parts.com Insiders Lock Up in Excess of 13 Million Shares
14 April 2000
parts.com Insiders Lock Up in Excess of 13 Million Shares; Company Challenges Other Dot-com's to Do the Same
SANFORD, Fla.--April 14, 2000--parts.com, Inc. (formerly Miracom Corporation) (stock symbol: MIRM), a leading real-time business-to-business e-commerce parts exchange, today announced that the company's insiders and affiliates have signed a one-year lock-up agreement effective immediately.
"As testimony to the strength of the parts.com business model in the United States, Europe and Asia and to show our long-term commitment in the growth potential of parts.com to our shareholders, the insiders have signed a one-year lock-up agreement effective immediately," stated Shawn D. Lucas, Chairman and co-CEO. "With this announcement, we intend to send a clear message to our loyal shareholders and to the investment community that we are committed to stake our claim in the $600 billion auto parts market. We have locked up in excess of 13 million shares, which will not be registered for sale. We challenge other dot-com companies to do the same."
"It is our obligation to our shareholders and to the investment community to inform and educate them as to the differences between our business model and the trade exchange jointly developed by GM (NYSE:GM), Ford (NYSE:F) and Daimler/Chrysler (NSYE:DCX)," continued Lucas. "It is also important to note that, from the beginning, parts.com has never taken a position of trying to compete with the car manufacturers, but instead has relied heavily on bringing value to the entire auto parts supply chain, eliminating those inefficiencies which exist today and maximizing the efficiencies through the use of technology. Our management team has met and addressed the areas which we feel will shed some light on the latest developments, strategies, goals, progress and - more importantly - our currently operating parts exchange."
The OCTANE System
As a business-to-business exchange, parts.com continues to fully integrate the automotive supply chain by processing real-time automated transactions, order placement, tracking, inventory control and the aggregation of information for improved market penetration.
Parts.com continues to execute its business model, whereby parts and accessories are delivered to dealerships, garages, collision repair facilities, and transportation fleets within hours on an as-needed basis. Parts.com's goal is the elimination of excess parts inventories through its auction and reverse auction. By capturing and providing "real-time" consumption information in graphical format to suppliers and manufacturers, parts.com allows the dealerships and manufacturers to forecast consumer demands, improve inventory controls and speed up the delivery ("just-in-time") of auto parts throughout the supply chain. This is accomplished through parts.com's OCTANE (Order Control Tracking and Network Environment) System.
"Parts.com's OCTANE System is the engine that fuels our company's rapid expansion," explained Lucas. "OCTANE improves supply chain performance and customer satisfaction for garages, tire shops, collision/repair facilities, transportation fleets, recyclers, dealerships, wholesale distributors, suppliers, and manufacturers. Certain car manufacturers have stated that OCTANE provides an exceptional service by allowing users a real-time view of accurate supply chain information. Technology companies and these same manufacturers have told us that we are well ahead of the curve with OCTANE."
The OCTANE System will allow users to measure and collaborate on performance over the Web so decision makers can dramatically reduce the time needed to make decisions and quickly adapt to market trends.
Parts.com Supports Its Position By Quoting Some of the Most Prolific Individuals in the Industry
"One thing is clear - they (the "Big 3") will not use the new exchange to buy modules, systems, subsystems and individual parts that they feel give them a strategic advantage over another automaker," stated Ralph Kisiel, reporter, March 20, 2000, US Auto News. "They will buy, especially during the early stages of the joint venture exchange, office supplies and goods needed for maintenance, repairs and equipment overhauls."
"How each automaker will use this new tool has been widely misunderstood," said Alice Miles, President of Ford Business-to-Business, the ConsumerConnect unit overseeing Ford's auto-exchange. "People tend to think that because we've introduced a tool, we're going to shift 100 percent through that tool, and that's really not the case," as quoted March 20, 2000, US Auto News.
"Auctioning is something that is very small in our vocabulary and very small in what we intend to do here," said Peter Weiss, project director of the e-Extended Enterprise at Daimler Chrysler. "Everybody gets very much hung up on auctions, and definitely Daimler Chrysler is not an auction type of company in terms of its procurement process," as quoted March 20, 2000, US Auto News.
