Napa Auto Parts 2015 Annual Report Download - page 11

comprises an important feature of the inventory management services that the Company makes available to its
NAPA AUTO PARTS store customers. Over the last 25 years, losses to the Company from obsolescence have
been insignificant and the Company attributes this to the successful operation of its classification system, which
involves product return privileges with most of its suppliers.
Competition. The automotive parts distribution business is highly competitive. The Company competes
with automobile manufacturers (some of which sell replacement parts for vehicles built by other manufacturers
as well as those that they build themselves), automobile dealers, warehouse clubs and large automotive parts
retail chains. In addition, the Company competes with the distributing outlets of parts manufacturers, oil compa-
nies, mass merchandisers (including national retail chains), and with other parts distributors and retailers. The
Automotive Parts Group competes primarily on product offering, service, brand recognition and price. Further
information regarding competition in the industry is set forth in “Item 1A. Risk Factors — We Face Substantial
Competition in the Industries in Which We Do Business.”
NAPA. The Company is the sole member of the National Automotive Parts Association, a voluntary
association formed in 1925 to provide nationwide distribution of automotive parts. NAPA, which neither buys
nor sells automotive parts, functions as a trade association and whose sole member in 2015 owned and operated
59 distribution centers located throughout the United States. NAPA develops marketing concepts and programs
that may be used by its members which, at December 31, 2015, includes only the Company. It is not involved in
the chain of distribution.
Among the automotive products purchased by the Company from various manufacturers for distribution are
certain lines designated, cataloged, advertised and promoted as “NAPA” lines. Generally, the Company is not
required to purchase any specific quantity of parts so designated and it may, and does, purchase competitive lines
from the same as well as other supply sources.
The Company uses the federally registered trademark NAPA®as part of the trade name of its distribution
centers and parts stores. The Company contributes to NAPA’s national advertising program, which is designed to
increase public recognition of the NAPA name and to promote NAPA product lines.
The Company is a party, together with the former members of NAPA, to a consent decree entered by the
Federal District Court in Detroit, Michigan, on May 4, 1954. The consent decree enjoins certain practices under
the federal antitrust laws, including the use of exclusive agreements with manufacturers of automotive parts,
allocation or division of territories among the Company and former NAPA members, fixing of prices or terms of
sale for such parts among such members, and agreements to adhere to any uniform policy in selecting parts cus-
tomers or determining the number and location of, or arrangements with, auto parts customers.
INDUSTRIAL PARTS GROUP
The Industrial Parts Group is operated as Motion Industries, Inc. (“Motion”), a wholly-owned subsidiary of
the Company headquartered in Birmingham, Alabama. Motion distributes industrial replacement parts and
related supplies such as bearings, mechanical and electrical power transmission products, industrial automation,
hose, hydraulic and pneumatic components, industrial and safety supplies and material handling products to
MRO (maintenance, repair and operation) and OEM (original equipment manufacturer) customers throughout the
United States, Canada and Mexico.
In Canada, industrial parts are distributed by Motion Industries (Canada), Inc. (“Motion Canada”). The
Mexican market is served by Motion Mexico S de RL de CV (“Motion Mexico”). These organizations operate in
the Company’s North American structure.
In 2015, the Industrial Parts Group served more than 150,000 customers in all types of industries located
throughout North America, including the food and beverage, forest products, primary metals, pulp and paper,
mining, automotive, oil and gas, petrochemical and pharmaceutical industries; as well as strategically targeted
specialty industries such as power generation, wastewater treatment facilities, alternative energy, government,
transportation, ports, and others. Motion services all manufacturing and processing industries with access to a
database of 6.5 million parts. Additionally, Motion provides U.S. government agencies access to approximately
400,000 products and replacement parts through a Government Services Administration (GSA) schedule.
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