Our History – Partco

Going into business with a back-up plan makes sense. Multi-national food chain McDonalds does it by buying real estate, and so it was for Partco.

What is best known about Partco is that for 24 years, it was an independent company operating as a leading importer/wholesaler of automotive spare parts to the Australian reseller and suspension specialist market.

What is not so well known is that Partco was also into real estate. Chris Lane, former Partco managing director and New South Wales sales manager for Australian Automotive Distribution, was on the floor with Partco from the beginning. Chris was the ideal person to talk to about the company, how it started and the trials along the road.

“The company was set up with two arms,” Chris said. “Partco was the major trading arm, and a separate investment company was formed to buy and sell the real estate properties that we would occupy. A growing business and a real estate arm seemed like a good strategy.

“I used to read a lot of books on business, and real estate used up much of my focus back then.”

It was an investment decision that worked well for Partco.

“We would pay off our properties using the rent we would charge, then borrow money from the bank against the increased equity in the properties to grow Partco, so to that end both strategies were complimentary,” Chris explained.

“The idea was that if the parts business didn’t succeed as planned in the long term, then we would be our own landlord, and prosper over time out of our real estate holdings.”

Partco was incorporated in 1989 and began trading on February 5, 1990. Terry Lane with son Chris, and Jerry Lenstra, were founding directors of the business. Jerry’s brother Bob joined as a director within the first few years. Terry and Jerry worked full-time from the start, while Chris worked on the accounts part-time at night, catching the train from North Sydney to Seven Hills at the end of his working day. Both Terry’s wife, Judy (Chris’s mother) and Jerry’s wife Lisa worked in the early hours of the morning re-packing water pumps for much of the start-up period as Partco became established.

Chris didn’t work full-time at Partco until August 1991. Prior to joining Partco, Chris was employed as a trainee bank manager by Westpac and studied accounting part time. Leaving Westpac, after serving in the bank’s legal department, he then went to work for the coal and shipping company McIlwraith McEacharn, where he furthered his accounts and management experience, and then specialised in foreign exchange exposures and dealings as their treasury officer.

Chris added: “It was all interest rate swaps, options and currency hedging back then.

“From the time I left school all I wanted to do was have my own business. Never wanting to be an accountant, I knew I needed to study accounting to create and understand financial statements and business. Eventually the Partco timing was an ideal opportunity. I was always conscious of being in the right place at the right time,” he said.

When Partco was in its infancy, Chris started in the warehouse as well as delivering parts to customers. But, he always looked after the financial areas of accounts, ordering, foreign exchange hedging, payroll and, as the years moved on, gained further exposure and experience in the business and the aftermarket industry.

Terry and Jerry had a lengthy association before going into business together. Terry started Carparts (part of Capitol Motors) in the late 1970s as general manager, and in 1980 hired Jerry as his sales manager. Capitol Motors was a distributor of genuine Nissan and BMW vehicles and parts. It was founded by Arnold Glass and sold to ANI in 1977, which in turn was sold to Kerry Packer’s Consolidated Press in April 1989. Carparts was sold by Consolidated Press in late 1989 to Atkins Carlyle who traded as Bennett and Wood in NSW.

It was after this sale that Terry and Jerry decided to leave and start up an importing business with Chris. Terry, who is 89 years-old, retired in 2003, and since the sale of Partco to AAD Pty Ltd, Jerry, who is in his seventies, works two days a week in product development for AAD.

When Terry retired in 2003, Chris was appointed managing director and focussed on growing the business. This included being involved in many areas of the business including overseas/local supplier negotiations, sales, ordering, and general management, while building an effective, enthusiastic and loyal team.

“Partco started out from a leased warehouse in Seven Hills importing GMB Water Pumps, GMB Universal Joints and Mitsu contact sets,” Chris said.

“Terry had introduced GMB Japan, manufacturers of universal joints and water pumps, to the Australian market in 1978 through Carparts, which he had established as the non-genuine arm of Capitol Motors. 

“GMB repaid their appreciation of Terry by offering Partco a direct import account, and in February 1990 the first 40-footer of universal joints and unboxed water pumps arrived from Japan. This was later followed by steering and suspension manufacturer, Transteering, who eventually appointed Partco as their sole Australian distributor.”

But it wasn’t all smooth sailing. The early 1990s were tough times for Australian businesses, and the Australian economy suffered its worst recession since the Great Depression. The pressure of high interest rates on businesses, many of them heavily in debt, was relentless.

In July 1990, six months after Partco had opened its doors to begin trading, Australia had entered severe recession. The recession started in the September quarter of 1990 and lasted until the September quarter of 1991. During this period, GDP fell by 1.7 per cent, employment by 3.4 per cent, and unemployment rose to 10.8 per cent.

