Aamco Transmissions Drives Ahead Of The Pack

With 37 years of experience under its belt, AAMCO is braced for massive growth well into the millennium.

(Saturday, January 01, 2000) - Recently, a customer walked into his local AAMCO shop in Maryland in search of a rebuilt transmission for his car. At the time, buying a transmission was cost- prohibitive for this customer's budget (the cost of a rebuilt transmission averages $1500-$2000) – but the man needed a car that ran properly. While the customer pondered his options, the owner of the Lanham, Maryland-based AAMCO franchise stepped up to the plate and offered to finance the transmission, with no interest or storage fees.

It was a good move on the business owner's part. The customer turned out to be a reporter for the local paper who ended up interviewing a host of other AAMCO customers to see if this level of customer service was across the board. Subsequently, he wrote an article for the paper revealing indeed it was common practice for AAMCO franchise owners to go the extra mile – not only within their own stores, but in their local communities as well.

The AAMCO Story
One would assume it was a mechanic or other professional from the automotive industry that founded Bala Cynwyd, Pennsylvania-based AAMCO. Not so. In fact, the company was founded by Robert Morgan, a professional dancer and actor from Detroit. As owner of the Robert Morgan School of Dance, he got his feet wet in the franchising industry after a man walked into his studio one day, asking Morgan if he was interested in franchising his concept. "My dad didn't know anything about franchising at the time, but he ended up having the second largest chain of dance studios, second only to Arthur Murray," says Keith Morgan, current AAMCO CEO and son of Robert.

When World War II ended, the nation entered a new era of music and ballroom dancing's popularity waned. Rock ‘n Roll was all the rage and Elvis Presley came into style. This left Morgan looking for other opportunities, including his first foray into the automotive industry as owner of 100 location aftermarket chain called Safeway Brakes. "it was a competitive field and not a very high-growth industry," recalls Keith Morgan. "My father sought out market opportunities that were more unique and had a lot of high growth potential."

By that time, it was the early 1960's and Morgan recognized the prevalence of automatic transmission in cars. As the new vehicles rolled off the Detroit assembly lines, a light bulb went on above his head. Will there be a niche for transmission specialists in the future? Living in Philadelphia at the time, Morgan checked out all the independent transmission specialist in his area, then approached Tony Martino, a mechanic who owned the first AAMCO shop.

It was March 1963, and my father suggested to Tony they start a franchise company," explains Keith Morgan. "They started the company with $300 worth of credit from Philadelphia Inquirer to run newspaper ads to offer franchise opportunities. With little capital, the first franchise location then opened in Newark, New Jersey, six months later. That shop is till open and operated by the same franchisee, and the original AAMCO shop is still there too."

Growing Up
Throughout the 1960's, the AAMCO chain grew at a rapid pace, growing to 450 stores by 1968. The company was a pioneer in using TV advertising featuring celebrity endorsements and professional athletes to promote its brand. "We were in the retail business and knew TV advertising was a powerful medium," says Morgan. "our first spokesperson was Zsa Zsa Gabor, then we had Wilt Chamberlain and Johnny Unitas. We built tremendous brand recognition through TV advertising and celebrity endorsements and today our spokesperson is Jim Brolin."

As a result, AAMCO enjoys 92 percent brand awareness and is the worlds largest chain of transmission specialists, according to Morgan, who has worked for the company since he was 11 years old when he worked during summers, and then eventually became CEO in 1992. "Based on research we've done, we're about the best known brand in the automotive aftermarket," comments Morgan.

Today, the company has 720 locations operating in North America, including 30 in Canada. According to Morgan, the company – which employs 200 persons in its corporate offices – expects 1999 revenues of about $460 million.

Walking the Walk
As transmission specialists who tackle transmission-related components on any car or truck, the AAMCO team was one of the first companies ever to offer a lifetime warranty on any product or service. "That's been a cornerstone of our business since the 1960's," says Morgan. "Since the very beginning we've always had the highest quality standards for our products and we've made a tremendous investment in the technical skills of our technicians. Our ‘100 percent customer satisfaction' slogan has been around since our inception."

The significance of this is consumers often feel vulnerable when bringing their cars to a garage for repair. With a car, anything can be wrong at any time, but the average consumer really doesn't know how big or small the problem really is. "Trust is a huge issue in this business," Morgan explains. "Because of this, we have strict policies and procedures regarding customer satisfaction, disclosure of information and pursuit of high standards."

