Built on Quality: H & H Truck Parts’ Steady Climb in the Remanufacturing Industry

Mark Harris: My name, as you said, my name is Mark Harris. I’m with H H truck parts. We are a rebuilder out of Cleveland, Ohio. Uh, we’ve been in the business. Uh, I’ve been in the business for 25 years now. My business partner’s been in the business for about 35 years. We started our company, we worked for somebody else. We started our company because we thought we could do things a little bit different. We thought we could provide a better product and keep prices affordable. So we started our company and it was founded in 2004. We’ve grown, we’ve had a positive year in growth every year since we’ve been in business. You know, we, we try to focus on quality rebuilding. We’re not going to be the most affordable unit on the block, but we certainly think that we’re the best, you know, with our product. We use all e OE parts in our transmissions. We are the largest Eaton Fuller purchaser in the state of Ohio. And I don’t know, I guess that’s about all I have for me.

Chandler Kohn: That’s helpful. Thanks. That’s a good overview. And you’re across the three locations, how many employees do you have?

Mark Harris: We actually only have one location. We work out of several cities where we have stock or inventory, but we don’t re. We only rebuild in Cleveland. We have. Okay, we have 30. 30 employees.

Chandler Kohn: Well, good. You know, so obviously when it comes to other remand groups, obviously you have the large players, you have some smaller ones. You know, I know you’re not necessarily competing on price. You’re, you know, competing on quality. You know, what’s, what’s, you know, why does somebody, why do your customers come to you versus, you know, just different groups? Obviously it sounds like you provide a great product, but talk to us a little bit about that, how you’re making that happen.

Mark Harris: Yeah, so we market through outside sales. Obviously that’s the best way to reach out to our customers of, you know, we, we do business with everybody from a one truck operation, owner operator, to many truck fleets. We also do business with truck parts companies that sell you know, new and remanufactured products out of their, their facilities. In terms of how or why somebody would want to come do business with us, we not only, I think we have honestly the best product in the country. We’ve built our business on honesty upfront business. We don’t, we don’t keep anything in the shade. You know, we, we do things like, we quote our customers before we do things to their vehicles. We have a service department and a lot of companies, when you take your vehicle to them, they’ll just open up the checkbook and do whatever and not even let the customer know. We go, we walk step by step with the customer. We talk with them about the things that we found. We give them an opportunity to, you know, make the decision on what they want to fix or maybe what they want to let go for a little while longer. They think they can get some more life out of it. But we focus on the, from the engine flywheel back, we don’t do brakes and brake shoes, but we do everything from the axle shaft to the engine flywheel. Everything in between there. We remanufacture transmissions, differentials, we rebuild or build new drive shafts. We sell clutches, we sell axle shafts, as I said, and all the accessories that go, you know, in between those two areas on the truck. But we really, we really take our, take pride in our quality of product. We sell new products as well, but we really take pride in what we do in terms of rebuild.

Chandler Kohn: How many, how many transmissions roughly are you guys doing a year?

Mark Harris: That’s a great question. Transmissions. I would. Gosh, you hit me with something I wasn’t prepared for. Let me do some quick math in my head here. A thousand.

Chandler Kohn: Yeah. Okay. Just trying to, just trying to get rough.

Mark Harris: Yeah. Roughly a thousand annually. Differentials. A little bit more.

Chandler Kohn: Yeah. Okay, good. You know, so I want to talk about this, right. The, the heavy duty. The heavy duty space is, is, is, you know, for the most part, it’s down right now. You know, trucking’s down. Tariffs of Hit Trucking, etc Remanufacturing is outperforming. That’s what we’re seeing. You know, recently spoke with Stellix Capital, who owns Phoenix Parts, and you know, they’re doing well. It’s great to hear that. You know, they’re growing. We actually have a client in space who’s growing. Tell. You know, the average age of a truck is, is getting older. Tell me where you think the industry is going to keep heading over the next two years, three years and you know, if you think that that growth within remanufacturing is going to level out or if it’s going to keep going?

