Genuine Parts Sets 2027 Split, Unveils Growth Plans for Automotive and Motion

Key Points

• Genuine Parts plans to split its automotive and Motion industrial businesses into two publicly traded companies in Q1 2027, aiming to create value and let each business pursue distinct strategies and capital priorities.
• The automotive business plans to focus on international growth, professional repair customers, and modernizing its U.S. supply chain with automated distribution centers. Motion sees room to gain market share in a large industrial distribution market and expects to prioritize organic growth and acquisitions.
• The separation is expected to cost $100 million to $150 million, including dis-synergies and costs to establish Motion as a standalone public company. Executives also cited persistent expense pressures from diesel, wages, healthcare, and IT.

Genuine Parts NYSE: GPC executives outlined plans to separate the company’s automotive and industrial operations into two publicly traded companies in the first quarter of 2027, emphasizing distinct growth strategies, capital-allocation priorities and opportunities to sharpen each business’s investor story.

Chairman and CEO Will Stengel said the primary rationale for the separation is value creation. He said the automotive and industrial businesses have reached different stages in their strategic development following five to seven years of investment in areas including supply chain, technology and operating capabilities.

“They are at slightly different parts in their journey in terms of how they are thinking about capital priorities, business strategy, how we are serving customers,” Stengel said. “Neither one is better or worse, they are just different.”

Stengel introduced Court Carruthers as CEO-elect of Genuine Parts Company’s automotive business following the separation. Carruthers said operating as a stand-alone automotive company should allow management to devote more attention to its international operations as well as its U.S. professional customer base.

Automotive business highlights international operations and supply chain

Carruthers said roughly half of the automotive business is outside the United States. The company holds leading positions in Canada, Australia and New Zealand, while its European operations are growing faster than the market and competition, according to Carruthers.

He also cited opportunities in the U.S. professional, or “do-it-for-me,” segment. Genuine Parts’ NAPA network includes 30,000 NAPA Auto Care locations globally, including 18,000 in the United States, he said. The company also sees opportunities in commercial fleet and local-government customers, where Carruthers said the business has a distinct competitive position.

A central element of the automotive strategy is modernizing the U.S. supply chain to improve local product availability for professional repair customers. Carruthers described the business as one centered on serving “car on hoist” situations, where mechanics need parts delivered quickly.

The company recently opened a highly automated distribution facility in York, Pennsylvania. Carruthers said such facilities can provide cost and productivity benefits, but their more significant role is to place a broader assortment of products closer to repair shops.

• Revenue growth opportunities from improved product availability
• Potential gross-margin benefits
• Operating-expense productivity gains from automation

Management said it has been opening distribution centers at a pace of roughly two to three annually in recent years, though it plans to provide a more detailed roadmap at its investor day. Carruthers said the company will continue investments in a “measured and disciplined” manner.

Chief Financial Officer and Chief Operating Officer Bert Nappier said investments in international distribution networks have enabled the company to bring operating lessons and technology back to the United States. He also pointed to the company’s robotics lab in Atlanta as a venue to test automation technology.

Motion seen as underappreciated industrial leader

Stengel said the planned separation will give the company’s Motion industrial-distribution business an opportunity to receive greater attention from investors. He described Motion as the leading industrial distributor in its served markets, with approximately 6% market share in a roughly $150 billion total addressable market and an estimated $70 billion serviceable market.

Motion’s next-largest competitor is about half its size, Stengel said. The business serves maintenance and engineering personnel in factories and operates a break-fix model similar to Genuine Parts’ automotive operations.

Stengel said Motion has improved margins since 2019 and sees opportunities to increase its share of customer spending. He also cited an “AI manufacturing build-out” as creating a favorable effect across manufacturing markets, which he characterized as a medium-term opportunity.

For capital allocation, Nappier said Motion is expected to prioritize organic growth and acquisitions before shareholder returns. The automotive company is expected to focus on capital expenditures for supply-chain modernization and technology, in addition to acquisitions and shareholder returns.

Separation costs and inflation pressures

Management said the two businesses have largely operated independently, with no shared customer-facing roles, few shared facilities and separate enterprise resource planning systems. However, the separation will require renegotiating shared contracts, separating certain back-office systems and adding some functions that had been shared.

Nappier said the company continues to expect $50 million to $75 million in dis-synergies from the separation and another $50 million to $75 million to establish Motion as a public company. He said the company remains on track to fall within its previously disclosed total range of $100 million to $150 million.

Stengel said a cross-functional internal project management office meets weekly and is tracking major milestones, including a planned December dry run for operating as two companies.

On broader operating conditions, executives said both businesses continue to operate in a low-single-digit inflation environment. Nappier said cost pressure remains particularly acute in selling, general and administrative expenses, citing higher diesel costs, wage inflation, healthcare costs and rising information-technology expenses.

He said diesel fuel was up 50% year over year and had reached $6 per gallon, while healthcare costs were rising at double-digit rates. Management said supply-chain investments, restructuring actions and efficiency efforts are intended to help offset those pressures.

Nappier also said supply-chain financing will remain part of the automotive aftermarket business and is important to the future automotive company, while Motion is not expected to use such financing. The company continues to target investment-grade credit ratings for both businesses after the separation.

About Genuine Parts (NYSE:GPC)

Genuine Parts Company NYSE: GPC is a distributor of automotive and industrial replacement parts. Its Automotive Parts Group supplies components and accessories for cars, trucks and other vehicles, serving professional repair shops, commercial customers and do-it-yourself consumers through distribution networks, stores and digital channels.

The company's Industrial Parts Group distributes products used to maintain and repair manufacturing, commercial and other industrial equipment. Its offerings include bearings, power-transmission components, motion-control products, industrial supplies and related maintenance, repair and operations products.

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