By Julie MacIntosh

LAS VEGAS, Oct. 31 (Reuters) - The car parts market has an image problem, some of its leaders agreed on Wednesday -- and now may be the perfect opportunity for a facelift.

Consumers asked to relate their impressions of the auto parts replacement market might say they've felt ripped off by auto shops -- deceived into paying premium for parts and services that may not have been needed in the first place, a panel of executives from within the industry said.

Investors might describe an opaque, unsexy market with little serious growth potential, they agreed, during a question-and-answer session at the the Automotive Aftermarket Industry Association in Las Vegas.

"If we were in the medical business, our bedside manner as an industry probably wouldn't be that good," said Larry Pavey, president of auto parts maker Dana Corp.'s (DCN) Under Vehicle group.

But expectations run high that new auto sales will drop after low-interest financing programs from U.S. automakers expire in mid-November. And consumers' love affairs with their cars have taken on a new meaning -- and should result in more miles on the roads and fewer in the skies -- following the Sept. 11 attacks on the World Trade Center and the Pentagon.

More miles are being driven per vehicle, and an increased number of vehicles have reached the prime age -- of six years or more -- for repairs. That yields some promising opportunities for makers and retailers of replacement parts.

"I think the whole view that Wall Street has that we're a slow-growth or no-growth industry is crazy," said David O'Reilly, Chairman and Chief Executive of auto parts retailer O'Reilly Automotive Inc. (ORLY) .

SAFETY FIRST

The U.S. auto parts replacement market, also known as the aftermarket, generates about $38 billion in annual sales to do-it-yourself drivers making repairs to their own vehicles, the executives said.

Still, O'Reilly noted that about $60 billion in revenue escapes the market each year due to underperformed maintenance by car owners, and could be captured with better marketing and a stronger focus on safety and customer satisfaction.

Rival auto parts retailer AutoZone Inc.'s (AZO) new advertising campaign, which stresses the need to make repairs to vehicles as a matter of safety, is aimed at taking advantage of those numbers, the company's Chief Executive, Steve Odland, said.

"I think this is a perfect opportunity to start repositioning our industry as a growth industry in people's minds," Odland said. "I think we have really allowed the agenda to be taken from us."

A study released on Wednesday showed more than 20 percent of about 485 American adults surveyed expected to fly less during the next three months, while 23 percent of those polled said they were likely to drive more for recreation, according to Hartford Financial Services Group.

If efforts by auto parts makers and retailers can convince drivers to change their oil and perform other marginal tasks every 4,900 miles on average instead of every 5,000, another $65 million in revenue per year could be generated for the industry, Pennzoil-Quaker State (PZL) President and Chief Executive James Postl said.

Lower gasoline prices have also aided the push for more frequency in auto repairs and oil changes, Postl said, and have encouraged drivers to put more miles on their cars in shorter periods of time.

"Certainly, the dynamics are moving in our favor," he said.

REUTERS

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