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Pep Boys revs its engine

There's a new Pep Boy-in-chief in town, and he has hit the ground running, visiting 70 of the chain's 593 stores in his first three weeks on the job.

There's a new Pep Boy-in-chief in town, and he has hit the ground running, visiting 70 of the chain's 593 stores in his first three weeks on the job.

He is Jeffrey C. Rachor, 45, and he is on a whirlwind campaign to convince his 20,000 employees that the venerable auto parts and service company will soon get off the bumpy detour it has been on for a decade and reassert itself on the American automotive scene.

Pep Boys - Manny, Moe & Jack was founded in 1921, in West Philadelphia, with an $800 investment. Its sales top $2.3 billion annually, from stores in 36 states. But it has lost money in three of the last five years.

Last year, a major shareholder persuaded the board to oust popular chief executive officer Lawrence N. Stevenson. This month, Rachor took over.

Stevenson, who has a Harvard M.B.A. and studied at the Sorbonne in Paris, was a retailer; Rachor is a car guy.

"I was born and raised in Flint, Mich., the birthplace of General Motors, a very prosperous city where you either worked for GM or sold hamburgers to people who did," Rachor said the other day, sitting in the audio section of the Pep Boys store in the Andorra section of the city.

Rachor's first job, as a 19-year-old co-op student at Michigan State University, was substitute foreman on a General Motors crankshaft assembly line, supervising 35 adults.

"I grew up fast. It was a very challenging employee- and union-relations situation. I learned quickly that a happy workforce is a productive workforce, that fundamentally employees want to know that you care when they are concerned about something," Rachor said.

He later worked in sales and marketing for GM and for American Suzuki before being recruited by Nelson Bowers, who owned dealerships in Tennessee, and remains a mentor he talks to "every other day." In 1997, Bowers sold most of his business to Bruton Smith, who went on to create Sonic Automotive Inc., based in Charlotte, N.C., with 175 auto dealer franchises and $9 billion in annual sales.

Rachor joined Sonic when it was formed, and rose to president and chief operating officer.

Car dealerships have become a complex collection of separate business lines - new-car sales, used-car sales, financing, repair service and parts sales.

"Twenty years ago, the service and parts departments were seen as only a necessary evil," Rachor said. That's changed. On his watch at Sonic, the nation's second-largest auto dealership group, the service and parts businesses grew to generate half the profits of the company.

That's what caught the eye of the Pep Boys' headhunters.

Rachor dresses up when he's at the corporate headquarters, a former warehouse on Allegheny Avenue. One day last week, he wore a light-blue suit; on another, a dark pin-striped suit. But he is spending most of his time these days wearing a Pep Boys jacket and visiting stores, talking with "every single technician and customer."

He spots name tags from a distance, calls people by name and says "sir" a lot, as people do down South. He gives employees and customers a business card with his e-mail address, and urges them to send him ideas and concerns.

He already has "pages and pages of e-mails and notes filed with ideas."

Sounding like the late legendary management guru Peter Drucker, Rachor says Pep Boys' business is far more than repairing cars and selling parts.

"Our job is to create an environment where everybody works together with a common purpose. Our mission is to provide reliable transportation," he said. Warming to the topic, he added, with increased fervor, "and that's a very high purpose when you consider America's reliance on transportation. You can't keep a job without a car, you cannot enjoy the great geography of our nation."

He exudes confidence in the company's future, spouting numbers to back his points. Used-car sales outnumber new-car sales three to one, and one-third of the used cars are personal transactions with no dealer or car lot involved.

Cars are hanging in there longer, being driven an all-time high average of 15,000 miles a year, and that means business for Pep Boys, Rachor declares.

In the beginning, carmakers were kind to Pep Boys. Henry Ford sold Model T's with only the bare essentials. That helped founders Manny, Moe and Jack create the automotive aftermarket industry.

Now Pep Boys faces tough competition from car dealerships, which aggressively market their service departments, as well as from Wal-Mart, Sears and others.

