Remanufactured Engines: An Overlooked Alternative

The technician shuts off the Pontiac's engine and walks over to Bob Johnson, one of his best long-term customers.

"I'm afraid your 'feeling' about this engine is right, Bob," he says. "There are a lot of valve noises, some knocking that's got to be a bad connecting rod or two, and it's burning a fair amount of oil. You've got $800 to $1,000 worth of repairs here. I'm not sure the whole car is worth that much by the book and, to be honest, I'm not sure I can tell a good customer to do all this work on a 12-year-old car."

You're the technician. Where do you go from here? Inside, you're thinking that you may lose this good customer. He'll likely buy a new car and take it to the dealer for three years under warranty. How can you save this important business?

The solution is one that is not put into play often enough: sell the customer a remanufactured engine. Both you and the customer will win -- by a bigger margin than either of you may think.

A Profitable Alternative
"I'm not sure why repair facilities don't sell more remanufactured engines," says Vincent Mancini, director of marketing for Recon, an engine remanufacturing firm. "Perhaps they think customers will be scared by the price. Or maybe they don't want to do complete engine installations themselves."

According to Mancini, these questions can easily be addressed and engine remanufacturing can be a profitable business. "It allows you to hold onto regular customers and it can save motorists a ton of money as well," Mancini said.

Mancini points out that professional engine remanufacturers know a great deal about an engine's weak points.

"Engine remanufacturers can strengthen the weak areas and add engineering improvements that even the OE manufacturers haven't implemented. You're getting an engine that has really been remanufactured, not just cleaned and put back together," said Mancini.

Price And Profit Levels
To determine profitability, there are three basic elements in the cost of an engine replacement job, according to Mancini Auto Parts, an arm of Recon that does engine installations:

"Let's take a typical General Motors four-cylinder or V-6 engine installed transversely in a four-wheel drive car," Mancini said. "The motorist will typically look at a cost of anywhere from $1,400 to $2,000 for the complete job, including the cost of the remanufactured engine. In our shop, that price would include fluids, a new thermostat, new plugs and a minor tune-up. If we include a new water pump, a thorough cooling system flush, belts, hoses and clamps, and a few minor sensors, that may add an extra $125 to $250 to the retail bill.

"A V-8 in a rear-wheel drive car is obviously a bigger engine, but the engine replacement might actually be less expensive for the motorist because it's an easier job. Putting a remanufactured engine in an import, on the other hand, is almost always more expensive -- $3,000 or even $4,000 retail for the job. It's primarily a function of labor; a shop won't usually charge a higher hourly rate for import work, but import engine replacements generally are more complicated and take more time," said Mancini.

A typical shop's profit margin on an engine replacement might range from about 20 percent of the total ticket (the wholesale rate charged to another shop) up to 40 percent. That means a $2,000 domestic engine replacement can net a shop $400 to $800 profit. That's good business. Import engine swaps will generate more profit because there is more labor input. High-performance engine jobs command still more dollars (and more profit), but skill requirements are significantly higher.

Remanufactured Cylinder Heads
Still reluctant to tackle a complete engine change? There's also plenty of business selling and installing remanufactured cylinder heads, and this might be a good way for a shop to "test the waters."

The same three elements contribute to the profit on a cylinder head job as on installing a remanufactured engine: cost of the new head(s); labor for removal and installation; and auxiliary parts (such as gaskets). Recon ballparks prices for head replacements using remanufactured heads at $400 to $800 retail, including parts and labor, with labor varying significantly from engine to engine. Profit margins will run roughly the same as for engine swaps, depending on labor input.

Other Benefits
There's one more overlooked benefit for the motorist (and the shop): the chance to get other necessary work done during the engine change at a reduced cost.

"First, you must understand that we warrant the remanufactured engine we put into a car," explains Mancini. "Comebacks on engine replacements are tremendously expensive for everyone. So we try to get the customer to let us do everything we can to help him protect his engine investment.

"For example, we feel that a newly installed remanufactured engine without a new water pump is like a grenade with the pin pulled. We'll try to get the customer to let us install a new water pump, and do a radiator flush, and a thorough cooling system service, and put in new motor mounts. Most customers see that this just makes sense."

Examples of potential new and possibly very needed work to consider before the engine swap:

Prevent Risks
The menu is not all peaches and cream with remanufactured engines. In warranting a unit as big as an engine, you're risking a major profit-killer if the engine comes back on the south end of a tow truck. You've got to offer a competitive warranty, but one you can live with. Mancini Auto Parts issues a one-year/12,000- mile warranty on all Recon remanufactured engines for personal cars. Engines for vans, pickups and sport-utility vehicles get a six-month/ 12,000 mile guarantee. Mancini offers commercial vehicles a six-month warranty instead of the 90 days common in his area.

One protective step a shop can take is to get the vehicle back into the shop for a "once over" after the job is done. Mancini Auto Parts offers the first oil change, at 3,000 miles after the engine replacement, for free. Mancini says it gives the shop a chance to look for leaks, retorque any bolts, etc. It also provides a chance to ask about doing further maintenance on the car when needed, creating a new steady customer if one didn't exist before.

One other self-protection step is mandatory: be sure of the quality of your remanufactured engine.

Selling The Job
Many service professionals feel the toughest part about engine replacement is selling the job to the consumer. Mancini says that keeping in mind the price benefits to the consumer, the service advisor should concentrate on seizing the opportunities to promote the remanufactured engine alternative. For example:

"Don't be afraid to promote remanufactured engines, even if a customer doesn't face an engine problem right now," adds Mancini. "You can 'pre-sell' these customers by mentioning engine replacement as an alternative when the car gets older. They'll remember this option when they're facing a $900 bill for engine repairs. And hopefully, they'll remember that you suggested it."

The bottom line? Engine replacement is a profitable business that can give your finances a big shot of black ink while also providing your customers good value.

This article was provided courtesy of Recon, an engine remanufacturer that produces an average of 125 remanufactured long-blocks and 300 remanufactured cylinder heads per day. Recon also remanufactures and sells crankshafts and kits, driveshafts, alternators, starters and other automotive components.

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AutoInc. Magazine ®, Vol. XLIV No. 12, December 1996