Mark Harris: You know, I. In terms of growth, yeah, the remaining, I think that is always going to be there. I mean a person can save up to 50, 60% on buy a reman. Buying a reman unit versus a new one. So it’s a lot more affordable for customers. Most people, you know, we sell to people that have vehicles that they make a living with versus going to an auto parts store. People don’t make a living with their car. They can be without their car for a day, two days a week. Your semi truck, your truck out there on the road, you need it running every day. So you know, that’s why we focus on quality on our remands. But I see the industry going more automatic and auto shift. It is, there’s no question about it. That’s grown quite a bit. I don’t see electric coming into play for a long time. You know, I don’t think there’s anybody really out there that’s plans on putting any on the road in, in terms of fleets for a while.

Chandler Kohn: So like 2032, 2035.

Mark Harris: I think further than that, to be honest with you. It’s. The hauling industry has kind of taken a back seat to the, the automotive industry when it comes to the electric vehicles. Definitely you don’t have as many people doing R D on, on the electric trucks, if you will. There are some that are working harder on it than others, but some people have even scratched, you know, scrapped it. They’re not even, they’re going to try it for now, you know. So I, I think we’re going to be fine. I think we’re going to stay with the, the I guess diesel engines. I don’t see electric taking over for a long time. So having said that, we have to ship years now to try to keep up with the automation side in terms of auto shifts, automatics. You know, we have to keep our people trained when new stuff comes out. In fact, we try to get involved with the, the manufacturers. We put on a class, we’re putting on a class in December preten Fuller. So anybody that’s listening that wants to come to it, you’re welcome to. We put on classes. We have them come in. They’re going to go over the endurance transmission, which is one of the newer transmission lines on how to rebuild it.

Chandler Kohn: So are the, are the, are the automatic transmissions, are they gonna make things more difficult from some standpoints but make things easier from Other standpoints, you know, from a remanufacturing perspective, in terms of.

Mark Harris: Automatics, yes, guys like us will probably. It’ll put a lot more pressure on us. The automatic. The true automatic manufacturers kind of keep things very streamlined in terms of who they sell their parts to, who they set up as, you know, warehouses across the country. There’s not a lot we have to buy through other people if we want to build them. We don’t even build automatics, true automatics. We build the auto shifts. And an auto shift is basically a manual transmission with a brain on the side of it that shifts, that tells it when to make the shifts, so it shifts through on its own. Whereas an automatic, it’s done with fluid. It’s fluid control that shifts the transmission totally. Although they’re the same, they’re both transmissions, they’re totally different.

Chandler Kohn: So is it a. Is it. Are you expecting a change of business model might be too much here, but are you expecting a change in the tooling requirements, really honing in your technicians, that type of thing? How, how are you thinking through your business to make sure you can adjust to that and, and kind of not skip a beat.

Mark Harris: We talk to the manufacturers we’re in close contact with, you know, the people that supply us with parts and the OEs. We talk to them regularly. We. That’s how we kind of stay in tune with what’s coming at us. They know what trucks, they’re, who they’re selling to, Freightliner or, you know, Mac or whoever. They. They know who they’re selling to. They know what they’re going to put in production next year. And that’s how we kind of stay in tune. Because those trucks that go through production now, we won’t see any work from those trucks for the most part for, you know, five years or longer, because it’ll be under warranty.

Mark Harris: You know, so that’s how we stay in tune. And like I said, we put on classes here. We have the manufacturers come in and put on classes, you know, for our rebuilders and mechanics. Install classes. Rebuild classes. That’s kind of how we stay in.

Chandler Kohn: In touch for, for the, for the transmissions under warranty. I mean, I know, I know sometimes when they’re still in warranty, the, the vehicle will still get a remand core or part of. Is that, is, is that not happening in this situation?

Mark Harris: No, not generally. They won’t put back in a remanufactured unit if it’s under warranty. They’ll have the dealership repair it or in Some cases, if it’s bad enough, they’ll send them another transmission, but they, they generally won’t pull out a warranty unit and put in a remanufactured unit.

Chandler Kohn: Okay. On the tech side, you know, how are you thinking about changing your, your tech stack, if you will, or your diagnostic tools, whatever that looks like software for the shift in the industry?

