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Editor's Ink: Behind the Rumors


7/1/2006
By Brian Cruickshank

This month, we look behind the rumors to present an in-depth look at the factors that contributed ARI’s downfall.
 

When the huge reman company American Remanufacturers Inc. (ARI) declared Chapter 11 bankruptcy on Nov. 7, 2005, many people around the industry were surprised — even shocked. After all, the company had been on a path of steady growth, headed by one of the most successful and well-known leaders in the industry. The PR had been, as PR tends to be, overwhelmingly positive, even as storm clouds were forming over the company and its many merged and highly leveraged assets.

But the ink had barely dried on the bankruptcy announcement when, nine days later, ARI converted its Chapter 11 filing to Chapter 7, which essentially shut down the entire company.

I can remember that day vividly since I was visiting a New England distributor that sourced a lot of product from ARI. The distributor’s VP had heard on the radio that Bedford, NH-based CCT, which was owned by ARI, had unexpectedly shuttered operations. What did that mean for ARI, he wondered, and more importantly, what did that mean for his business?

The news wasn’t good. ARI and all its subsidiaries were gone, along with some 1,600 jobs across North America. WDs were left holding millions of dollars in cores and had to quickly hunt for new suppliers of a wide range of products. Even today, CV axles, which accounted for the majority of ARI volume, are in short supply, as other suppliers in the industry race to fill the product void.

So what happened to ARI? It was a story worth investigating since ARI’s collapse was a story of major proportions in the aftermarket, one whose impact touched many parts of the industry.

Unfortunately, with stories of such import, there will always be the rumors, many of which were neither fair nor based on fact. There were rumors about the company’s CEO Larry Pavey, rumors about financial malfeasance, even rumors about people possibly going to jail. Given the story’s importance and the rumors flying around, Counterman Publisher Jon Owens felt it was essential that we look into it and report on what we found. And so began my three-month investigation into what happened at ARI. I talked to many people from within and around the ARI operations. Given the touchy subject, most agreed to talk to me, but did so anonymously. I am grateful for their honesty and assistance.

Counterman presents an in-depth look into the collapse of ARI. We hope it clarifies a tragic situation, puts to rest many of the rumors and helps an industry understand just how internal and external factors can destroy a business.

On an unrelated note, I am thrilled to welcome Mitch Schneider to the Counterman staff. For many of you and your professional customers, he’s a familiar face as he’s no newcomer to aftermarket journalism. He has been a very well-known contributor, speaker and trainer around the industry for years. His first column appears this month.

Travelin’ Notes: A special thank you to the Automotive Specialty Products Alliance, which invited me to speak at their recent meeting in Baltimore, MD.















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