As profits fell, Pep Boys tinkered with its business model - sometimes pushing retail, sometimes repairs. There were even discussions about doing only minor maintenance in the company's 6,153 service bays.

That's over, Rachor declared, adding: "There's no reason we cannot meet 100 percent of the automotive needs of our target customers" - people who drive cars after the warranty has run out.

Even while cars are new, he said Pep Boys can be competitive for tires, batteries, and work not covered by warranty.

The company has the resources to support a comeback, thanks in part to cofounder Manny Rosenfeld's eye for real estate, and an early decision to expand in a big way into Los Angeles, back when land costs were still reasonable.

Rachor will be well-compensated, according to documents filed with the Securities and Exchange Commission last week. He received a $1.2 million signing bonus, and will be paid a base salary of $1.2 million, plus performance bonuses, stock options, and retirement benefits.

After only three weeks on the job, it's too soon, Rachor said, to talk strategy. But some ideas are already stirring. He said he may borrow an idea from the giant home-improvement chains and "leverage the expertise of our skilled technicians" to teach customers how to do some work on their increasingly complex cars.

Rachor has decided where he'll live. He and Lisa, his wife of 20 years, daughter, Corbin, 15, and son, Colby, 13, will live on Rittenhouse Square, and get their first taste of Center City life.

One thing is certain, Rachor said: Manny, Moe and Jack, the original Pep Boys, are coming back - and in a big way. Other companies have made good use of icons, but the Pep Boys represent real people, the founders of the company who gave it energy and personality for decades. Rachor said they will give the far-flung company a personal feel and set it apart from rivals. At a tire safety event last week, Rachor appeared with employees who were in costume as Manny, Moe and Jack.

In the early days, the Manny, Moe and Jack images were cartoonish and sometimes frightening to children. Manny had a big cigar: The real Manny enjoyed smoking until he died in 1959, at age 62, in the arms of his wife, Mary, on the dance floor of the Fountainbleu Hotel in Miami Beach.

Going forward, Rachor said, the spirit and likeness of Manny, Moe and Jack will be out front for the company once more, but looking healthier and more lovable.

The Men Behind Pep Boys

Founded: 1921, with initial investment of $800, at 7-11 N. 63d St., Philadelphia.

Manny: Emanuel Rosenfeld, born in 1896, an outgoing department store shoe salesman, who was a cofounder, problem solver, real estate expert, and guiding force in the company.

Moe: Maurice L. Strauss, born in 1897, a cigar salesman and cofounder, who created the prototype auto specialty store, crafted advertising, and managed inventory.

Jack: W. Graham "Jack" Jackson was an initial investor, but left during the first decade. The official company history said only that he was last seen being chased down the street by Moe "after what must have been an awful argument."

How it got its name (Part I): While wondering what to call their new store, Moe spotted a carton of Pep valve grinding compound, and they decided on Pep Auto Supply Co.

How it got its name (Part II): A police officer at 63d and Market told motorists he ticketed to "go see the boys at Pep" and get their oil lamp wicks replaced. That caught on, and the name became Pep Boys.

How it got its name (Part III): In 1923, Manny and Moe took a research trip by Model T from Philadelphia to Los Angeles, where they were inspired by a dress shop called Minnie, Maude and Mabel's, and the name was changed again to Pep Boys - Manny, Moe & Jack.

1933: Manny, Moe and Jack provide autogyro aircraft, used to tow advertising banners at the Jersey shore, and other gear for Admiral Richard E. Byrd's Antarctic expedition.

1946: Stock listed on American Stock Exchange.

1947: Headquarters moved to current location, 3111 W. Allegheny Ave., from 5th and Courtland Streets.

1959: Manny dies.

1975: Sales top $100 million.

1982: Moe dies; stock listing moved to New York Stock Exchange.

1990: Manny's cigar removed from trademark at American Cancer Society event on Independence Mall.

1991: Sales top $1 billion.

2006: Sales top $2.2 billion.

Top two markets: Los Angeles and Philadelphia.

Number of stores: 593 in 36 states, with total of 6,153 service bays.

SOURCE: Pep Boys company historyEndText