Mark Harris: We stay up with it. Again, the manufacturers supply software to plug into these trucks that will diagnose them for the most part. Kind of just same as a car. And we just update that software annually and we keep our OR techs, you know, up to speed with all that kind of stuff. Yeah, technology changes every year.

Chandler Kohn: So yeah, I’ve been talking to a couple folks on the show about like Google Glass and kind of using like the, the backend AI to diagnose, kind of do some Pete, not so much diagnose, but some preventative maintenance work. You know, telling the technician how to kind of, you know, remove a part and then replace the part, the steps. Is that something that you’re going to see in, in the, in the remanufacturing or rebuilding space down the line? It’s like a, it’s like a, you know, you know, Google Glass is an example, but it’s something that the, the technician would wear kind of over their face. But they’re looking at the vehicle and that technology is kind of telling them the next steps to make.

Mark Harris: Yeah, yeah, I foresee that in the future. I don’t foresee it in our industry. The near future. Yeah, I’m not aware of anything out there. I know what you’re talking about. Now. The automotive industry for some reason is, you know, always ahead of us in terms of a technology like that. And I’ve already seen that that stuff is already out there with, with the automotive side with us. I’m not aware of anything yet, so. And I don’t see it coming into play in the next probably five years.

Chandler Kohn: Got it. So you, you’ve been growing year over year since you started in the early 2000s. Is a lot of that. Obviously you’re producing a quality product, but is some of that attached to your sales and marketing initiatives? Building your brand and name, maybe describe that. Or are you just riding kind of the industry waves as they’re going up?

Mark Harris: No, we’ve, I think we’ve worked very hard to build our brand. You know, I think we’ve got some brand recognition and we work hard for that. We definitely don’t just ride the wave. Companies that ride the Wave, you know, won’t be around too long. You know, you, you’ve got to put effort in there. And we do, we, we market. Like I said, we market our products locally in the state of Ohio with outside salespeople. I work on that side, the sales part of the company. I kind of handle that. So we stay very involved and very try to stay in front of the customer.

Chandler Kohn: And are your, are your customers in the region? Are they outside of, you know, the Midwest and kind of the, the Northeast area?

Mark Harris: We actually do business all, all across the United States. We supply a truck parts company, one example that has locations all across the United States. So our product goes from shore to shore. People see it, they distribute it. They’re a distributor. Yes, we supply.

Chandler Kohn: Yeah, so. So you’ll bring them to a. Like, you’ll bring your product, products to their kind of their, their central hub and they distribute it all across the U.S. you, you don’t necessarily have to worry about right across the country.

Mark Harris: Correct. We, we supply their distribution centers. They order from us direct. We supply their distribution centers and they take it from there. They filter the units out across the United States into their stores, sometimes on demand. Some areas in the country, they actually stock units to help supply even further out locations.

Chandler Kohn: Got it. Talking about talent and labor and the, just kind of the labor shortage, is that hitting you guys and what are you doing to make sure that you have a pipeline of talent?

Mark Harris: Yeah, it’s definitely affecting us. There’s no question about it. We, you know, we could probably hire three to five more guys today. They’re hard to find people that really, these generations coming up, they just, they don’t see things like we do. These kids don’t like to be hands on, especially in mechanical work. It’s very often find young guys that, that want to be a mechanic or a truck mechanic. So word of mouth kind of helps us. I think we have a great program in terms of pay, benefits. I think we’re a great company. I think our. We don’t. We have. Very rarely do we have turnover with our employees. So it’s about, having a great workplace. It’s about having the benefits and the pay to go with it. And that’s how we’ve attracted the people that we have. And from there, it’s kind of in word of mouth that we’ve been able to hire people. Rarely do we get. Somebody just comes in and fills out an application and they’re either qualified or fit the position that they could be qualified if we trained them. They’re hard to find.

Chandler Kohn: And do you, do you. You know, obviously, if, if your, you know, workforce is, you know, in their 30s and 40s or 40s or 50s, you know, they, they obviously have some Runway. But if you have older employees, you got to be thinking about, you know, retirements and, and potentially just moving on to, to something else. If you’ve been doing it for 20 or 25 years, is that something you’re worried about now or is that something that, you know, you can kick the can down the road a little bit on?

