Automotive Exhaust System Repair Shops

SIC 7533

Companies in this industry

Industry report:

This industry classification includes establishments primarily engaged in the installation, repair, or sale and installation of automotive exhaust systems. The sale of mufflers, tailpipes, and catalytic converters is considered to be incidental to the installation of these products.

Industry Snapshot

This industry covers exhaust system repair, which primarily involves the sale, installation, and repair of mufflers, tailpipes, and catalytic converters. It is distinct from businesses engaged in the overall repair of automobiles. Such businesses are primarily categorized in SIC 7532: Top, Body, and Upholstery Repair Shops and Paint Shops and SIC 7538: General Automotive Repair Shops. Businesses engaged in specialized automotive repair, such as fuel service, brake repair, and wheel alignments, are classified in SIC 7539: Automotive Repair Shops, Not Elsewhere Classified.
Car exhaust system service is typically provided by dealership garages and auto exhaust repair shops. Besides numerous "mom and pop" auto service businesses, in the early 2010s the industry was led by a few relatively well-known repair shop chains, including Monro, Midas, and Meinke. Combined, the 2,471 establishments in the United States employed almost 8,000 people and earned $769 million in revenues in 2010, according to the U.S. Census Bureau.

Organization and Structure

Exhaust Systems.
The exhaust system of every modern automobile requires frequent care and repair. Condensation in the typical exhaust flow, coupled with ordinary wear, will often result in the necessary replacement of the car's muffler and exhaust pipes. The result is a vehicle with minimal engine noise and an exhaust system that more effectively funnels toxic fumes produced by the vehicle away from the car's interior. When owners decide that their exhaust systems may need repair, they typically avoid do-it-yourself (DIY) replacements and seek the services of exhaust system repair shops. These repairs are also necessary for the owner to maintain car emissions that meet Environmental Protection Agency (EPA) standards. Auto exhaust repair shops install, repair, and inspect the proper pollution control devices.

A car's exhaust system consists mainly of an exhaust pipe, a muffler, and a tailpipe. The exhaust pipe collects the exhaust of a car through a series of exhaust ports in the internal manifold of a car engine. This exhaust is funneled to a downstream pipe and moved through the muffler. The tailpipe discharges the car's exhaust into the atmosphere after it has passed through the muffler.

The muffler is the main component of the exhaust system. It is basically a device that reduces the noise produced by the movement of gas and internal combustion of the car's engine. The typical shell of an automobile muffler is shaped like an oval that measures roughly 20 inches long, 10 inches wide, and 6 inches high. Its internal architecture is made of perforated steel tubes and a number of chambers separated by steel partitions. This combination of filters and tubes acts as a honeycomb that acoustically filters the exhaust sound. The typical muffler can reduce the sound pressure of a car's exhaust from 90 to 60 decibels, a 1,000-fold decrease. More expensive dual exhaust systems have four or more mufflers.

Federal regulations require that motor vehicles be fitted with emissions control devices. Therefore, a mechanism like a catalytic converter has become an addition to a car's exhaust system. Since their initial requirement in 1975, catalytic converters have served to reduce harmful exhaust. Improved emissions allow the owner to comply with standards mandated by the EPA.

Legislation to control automobile pollution is in the Clean Air Act, which was passed in 1956 with significant amendments in 1970, 1977, and 1990. Regulation of mobile pollution sources was considered controversial. An EPA study in 1979 attested to the difficulty involved with getting automobile owners to comply with state and federal standards requiring the installment and maintenance of properly functioning pollution control equipment, specifically the catalytic converter. The converter cleans the car's exhaust gases to meet EPA standards. Converters at the end of the first decade of the 2000s are made of a honeycomb-like material that is lightly coated with palladium and platinum. These two elements, when in the presence of oxygen, aid in the reduction of hydrocarbons and carbon monoxide.

The emissions control system of a car does not become the responsibility of the owner until the manufacturer's warranty expires. At that point, problems with the catalytic converter usually lead the car owner to an auto exhaust repair shop that provides emissions control work. The most common difficulties with the converter are clogging and melt down. These two problems typically occur in high-mileage engines and result in exhaust problems. Converter failures can also be symptomatic of other problems.

Technicians at auto exhaust repair shops who are faced with converter problems have a number of options for diagnosis of the converter and accompanying emissions systems. Technicians may begin with a visual examination of the mechanism to discover any evident rust destruction, leaks, or broken connections. More complicated methods of testing the system include thump, temperature, and back pressure tests. These tests detect difficulties of the converter caused by circumstances, such as build-up of phosphorous on the surface of the converter due to burning oil, foreign matter plugging the interior of the converter, excessive sulfur content in the fuel, antifreeze leaks into the engine which pollute the converter, or broken or ineffective exhaust air pumps.

Technological threats to the exhaust repair industry have occasionally appeared in the form of improved components that require fewer repairs. For example, in the late 1980s, a stainless steel muffler was introduced that promised less erosion. Many of these advances acted to improve business. Although no major changes were made to the Clean Air Act after 1990, the EPA and high-density communities with smog problems continued to toughen rules for checking vehicle emissions. Some states and local communities began to require emissions testing as part of the annual inspection process for auto licensing.

Advances in muffler and converter technology resulted in improved efficiency. Researchers at the Noise Cancellation Technology Labs in Connecticut invented an electronic muffler that utilized computer generated "antinoise" to further mute engine noise. This muffler, which could be produced for the same cost as conventional mufflers, improved engine power and fuel efficiency. Meanwhile, Corning Inc. developed a catalytic converter that would not require a car to warm up before operating effectively. These and similar developments for improvement to automobile exhaust systems did not appear to threaten the industry's steady increase in size and revenues.