That commitment is so strong that AAMCO regularly sends "mystery shoppers" out to its various locations for quality checks. "We'll pretend to be a customer, and we'll take a car into the AAMCO center to see how the customer is handled by the center," Morgan says. "We may even purchase a rebuilt transmission we dismantle to ensure it was rebuilt to the proper standards. We do the same type of thing over the telephone, just to be certain out customer service representatives are handling calls and problems effectively."

Meeting Challenges Head-On
During his years in the business, Morgan has seen a lot of changes in the automotive aftermarket industry. For example, when AAMCO was founded, there were 15 different types of transmissions. Today, there are over 150. "The technical complexity of our business has grown substantially," he says. "But, this is actually an opportunity for us now because it's actually harder for the local garage to service the customers, namely due to the necessary technology investment, especially on the diagnostic side."

Managing growth has been another challenge for the AAMCO team. The company opens 35-40 new centers each year, and handles all new franchisee training with its AAMCO University, a 5 week training school. The company has also developed a center consultant program for its franchisees. "We have individuals who are trained in all aspects of the business who can go out to an AAMCO shop and help with both front room (customer service and sales) and Back room (technical services) issues," says Morgan.

Given the fact that AAMCO started 37 years ago, the company realizes franchisees want to transition their adult children into a position where they can take over the business. However, because many of those children are already active in the day-today operations of the company, they simply don't have time to pick up and leave for a five-week training course. For them, AAMCO developed "Second Generation School." We designed a special school for them that takes place twice a year and runs only eight or nine days," says Morgan. "They take the same final exam as everyone else; it's a very popular program."

Keeping the Pressure On
To raise its brand awareness even further – and to keep its company name in the spotlight – AAMCO spends about $25 million on national advertising, including TV, radio, print, and Yellow Pages ads. The company also has a long history of using celebrity spokespeople, with James Brolin being the current celeb to grace AAMCO's ads. The company recently rolled out a new program; a toll free number (1-800-GO-AAMCO), which allows a customer to connect to their nearest AAMCO center automatically. "We're also exploring our options on the Internet, and we're very interested in using it as a powerful way to reach consumers and provide information to them," says Morgan.

Overall, Morgan says his company's goal is to reach 1000 location by 2004. He and Wurth, who recently returned to the company and was previously with the company for 12 years as a senior executive, have a "very ambitious plan to grow the chain," he says. "We have a number of strategic initiative in place, both on the advertising/marketing side and with regard to internal operating procedures. We're running test in several markets, and the results are very encouraging so far."

According to Morgan, favorable trends in the automotive aftermarket look very promising for the future growth of AAMCO. He says there are 200 million vehicles on the road today, with the number consistently increasing year after year. New car sales are around 16 million annually, cars are lasting longer (with an average age being nearly 10 years), and the number of cars per a household is increasing. "This is a huge market opportunity for us because cars are retained longer and are being driven 15,000 miles each year on average," Morgan emphasizes. "Even though we're in a mature industry and well-established company, we feel there's still a lot of growth potential in the automotive aftermarket based on the evolving trends."

Partnering for Success


A glance around today's business landscape reveals an unprecedented number of strategic partnerships. Companies of all shapes and sizes are teaming up with their vendors, customers and even their competitors to gain an edge, up their bottom lines and create efficiencies within their firms.

AAMCO is no different. Most recently, the transmission specialist paired up with Exxon Superflo to sponsor a NASCAR racecar. Managed by the HVP Motorsports race team, the Number 83 Chevrolet Monte Carlo runs into the Busch Grand National Series. The racecar carries the new 1-800-GO-AAMCO national phone number emblazoned across its tail section.

In addition to this co-sponsorship, AAMCO and Exxon Superflo have a licensing agreement in which Exxon blends, packages and markets a private line of AAMCO Automatic Transmission Fluid (ATF) sold through automotive product retailers. Exxon first created AAMCO's ATF products two years ago, and AAMCO ATF is now a top seller.

"AAMCO ATF is available for transmissions covering more than 95 percent of automatic transmissions on the road in the United States today," says Keith Morgan, AAMCO's CEO. "We're very pleased to be collaborating with EXXON Superflo on the ATF and are happy to team up on the NASCAR sponsorship."

During one of the Busch Grand National NASCAR practices, actor James Brolin, AAMCO's spokesperson, visited the track and posed for a photograph alongside the AAMCO-sponsored car. Brolin, star of the television series "Pensacola Wings of Gold," has been spokesperson for AAMCO since 1995.

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