Industry Report - Tire Review Magazine

Industry Report

Goodyear Tire & Rubber Co. received a one-month extension from its various banks to comply with loan agreement covenants that, among other things, would have forced the struggling tiremaker to make a $500 million contribution to its underfunded pension program. The extension was granted Mar. 5, two days before a temporary waiver was set to expire, and expires Apr. 4.

Waiver gets extension

Goodyear Lands Credit Line, Reworking Loans

Goodyear Tire & Rubber Co. received a one-month extension from its various banks to comply with loan agreement covenants that, among other things, would have forced the struggling tiremaker to make a $500 million contribution to its underfunded pension program. The extension was granted Mar. 5, two days before a temporary waiver was set to expire, and expires Apr. 4.

In addition, J.P. Morgan and Citigroup committed to underwrite for Goodyear a new three-year, $1.3 billion asset-based credit line. The new financing would kick in once Goodyear modifies its current loan agreements. The tiremaker is working with J.P. Morgan to restructure, refinance and extend some of its loans into 2005, which would lessen its debt burden.

The waiver extension gives Goodyear some breathing room, according to the company, and the new credit line will help it pay its burgeoning bills. At the time the original waiver was granted in early February, Wall Street analysts feared Goodyear didn’t have enough available funds to meet on-going obligations.

Analysts projected that Goodyear’s pension obligations were $2.2 billion underfunded, plus it had debt coming due this year and in 2004, including remaining debt from the 1998 purchase of Sumitomo Rubber Industries’ Dunlop operations in Europe and North America.

Goodyear said in February that it had $700 million credit line for accounts receivable, $600 million in cash on hand, another $700 million in committed and uncommitted credit, and $400 million available from international receivables.

"The new asset-based facility, which extends into 2006, provides additional liquidity that offers financial and operational flexibility for our businesses," said Robert Tieken, Goodyear executive vice president and CFO.

Continental Goes ‘Out West’ to Intro Seven New Truck Tires

Continental Tire North America (CTNA) has seven new tires to complete its Continental premium truck tire line and provide what it says is one-stop shopping for commercial customers.

Marketed as "The Test Out West," CTNA took both dealers and media to its Uvalde, Proving Grounds in Texas to introduce new commercial tires ranging from long haul steer and trailer to off-highway drive tires.

"The Continental brand is known for its advances in truck tire technology," said Clif Armstrong, CTNA’s director of OE and commercial brands management. "We have products that are industry leaders in performance and value, but until now, we didn’t have a Continental-branded product for every application. With this product launch, we will be able to offer our customers premium tires designed to meet all their needs.

"We’re going to be moving and pushing the Continental brand as far as we can."

While at the proving grounds, CTNA demonstrated the new tires by showing how well they performed in rolling resistance "coast down" tests, fuel economy tests and heat reversion tests – in which the tiremaker runs the tires for two hours at 65 mph and then measures each tire’s temperature with thermocouples embedded in the rubber.

The new tires are:

®′ The HSL Eco Plus is a long haul steer tire that has an 18/32-inch tread depth and equal rib widths to distribute pressure, provide long mileage, reduce rolling resistance and resist irregular wear, CTNA said. The tire also features a new stone ejection system.

®′ The HDL Eco Plus is a long haul drive tire with a 28/32-inch tread depth and a closed shoulder design for even tread wear and excellent traction, the company said.

®′ The HTL is a 13/32-inch long haul trailer tire that provides long mileage, resistance to rapid shoulder wear, according to CTNA, and scuff ribs. The tire also features the company’s Visual Alignment Indicator (VAI) system to alert drivers of alignment problems.

®′ The HSU is a 10,000-pound on-/off-highway heavy service tire with a special cut and tear resistant compound, CTNA said. The tire also features VAI technology.

®′ The HSC all-position on-/off-highway service tire, according to the tiremaker, has a cut/chip resistant tread compound, a stone ejection system and a sidewall with a curb rib to reduce damage.

®′ The HDC is an on-/off-highway drive tire with a 30/32-inch tread depth and an aggressive tread utilizing lateral grooves and sipes for traction in all weather and surface conditions, CTNA said.