Mark Harris: Yeah, we, no, we, we worry about it now. We think about it every day. We’ve employees that are, you know, tenured with the company. They’ve been here, you know, since day one or within the first five years of being in business. And we’re in our 21st year of business. So we’ve got, but we also have guys that we’ve brought on since then. So we’ve got kind of a nice mix. We’ve probably got probably 25 of our rebuilders have five years or less experience. 50% of them probably have ballpark, 15 years experience, and then the rest are over 15 years experience. So. And they’re, you know, they’re coming up on retirement probably in the next five to ten years.

Chandler Kohn: Yeah. Good. Good. Thanks for talking about that one. You know, talking about growing your, your customer base and, and you know, mentioned word of mouth and all these things. Sales teams, outside sales teams. Are you using any other creative messaging or, or mediums or, you know, in person events to, to get the word out to, to grow that base. I mean, obviously, you know, customers always number the number one thing to worry about. Maybe just add a little color there.

Mark Harris: Yeah, we, I mean, we, we, we don’t host events, but we sponsor events locally from time to time. Truck pools, things like that, where we will have, have a team out there on site, you know, handing out T shirts or, you know, we’ll have products out there that we can talk to people about that come to these, these events. So we try, I don’t know, there’s, there’s several methods like that that we use, but it’s all locally. We don’t, we don’t do any of that outside of there. We’ve kind of had, kind of have a gentleman’s agreement with our distributors so that we don’t step into their territories.

Chandler Kohn: Yeah, that makes sense. Now let’s go back to kind of the, the competitive positioning, you know, value, if you will, over price, obviously Your customers have some, you know, price elastic. Elasticity. Right. Which is good. But, you know, how much, how much can you deviate outside of kind of a cheaper offering, if you will? And, and how do you make sure that you, you capture that audience when you’re, when you’re kind of basing your, your sales off value versus price?

Mark Harris: Yeah, you know, we, I, I think what you’re asking is how do we maintain the level of people that are looking for the quality rebuild and, and also trickle into the people that really are looking for an affordable unit? Is that kind of what you’re asking?

Chandler Kohn: Yeah, I think. I mean, you know, you know. Right. I mean, it’s been a tough year for a lot of people. The markets overall, it’s, it’s still down. Right. You know, especially compared to 21, 22 for, you know, truckers and anybody in the, in the industry. A lot of people are price focused. A lot of people are pushing off repairs, quite frankly, unless they absolutely need them. So I would, I would think that if you’re not offering the cheapest price, you know, they may jump to a competitor. So how are you still selling on value, the value you’re offering, and not just the bottom line price?

Mark Harris: Well, current customers see that value. Yeah, they buy, they buy. They see the turnover in their units as far as failures, very low failures. So that’s how we succeed there. New customers. We just have to sell the value of, of buying a unit that’s, you know, got more new parts in it or OE parts versus aftermarket parts. We have to, you know, we really got to sell that value. Yeah, but I think once a customer in, in our opinion, you know, once a customer tries a unit like ours, I think they come out ahead in the long run. I think if they’re tracking that stuff, they see it, you know, they don’t have nearly failures. Now. There are some very there, I guess there’s different markets for everybody and there’s room for everybody. There’s some guys that, you know, they sell either just takeout units that are running takeouts that they’ve cut out of vehicles. There’s a market for that and they, some of them give good warranty. You know, they’ll, they’ll give you another unit. But you have to remember, even though they give you another unit, you still got to pull that unit out of your truck. You got to have it down. You got to pay the mechanic to pull it out, put another one in. You know, if you don’t have those problems, you save that time and Money and that can add up quick.

Chandler Kohn: Yeah. So question on potentially consolidation in the industry. You know, remand’s very niche. There’s not a whole lot of players. It’s just a niche industry. If you take the heavy duty space, for example, it’s. It’s larger. You know, there’s a lot of heavy duty parts and service providers across the nation. That consolidation is starting to happen. Mom and pops are getting bought up. Know, regionals are becoming a little larger. Are you expecting to see this in your space? Have you seen it? Do you think it’s gonna, you know, maybe shift the balance of power in the remand space when it happens?