"Companies such as parts.com will need some time, maybe as long as three years, to become well-known to investors. Then I would expect stock prices on these Internet-based exchanges to spike way up, trading at very high multiples, like an eBay (NASDAQ:EBAY) for example," stated Randy Barba, Anderson Consulting specialist in Distribution-Channel Strategies for the Automotive Industry in a March 14, 2000 Dow Jones Interview.
Defining the Markets
There are multiple market segments in the automotive parts industry, each providing a variety of opportunities for technology companies. However, there are two general areas with distinct differences where parts procurement, distribution and manufacturing can gain through the utilization of Internet-based technologies/exchanges. The first area is that in which parts are being procured, manufactured and distributed in order to be used for the manufacturing of new vehicles. The raw material logistics is the primary area where the Big 3 will focus the implementation of their exchange. The second area is that in which parts are being procured, manufactured and distributed in order to replace the original part when it fails. This is the primary area where parts.com is focusing the implementation of its exchange. These two sides of the market are completely different in procurement, distribution and purchasing.
These two areas have some overlap, but are completely different with respect to operations - so different, in fact, that each is a separate industry within an industry. Individuals whose careers lie in the automotive industry refer to the markets as the "OEM market" and the "replacement market." To realize the distinction as a financial advisor and/or shareholder is very valuable, but being informed about the massive size and complexity of each market will help to understand why so many technology companies can and will exist in this marketplace.
The manufacturers are the companies that actually make the majority of the parts for the Big 3. This exchange alliance (unnamed at present) between the Big 3 will strive to create a standard means of communication and purchasing process between the Big 3 and the manufacturers that supply them. Today, that process is quite laborious, time-consuming and paper-intensive - resulting in high labor costs, increased time-to-market and unnecessary use of paper for the OEM's. The exchange will initially focus on those raw materials intended to be used in the production of new vehicles. Additionally, the exchange will also leverage the purchasing power of the Big 3, in an auction-type setting, relative to common items such as steel, office supplies and maintenance products, in order to provide further cost savings.
The Big 3 believe that the efficiencies and cost savings will be realized by all participants; however, many of the parts manufacturers are skeptical when they consider their technology history with the Big 3 and the potential software and implementation expenses that will likely be a part of the industry. This is not the first time the Big 3 have attempted to come together to create a standard communications platform for procurement. Just five years ago, the Big 3 endorsed and authorized the development of the Automotive Network Exchange (ANX), which went live about a year ago. ANX is a private network that utilizes a single communications protocol (TCPIP - the same protocol used by the public Internet today), providing a common platform to host standard applications for product procurement and product development. The network was formed to eliminate transaction costs that are typically incurred when using traditional means of business communication, such as EDI (Electronic Data Interchange) and point-to-point. Parts manufacturers like Chicago Rawhide and others who made substantial investments to comply with the ANX requirements will likely have to duplicate that expense to now comply with the new exchange. That may not appear to be much of an expense for multi-billion dollar or multi-million dollar companies, but then consider the fact that the majority of those companies only net single digit percentages on their business with the Big 3.
Dealership Distribution and Franchise Laws
It is important to note that automotive manufacturers cannot circumvent their existing dealerships with respect to new car sales and automotive part sales, due to the strength of many state franchise laws. Nearly every state has legislation with respect to dealer operating policies and procedures, thus mandating that new vehicle sales must be sold through a state licensed franchised dealer. The law is therefore on the side of the dealerships and parts.com. Businesses that sell books, toys, CD's, and other items are not regulated like automotive dealerships, who are subject to the rules of the Department of Motor Vehicles, which protect the dealer distribution system.
Understanding that car manufacturers cannot circumvent their existing dealer body and that the car manufacturers lacks the physical distribution system (without their existing dealerships) to deliver "just-in-time" auto parts to the local garages, collision repair facilities, fleet vehicles and dealerships - justifies why we have implemented our Platinum, Gold and Silver dealer agreements and will continue to do the same until we reach critical mass.