®′ The HDO off-highway drive tire, with 32/32-inch depth, has a self-cleaning pattern for high traction in predominately off-highway applications, and a stone ejection system, according to the tiremaker.

Bridgestone Corp. Buys Share of Nokian Tyres in $84 Million Deal

Bridgestone Corp.’s European tire unit is buying an 18.9% share of Nokian Tyres PLC, the Scandinavian region’s largest tire company well-known for its extensive line of passenger, performance and light truck/SUV winter tires.

The deal, estimated at $84 million, makes Bridgestone Europe NV/SA the largest shareholder in the Finnish tire company with two million shares. The purchase was facilitated in a deal with Nokian Tyre’s parent company, Nokia Corp.

Bridgestone Europe officials said that Nokian Tyres would continue to operate as a separate company, and that the companies would explore areas where they could compliment each other, such as in product development, testing and distribution.

Nokian Tyres’ North American subsidiary, Nokian Tyres Inc., is based in LaVergne, Tenn., less than a mile from Bridgestone/Firestone North American Tire’s tire plant there. Nokian Tyres also owns and operates some 170 retail outlets across Finland, Sweden, Norway, Estonia and Latvia.

Last August, Nokian announced plans to create a joint venture with Amtel Holdings to produce Nokian- and Nordman-branded tires in Russia and other former Soviet states. Nokian also has one year left on an off-take agreement with Groupe Michelin in which Michelin is producing Nokian agricultural and OTR tires at its plant in Olsztyn, Poland.

Galaxy Buys Serbian Tiremaker, Plans Expansion of Brands in N.A.

Galaxy Tire & Wheel Inc., the Malden, Mass.-based specialty manufacturer of tires for agricultural, industrial and OTR tires, acquired controlling interest in Serbian tiremaker Rumaguma AD. Galaxy took control of the tiremaker on Feb. 20, and moved its people into top management positions.

Galaxy officials said the company, which had previously outsourced much of its production, would launch a five-year capital program aimed at modernizing Rumaguma’s 20-year-old plant and double its current capacity.

And with the added capacity for its Galaxy and Constellation brands, Galaxy Tire plans to "aggressively expand" its dealer base in North America and Europe.

Rumaguma, which produces agricultural and OTR tires, is one of Serbia’s premier industrial companies, and has a "long-established reputation for producing high-quality" tires, said Galaxy officials. Currently more than 75% of Rumaguma’s production is exported, with Continental AG among its largest customers.

The Serbian plant is running at 65% of its capacity, said Galaxy officials, and the addition of its own production will fill that available capacity.

Galaxy said it purchased Rumaguma to "ensure a permanent and secure source of supply for Galaxy’s critical OE products for customers such as Case New Holland, John Deere, Caterpillar and Terex ®ƒ and have the needed capacity to both satisfy current demand and support Galaxy’s expansion plans for many years to come."

Wellen Leaves CTNA, de Louw Tapped as New President

Just 14 months after he became president of Continental Tire North America, Dr. Ulrich Wellen decided to leave the company. Martien de Louw, who recently joined Continental AG to head its worldwide consumer tire business, was named president and CEO of CTNA.

CTNA said Wellen left at his own request to "pursue other professional activities," and did not elaborate on his departure. In January 2002, Wellen, who holds a doctorate in chemistry, replaced Bernd Frangenberg who retired after eight years at the helm of CTNA.

de Louw, who came to Continental from DAF Trucks, a division of Paccar Group, remains a member of the Continental AG board, and will also head CTNA’s passenger and light truck tire replacement business.

No Real Losers in New BFNAT Drive a Dream Sweepstakes

Consumers who might have wondered what it would be like to own a Ferrari, BMW, Lexus, Nissan 350Z, Porsche or Mercedes may not have to wait long. In a new sweepstakes that runs through April, Bridgestone/Firestone North American Tire is giving consumers a chance to win one of those luxury vehicles, which sport Bridgestone brand tires as OE.

Consumers can enter the Drive a Dream Sweepstakes at participating Bridgestone tire retailers in the U.S. and Canada. Winners will be selected in May.

The grand prize winner will receive a Ferrari Modena. The first place winner can choose between a BMW 7 Series, a Lexus LX470, a Mercedes SL500 Roadster or a Porsche 911. The second prize winner gets to choose between a BMW Z4, a Lexus LS430, a Nissan 350Z and a Toyota Land Cruiser.

