Byline: JIM MELE, EDITOR-IN-CHIEF
Fake Gucci handbags being sold on the streets of New York are getting a lot of press and police attention recently. While the economic damage to high-end fashion designers may be painful, the potential threat to public safety and welfare is small, making the entire issue of counterfeiting name-brand goods seem more like a consumer game than a real crime.
But what about a counterfeit air brake valve or engine main bearing that isn't up to the rigorous requirements of heavy-duty truck operations? Angry customers who don't get their freight, or damage caused by a runaway truck are not the same as a zipper that doesn't work.
Unfortunately, counterfeit truck parts haven't gotten a great deal of attention from either law enforcement or their ultimate target, those that operate heavy-duty trucks. There are no reliable ballpark estimates of the size of the problem, or even general agreement on what makes a replacement part counterfeit. What is clear, though, is that substandard heavy-duty replacement parts do get into the U.S. aftermarket in significant numbers and the problem is likely to get worse.
There is no question that parts counterfeiting is already big business in the passenger car market. The Federal Trade Commission (FTC) estimates that counterfeiting accounts for $12 billion a year in lost auto parts sales globally and about $3 billion in the U.S. alone. According to Wards Automotive Reports, FBI officials now put automotive parts at the top of counterfeiting activities, along with computers and apparel.
IS IT OR ISN'T IT?
Initially counterfeiters focused on cosmetic items like car accessories and body parts, but in recent years they have moved into safety related components like brake pads and suspension components. It's now possible to assemble a complete car or motorcycle from illegally copied and produced parts, according to a spokesperson for the International Anti-Counterfeiting Organization.
The FTC numbers only account for parts that are clearly counterfeits, parts that illegally copy the originals right down to brand logos and even packaging in an effort to pass as genuine OEM replacement parts. The picture gets murkier and much harder to quantify when you consider "knockoffs," parts reverse-engineered to look like the originals and often even carrying OEM parts numbers, but skirting patent and trademark infringement laws by avoiding actual brand names.
In countries where such knockoffs are produced, China in particular, weak or non-existent patent laws offer little protection to the original designer. For example, General Motors has been unable to stop production of a Chevy look-alike in China under the name Chery. Though tougher U.S. laws apply when such parts are imported, it can be hard to prove infringements or pirating. And for the most part, the law cannot address questions of quality.
Operating completely within the law are what are sometimes called "will-fit" parts makers. These companies often operate under their own brand names and make no attempt to represent goods as OEM parts, instead generally offering lower-cost alternatives and leaving quality decisions up to the end user.
Illegal parts activity has been largely confined to the passenger car market in this country for a number of reasons. The car parts market is far larger than the heavy-duty market, offering much more attractive volumes to counterfeiters.
Channels for distributing parts are also much narrower in the heavy-duty market with truck builders and original component makers maintaining strong relationships with their dealers. Independent parts dealers are also closely aligned with genuine parts distribution, relying on engine, drivetrain and other component producers, as well as truck OEMs for the ready access to parts and technical support fleets require.
"There has to be volume and a channel to dump them to make a market attractive to counterfeiters," says Josette Russell, manager of aftermarket marketing and business development for Eaton Corp.
Fleets are also more sophisticated about total lifecycle costs and have far more at stake than a consumer buying parts for their car. "With a truck, you're dealing with a piece of capital equipment, so you're selling uptime," says Harry Howard, vp and GM for ArvinMeritor's worldwide commercial vehicle aftermarket activities. "The risk is far lower with a personal vehicle."
LOOKING AT TRUCKS
Conditions now, however, are ripe for illegal parts producers looking at the U.S. heavy-duty market for new business. With industrialization of huge economies like India and China, it has become easier and cheaper to reverse engineer and manufacturer parts, making lower volume items like heavy-duty parts more economically attractive to pirates.
"Today reverse engineering products is far easier and requires less [technical] sophistication and investment, making it much easier to exploit [counterfeiting] opportunities," says John Flad, vp of Aftermarket Sales for Bendix Commercial Vehicle Systems LLC.
Saturation of markets closer to production sites also increases pressure to move on to the U.S. Some estimates have counterfeit automotive parts of all types accounting for 30% of the market in the Middle East. No estimates exist for Asia, but there is plenty of anecdotal evidence that counterfeit or knockoff truck parts are widely available there as well.
"We've seen main bearings in Cummins boxes carrying Cummins parts numbers on the aftermarket in India," says Dave Porter, director of marketing and product management. "If you looked at them closely, it was easy to see the substandard quality, but they were represented as Cummins products."
"A chemicals supplier told us they were offered a choice of original or 'fake' versions of their product in Asia," says Michelle Calbi, GM for parts, sales and marketing at Freightliner LLC. "They looked identical right down to the packaging."
And pirating activity isn't confined to less sophisticated developing markets. "We've had some cases in Europe where even the packaging was copied so closely that it was only identified [as a counterfeit] by the placement of the [three-arrow] recycling symbol," says Howard.
With most pirated parts coming from offshore, the U.S. Customs Dept. has been an effective barrier to goods that clearly violate patent and trademark laws, with the Federal Bureau of Investigation providing the prosecuting muscle. National security, however, has become the top priority for both organizations, pushing counterfeiting of all types of goods into the background. For example, the public information officer for the Detroit area FBI office told FLEET OWNER that the most of the agency's resources were focused on security issues now rather than patent or trademark infringement.
"For whatever reasons, we're hearing more and more about counterfeit truck parts," says Jim Conner, managing director of the Heavy Duty Manufacturers Assn. "It's not just counterfeit parts. It's just as much outright copying and theft of technology, and it's not subtle.
"The only place we have much chance of effectively stopping it is at our own borders," he says. "The [federal agencies] sympathize with us, but they have other stuff to do no. Security is their main focus now."
While the numbers may still be low compared to the passenger car market, counterfeit heavy-duty parts are here already.
Last year a Cummins dealer in the Southeast was offered remanufactured short blocks from the company's plant in China. "Cummins doesn't have a plant in China," says Loretta Evan, director of marketing and product management.
"We had the dealer buy one for us and analyzed it," she says. "The quality was so bad that we dismissed it as a threat, and we haven't seen any further activity or reports about that particular counterfeit. We think [the counterfeiters] probably bombed because of the quality."
Complex components like a complete engine aren't likely targets for more sophisticated counterfeiters. "When we have seen it, it's been things like simple gears, simple 'hard parts' that can be replicated by anyone with a good grinding machine or laser cutter," says Russell. "They target high failure parts like gears used to rebuild transmissions. It's a very small problem for Eaton right now because it's so hard for a counterfeiter to find a part that combines that simplicity with high enough demand to make it pay."
Other industry suppliers, however, already see counterfeiting growing, especially in the area of air-brake system components. The reason for that growth is probably tied to volume. Effectively, there are only two air-brake performance standards for the world, the U.S. FMVSS standard, which has also been adapted by Mexico, Central America and Asia Pacific, and the European standard, which is also the law in large parts of South America and Eastern Europe, according to Howard.