LKQ Europe: Reorganized to grow faster

It is difficult to read into the figures of the US aftermarket giants. There are gross figures, and those provided in “constant currency” eliminating the impact of fluctuating exchange rates between the euro and the dollar, this should make it possible to measure the real trend in operational performance. And the third level of business analysis is organic growth which excludes the effect of external growth. The result is that, in the first nine months of 2022, the Chicago firm announced that its European subsidiary’s business was down 5% or, excluding currency effect, it was up 5.7%. A bizarre calculation given that all business in Europe is carried out in euros. Total revenue in 2022 should end up around €6 billion. 

This is a good result for the European team which says it is in line with its expectations, “including the regions in most difficulty. These include Eastern Europe because of the war in Ukraine, and Italy where we have lost a lot, but which is recovering today and remain profitable” says Alex Gelbcke, CEO Fource (France-Benelux) and responsible for trade business. “We want to have sustainable results and the ability to invest over the long term thanks to a good level of cash flow. This requires efforts in terms of integration, and have taken up a lot of energy” he continued last October. And it’s not affected by the departure of Arnd Franz. He “paved the way for us towards a very bright future” and could not resist the call to become president of Mahle, a leading German parts manufacturer where he had worked almost twenty years before joining LKQ. 

The Briton Varun Laroyia, Leaving Chicago and the financial management of the group to take over the reins of the European subsidiary had one priority in his sights, to find a clear path to growth. The first action of the new boss of LKQ Europe was to remove a layer of the managerial structure to lighten the decision- making chain which was drifting towards centralisation as part of the integration plan.

No more inducement for a vertical organisation. In addition to lightening support functions there was a return to decentralisation to be closer to the specific needs of the markets, with five regional CEOs responsible for the profitability of their activity and decision-making on sales. This group is close to Varun Laroyia “who has a real sense of business and operations”. “In the life of a company, there are phases. Arnd Franz designed the future, established the vision and put in place what was needed to move forward. His successor, who was a stakeholder in this plan, comes at a time when we need to accelerate and set up a more agile organisation. Varun Laroyia has a real desire to continue growing, but over a reduced number of folders” insists the CEO of Fource. “With One LKQ, we wanted to have innovative solutions for all aspects of the business. But the reality is that not all the markets in which we are present have the same level of maturity.”

So, the second significant strategic decision was to refocus actions on priority projects within the sprawling standardisation project of One LKQ. This covered ERP, MDD, customer portals, centralisation of purchases, etc. No change in strategy but in tempo and with a pragmatic approach. “Varun Laroyia has looked at what had not been deployed, took it on and went faster than before, a selective approach to transformation projects.” 

France showed great growth in 2022, with the strengthening of the network through three new warehouses in Toulouse, Paris (Les Ulis) and Nantes. This means that the subsidiary ended 2022 with six logistics platforms over eight months, to which a seventh will be added in January 2023 with Marseille. The ultimate objective is to set up a central LKQ hub in France, “but this is not a priority project”. The result is that the subsidiary, which was stagnating for lack of investment, has reached €100 million in turnover and is aiming for €500 million of business by 2025-2027. Purpose: make France no longer a marginal market within LKQ Europe “but a strong national player and a real alternative to the two French market leaders”. It is an achievable goal, especially since LKQ will (finally) start using its favourite lever of external growth through acquisition. “Between acquisitions and BPN partners, we should have more than 80 new sites by this deadline” says Alex Gelbcke.

Clearly the regional bosses’ business plan is to be in the top three in each country. This is far from the case in France. Present in twenty countries, LKQ is leader in the Netherlands, Belgium, Germany, United Kingdom, Italy and Czech Republic. Elsewhere investment will have to continue “and one day we will invest in the Iberian Peninsula from which we are still absent”. 

LKQ believes in its lucky star “and above all in our coherent offer, our reliable service and bringing innovative solutions in phase with the transformation of the business”. Hence the deployment in Europe of its garage concept Moobi dedicated to electrics, the clear desire to be part of the circular economy started by Atracco in Sweden, its auto recycling pilot site producing 500,000 reusable parts per year, and the well-advanced project to establish the company in the emerging market of remanufacturing of electric vehicle batteries. “Today, if LKQ earns money it is also to reinvest in our tools, in our regional development and in new technologies. And we want to support garage owners towards this future.”