It was a period of disruption and economic distress. In Victoria in 1990, the Pyramid Building Society collapsed with debts in excess of $2 billion. With Victoria deeply in debt, Labor Premier John Cain resigned and Joan Kirner took charge. Melbourne businessman Christopher Skase's business empire crashed, and he fled to Majorca in Spain.

In South Australia in 1991, the State Government owned State Bank of South Australia collapsed and in February 1991 the Bannon Labor Government had to launch a $970 million bailout due to its bad debts. And the bank's debts soon reached $3 billion. Premier Bannon resigned after appearing at a Royal Commission into the affair.

In Western Australia the ruling Labor Party replaced Premier Brian Burke; first with Peter Dowding, and then Carmen Lawrence. The subsequent WA Inc. investigation saw Burke jailed.West Australian high flying businessman Alan Bond was declared bankrupt in 1992, and jailed in 1997 for corporate fraud.

And despite this, Partco traded on. In the early days, Partco set up a warehouse in Prime Drive, Seven Hills and later purchased and moved to Prospect Highway in Seven Hills. The company outgrew this warehouse, so they purchased a larger building in Girraween. As the business expanded so too did the need for storage space, so Partco, through their investment company, bought the adjacent warehouse based in Magowar Rd, Girraween, Sydney.

Chris said the company was nearly wiped out with a severe bad debt in the early years: “We had a container of water pumps delivered to a South Australian distributor who subsequently went broke, and that impacted on our cash flow.

“It really was the worst time to start a business the way the economy was,” he said. “High interest rates in 1992/93 made the banks wary of lending, so we relied on the goodwill of our suppliers to get through.”

As for the Global Financial Crisis, Chris said that other than currency exposure, the GFC was a valuable time to be in business: “Sales were booming and there seemed to be plenty of money around.”

The last major disruption was the Queensland floods in 2011, when a building Partco was leasing was destroyed.

“We were out of business in Queensland for six months. It was a massive clean-up: at the height of the flood we had Chep pallets floating and stuck on our roof. Eventually we purchased a warehouse in Acacia Ridge and re-opened.”

In 1996 Partco purchased a warehouse in Rowville Melbourne, but this was a challenging time for business in Victoria. It was extremely difficult to get a foothold, and after a period Partco had agreed on a strategic deal with Roadsafe Victoria to take over their Sydney operation and for Partco to close their Melbourne warehouse. This was the catalyst for introducing Super Pro, amongst other products, to the Partco range which complimented the steering and suspension program. It also allowed the company to focus more on its Sydney operation.

Chris said Partco expanded by rapidly increasing product ranges: “We started importing Transteering suspension components and with water pumps, these ranges provided the catalyst for growth.”

In the late 1990s, KYB (Kayaba) Japan made Partco their exclusive Australian importer for their shock absorbers. Previously, KYB had been exclusive to Carparts. The change allowed Partco to rapidly expand with increased market profile, profits and, consequently, generating increased cash flow. 

Chris said: “Our philosophy was always to become a market leader in water pumps and steering and suspension, and to have the largest range possible in stock at our warehouse of all products we distributed. After adding KYB shock absorbers and Super Pro to our range in the late 90s we increased our presence in the suspension market. We were never concerned about our opposition, just focussed on growth and customer service.”

After National Parts closed in 2008, Partco added more leading brands to their product range including NGK, Ryco, Goss, Bendix, Gates, Transgold, and CPC, at the same time continuing to build the imported ranges the company already controlled.

“Partco opened in Queensland to increase distribution and service more customers after the Global Financial Crisis.” Chris said.

“This helped with distribution, sales and profit growth. And instead of opening in other States, we expanded by using existing market players to create and manage our water pump and steering and suspension programs. These customers included Coventry (Covs), Sprints, R & E, ATAP, AAP and APW.

“A large component of the company’s expansion was to focus on creating a market-leading automotive online catalogue and ordering system. In the early 2000s we worked closely with Peach Software to make this happen, and this was instrumental in increasing our exposure and expanding existing customers average spend.

“By 2013 we were receiving over 70 per cent of orders from our reseller customers through our online offering. We had built a loyal team and achieved our goal of ten consecutive years of sales and profit growth. It was a long and challenging road and our success was a team effort. From employees past and present, our directors, suppliers, and most importantly our customers … we should never forget them.”

Unlike some distributors, Partco never developed a franchise business. The company was purchased by Australian Automotive Distribution Pty Ltd, a wholly-owned subsidiary of Metcash Automotive Holdings Pty Ltd on December 18, 2013. After Partco was sold it formed part of AAD group of companies (Partco, ATAP, IBS, Garrmax), which is currently in the specialist wholesaler division of Bapcor. AAD employs in excess of 200 people Australia Wide, within sales and warehousing operations in Melbourne, Sydney, Brisbane, Townsville, Adelaide and Perth.

Interviewed March 2018