prod/2/bus/cbp94/cbp94-6.pdf .
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