Mark Harris: What does that look like, you know, there? Yes. I mean, obviously it will shift the balance of power as mom and pops are, you know, bought up. People that are larger obviously have more buying power. Thank goodness we’ve kind of broken that threshold. I think we’re probably as good or anybody in top tier pricing with our purchases. So, you know, we’ve, we’ve won that battle for the most part. Now it’s just focusing on competing with efficiency in our shop, trying to, you know, produce more units as quality in the same amount of time as before. You know, our industry versus automotive is so much more competitive, even though, because automotive, you know, like as I said before, the automotive industry, most people aren’t using their vehicles to make a living. They drive to work and they drive home. They can get a ride from somebody for a week or two. You know, our industry and the vehicles are, you know, they’re being used every day and they got to be on the road. So.

Chandler Kohn: And, and are you. Have you guys developed a way to kind of track that efficiency or revenue per employee?

Mark Harris: You know, we do, we monitor it pretty closely. You know, that’s something you have to do, you know. Yeah, you have to control your costs in your rebuild units. So, yeah, we do track it. We look at how many units we’re putting out, each person, how many units they put out in a given time. We track, you know, if there are any warranties. We know about them all. We know what bench it came off of. We know you know, all those things, what parts were used. We track all that stuff.

Chandler Kohn: And what’s the, what’s the biggest jump in improvement? If you saw somebody’s not, you know, operating as efficiently as possible, or now they’re producing more revenue on their bench than they were last year. What’s, what was, you know, what are the top one or two changes that you’ve made? You know, to make that happen.

Mark Harris: Sure. Equipment getting better equipment. Making sure that we don’t have any bottlenecks in, in our production. You know, that that’s what really costs you when, when you’ve got machines down or you don’t have enough machine space to wash the parts, to clean the parts or whatever costs you, you know, those. That’s units not being built. So we try to keep as good of a unit as we build. We try to keep. Is that good of a unit in our machinery that we use to, you know, help us rebuild. Tooling. We keep up with all the tooling. The manufacturers suggested tooling. We make sure that all of our people have the right tools to do the job.

Chandler Kohn: Have you made, have you made investment in the past couple years a significant investment in your.

Mark Harris: We every year we make an investment. We. We’ve kind of. Some people do it in spurts, you know, every two to three years or five years or whatever. Every year we make purchases to try to make sure that we have, you know, the top, top notch equipment out here to rebuild units.

Chandler Kohn: Yeah, obviously that’s probably capitalized and then depreciated, but how much are you spending a year on that equipment?

Mark Harris: You know, it varies. I would say on an average probably 20 to $50,000 a year will drop on, you know, a new piece of equipment or, or average over time.

Chandler Kohn: Helpful. Let’s talk about a little bit going back on the, on the growth side of things. Yeah, I tend to ask people the same question, but you know, what was. What’s been the biggest inflection point for H H in terms of your growth since the early 2000s? Is there one thing that kind of set you guys up for, you know, an improved growth rate or is it just been steady? I mean, what, what, what is that inflection point, if there is one?

Mark Harris: I would say doing business kind of going on the national level. That certainly drove our sales considerably when we started doing business on a national level. So for us it was that. But also we, we’ve stayed very diverse. You know, we have a nice mix of owner operators, small to medium fleets. And then the national business, we keep a nice mix. So it’s never, we’ve never had a major jump in sales year to year, but we’ve always had a nice steady growth. Growth from day one.

Chandler Kohn: Excellent. And then for closing, knock on wood and just keep doing what you’re doing. Right?

Mark Harris: Yeah, exactly.

Chandler Kohn: And then for a cl. You know, piece of closing advice, you know, what, what would you tell, you know, appear to, to. To do or think about to, to be a top, truly a top performer in their vertical.

Mark Harris: I would say take care of your employees, make sure you have a great place to work. It’s the, the value there is to the nth degree, honestly. You have to have great employees. And then, of course, you want to stay on top of having the tools that they use. You know, don’t cut corners, don’t try to save money by using something that doesn’t do the job nearly as efficient as something that that does. And by recommended by the manufacturer.