The year-to-year fluctuation in the exhaust repair business was largely a result of weather, such as salt on snowy and icy roads causing corrosion, and the amount of technological change, creating large, fragmented growth in automotive aftermarket repairs. Factors in favor of the industry were the declining ability of car owners to perform their own repairs because of more complex vehicles (particularly the dramatic increase in electronic components), less leisure time, and increasingly stringent emissions regulations that made more exhaust system inspections necessary. Likewise, the increase in vehicles on the road, vehicle miles driven, and the average age of cars contributed to the strength of the industry.

Although the economic recession at the end of the first decade of the 2000s put a damper on sales for most U.S. industries, the outlook for auto exhaust repair shops was relatively promising. Advancing technology, particularly in the area of mufflers and catalytic converters, and increased automobile emissions regulations promised to create more work for exhaust repair shops. In addition, an increase in the number of older cars on the road resulting from high car prices and a prolonged recession meant that more car owners were maintaining and repairing their cars rather than simply replacing them.

Specifically, the overall auto repair market was being affected by several, sometimes contradictory, trends at the end of the first decade of the 2000s, all of which were created by the economic recession. First, because of high fuel prices and less disposable income available to consumers, Americans drove less. According to research by A.M. Best, Americans drove 52 fewer miles in 2008 than in 2007, when a decrease in miles driven was also reported over the previous year, the first time U.S. miles driven had decreased since 1980. However, consumers were keeping their cars longer and spending more on repairs. According to the U.S. Bureau of Transit Statistics, the average age of registered vehicles in mid-2009 was 9.4 years, up from 9.2 years in 2008. These older cars require more maintenance and repairs. Although this trend worked in the industry's favor, research also showed that in an attempt to save money consumers were delaying nonessential repairs. Therefore, segments of the industry that provided service and repairs necessary to keep vehicles up and running performed better than those that offered less immediately necessary services, such as dent repair.

The industry was also affected by the bankruptcy filings of giant auto companies General Motors and Chrysler in 2008. Hundreds of dealerships closed across the country, with Chrysler alone closing nearly 800 dealerships. As a result, independent and franchise auto repair shops scrambled to win the displaced dealership customers. For example, in 2009, AAMCO, which had expanded from its traditional service of transmissions to provide full-auto care, including mufflers and exhaust, announced a $30 million advertising campaign. With many dealerships either shutting their doors or struggling to survive at the end of the first decade of the 2000s, the competition for repair work was stiff. In general, however, the trend toward extending the life of vehicles favored independent and franchise auto repair shops because more work was done beyond the life of the warranty. Because repairs under warranty are commonly required to be performed only by dealer service departments, the growing number of vehicles on the road no longer under warranty grew the customer base of the independents. According to the National Automobile Dealers Association, revenues from dealership repair work fell in three of the five years from 2005 to 2009.

Current Conditions

In the early 2010s, several factors benefited auto exhaust system repair shops, some as a result of the recession at the end of the previous decade. For example, by 2011 the median age of vehicles on U.S. roads had reached a record high of 10.8 years. These older cars required more maintenance and repairs, which boded well for the auto repair industry overall. According to the National Automobile Dealers Association (NADA), U.S. franchised dealerships earned $77.6 billion from the sale of auto service and parts in 2011. A total of approximately 245 million repair orders were written, and repairs were conducted in 309,750 service bays. The labor rate for auto mechanics averaged $93 an hour.

Industry Leaders

One of the most successful companies in this industry was Monro Muffler Brake, Inc., of Rochester, New York, with fiscal year 2011 sales of $636.6 million, up from $476.1 million in 2009. Founded in the 1950s by Chuck August, the company added brake shops and went public in 1991. Between 1987 and 1992, the company more than doubled its sales. Beginning in the early 1990s, the company aggressively opened new shops. In 1992 the company had 167 shops in eight states, predominantly in the Northeast. Overall, Monro's rapid expansion added 15 percent of square footage every year. Substantial growth occurred between 1991 and 1996, when sales climbed from $21.5 million to $117 million. By 1996 the company owned and operated 274 muffler and brake repair shops. Monro also came close to doubling its number of stores again in 1997. In 2011 Monro had 800 shops in 20 states and serviced 4 million vehicles annually.

Monro's management strategy relied on advanced inventory control systems and exceptional customer service. The focus on customer service gave the company an advantage over its larger franchise competitors. The strategy manifested itself even in chairman Jack Gallagher's policy of personally replying to all customers' letters. This strategy tended to create a focus on customer satisfaction at every level.

The typical Monro outlet and repair shop was 4,500 square feet with six service bays. Monro organized its stores around one key outlet, which carried a large inventory and acted in a support role for small satellite shops. Monro improved its overall service when it implemented measures designed to result in more effective inventory management. Since the 1989 installment of a point of sale (POS) inventory tracking system, the company dramatically increased its ability to meet customer needs with on-hand inventory. This system improved customer satisfaction, increased gross margins, and allowed Monro to react more efficiently and effectively.

Monro repair shops employed about 5,000 workers by 2011. The company retained its quality mechanics by providing them with career growth opportunities. Most regional and store managers began their careers with the company as service technicians. In addition, the company paid a premium hourly wage to mechanics who received an Automobile Service Excellence award. This emphasized the company's desire to insure quality service and acted as an incentive for employees to become certified mechanics.

Besides Monro, significant industry firms included Midas, Inc., of Itasca, Illinois, with $183.6 million in 2011 sales and 765 employees. Midas had about 2,250 locations worldwide in 2011, with 95 percent of its $184 million in 2011 earnings coming from North American locations. Meineke Car Care Centers had over 900 locations in the early 2010s. Formerly Meineke Discount Mufflers, the privately held company changed its name as it broadened its customer base by including maintenance and installation services like brakes, tires, and oil changes.

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