The eAuto Report, by Robertson Stephens, indicated, "The dealer body is extremely powerful and geographically diverse. Dealers are often the leading contributors to state legislative races, are significant employers and contribute approximately 20% of all state sales tax revenue." Thus, the rumors regarding the demise of the car dealers are grossly overstated. Car dealers are entrepreneurial; therefore, those dealer operators who embrace e-commerce will continue to thrive in their local trading areas.
Dealership Profit Centers
Another area of importance, which will continue to drive value in parts.com, is the dealership profit centers: vehicle sales; finance and insurance; and parts and service. It is our opinion, backed by industry knowledge, that many "dot-com" companies specializing in new vehicle sales on-line will continue to squeeze the front-end profit margin at the dealership level. An even greater threat to dealerships nationwide is the expansion of on-line new vehicle financing and insurance on which these "dot-com" companies have focused their attention, knowing that on-line new car vehicle profit is minimal at best. These on-line companies will make their profit in only one category: finance and insurance. They haven't got the physical locations (brick-and-mortar) to support parts and service - and therefore maintain a long-standing relationship with their clients. Thus, we believe customer retention will continue to fall upon those local dealerships which need to continue to increase their customer satisfaction index (CSI).
Knowing full well that parts and service are the largest profit center to date and will continue to be in the foreseeable future puts parts.com in a very favorable position. More importantly, in a recession, consumer purchasing of new vehicles slows down and parts and service revenue increases - thus increasing our revenues due to the transaction fees collected for the procurement of the auto parts.
Another important note is that all warranty work on new vehicles must be done at the dealership level. To date, we are not aware of any technology that can repair a vehicle on-line.
Parts.com and The Big 3
We are pleased that The Big 3 have "announced" their joint collaboration for the procurement of raw materials. First and foremost, parts.com is a "live" operating exchange. As a technology company with industry expertise, we have created a new pipeline to serve business-to-business-to-consumer ("B2B2C").
Parts.com is leveraging the use of technology and e-commerce, to replace the phone and, in particular, the antiquated and proprietary systems that exist today, for locating, procuring and fulfilling auto parts needed by franchised dealers, garages, collision repair facilities and transportation fleets to service their customers and vehicles.
Parts.com is standardizing the means of communication between the thirty-four vehicle lines on a single exchange through the use of an ASP (application service provider) and our patent-pending OCTANE system.
Ultimately, parts.com will leverage its dealer/distributor base to purchase aftermarket parts directly from the parts manufacturers through OCTANE. This will inevitably increase our dealer/distributor's ability to positively impact service retention, loyalty and increase profitability by recapturing their share of the $127 billion U.S. aftermarket parts segment.
Parts.com is one of the largest and most ambitious B2B2C exchanges to date. Our strengths are tenacity, passion, drive, and the relentless pursuit to be the best and most powerful parts exchange in the world.
parts.com's business model calls for Platinum Suppliers, Gold Suppliers and Silver Suppliers to build the infrastructure needed for "just-in-time" auto parts. This platform is expected to enable the parts.com parts exchange to deliver parts within hours - or even minutes - of order placement.
About parts.com
parts.com provides a business-to-business e-commerce solution for the $600 billion auto parts industry. The site creates value for participants throughout the supply chain, including manufacturers, distributors and parts buyers, as a result of its unique, direct business model which eliminates a number of inefficient links in the supply chain inherent in the auto parts business. parts.com's technology and logistics plan enables parts suppliers to deliver their product more quickly and cost-effectively than through traditional distribution channels. parts.com was officially launched on January 23, 2000 at the National Automobile Dealers Association's (NADA) annual conference in Orlando, Fla.
(This news release includes statements that may constitute forward-looking statements pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Although parts.com, Inc. believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be met. Factors that could cause actual results to differ materially from parts.com's expectations include the operational performance of parts.com, the Company's success in entering into strategic alliances, parts.com's and ReallyKnow.com's operational and financial performance, industry conditions, demand for its products, as well as other risks.)