"We want to show our customers that some of the greatest vehicles in the world ride on Bridgestone tires," said Phil Pacsi, executive director of North American consumer tire brand marketing. "What better way to do that than to give them the chance to win, simply by stopping by a participating Bridgestone retail location."

Federal Grand Jury investigating Ford, Bridgestone

A federal grand jury in Illinois began investigating both Ford and Bridgestone Americas Holding in late February, and could hand down criminal indictments against the companies and company executives in connection with fatal rollover accidents attributed to recalled Firestone ATX, ATXII and Wilderness AT tires and the Ford Explorer.

Miriam Miquelon, U.S. attorney for Illinois’ Southern District, reportedly issued subpoenas to attorneys involved in civil lawsuits against the companies, seeking documents and testimony. Some 270 deaths have been attributed to tread separations suffered by the recalled tires, many of which were OE on Explorer models.

According to the Associated Press, which obtained a copy of the subpoenas, an accompanying letter indicated the grand jury wanted the documents "pursuant to an official criminal investigation of a suspected federal offense."

No specific charges have been filed, and grand jury investigations are generally kept secret. At press time, neither BAH nor Ford officials had seen or received any subpoenas.

One report said that among the records requested is sworn testimony by John Lampe, BAH chairman and CEO, and by Sanjay Govindjee, the independent consultant hired by BAH to investigate what happened to the tires in question.

michelin adds $144 million to ardmore p/lt plant

Michelin North America is putting another $144 million into its Ardmore, Okla., passenger tire plant in a move to boost production of large size passenger tires as well as light truck radials.

The move came as a result of the state’s offer of economic incentives, and follows an earlier commitment of $56 million to improve the 33-year-old plant. The 1.5 million-square-foot plant employs nearly 1,850 people, and produces both OE and replacement tires.

"Increasingly, automakers and the public are demanding larger tires, more high performance tires and more SUV tires," said Pete Selleck, COO of Michelin Americas Small Tires. "The investments we are planning will position us to meet those demands."

automaker warns it won’t back dealer wheel sales

In a move born out of growing product liability concerns in the aftermath of the Ford-Firestone controversy, General Motors is warning its dealers that it will not handle warranty costs or be a defendant in suits involving non-GM accessories, especially custom wheels.

GM officials said they are concerned about the safety and reliability of non-GM accessories, including custom wheels, which have a direct relationship to vehicle performance and on-road driver safety. No other vehicle maker has taken such a stand, and there appears to be no data that suggests that non-OE accessories or wheels pose any safety threat.

While GM officials said the carmaker wants to increase sales of its "authorized" accessories, one of its primary concerns is the potential impact plus-sizing tire and wheel packages could have on handling and safety. GM officials said that the automaker’s extensive tire/wheel engineering efforts optimize the OE tires and wheels for the specific vehicle. By offering non-GM products, dealers could alter engineered-in performance and safety.

News reports indicate that some GM dealers have abandoned custom wheels, but most continue despite the automaker’s position. SEMA said sales of aftermarket wheels reached $1.1 billion in 2001.

TIA Announces Winners of Industry Awards

Seven individuals were selected to receive high honors during the 2003 World Tire Expo, including three people who were instrumental in the merger of the former Tire Association of North America and the International Tire & Rubber Association into what is now the Tire Industry Association.

TIA immediate past president Steve Disney of Disney Tire Co. in Louisville, Ky.; Paul Routhier of J.P. Routhier & Sons in Littleton, Mass.; and current TIA President Tom Raben of Raben Tire Co. in Evansville, Ina., will be honored with the Industry Leadership Award.

Industry Pioneer Award recipients are Frank Hall of Frank Hall Tire Service in Spartanburg, S.C., and Anne Evans of Tyres 2000 in Hebron, Conn.

TIA Tire and Rubber Recycling Council member Allan Lassiter, of the Virginia Department of Environmental Quality, and former TIA executive vice president Ross Kogel Jr., now of Tire Wholesalers in Troy, Mich., will receive the Friend of the Industry Award.

The awards will be presented at the WTE’s Industry Recognition Dinner, Friday, Mar. 28 at the Seelbach Hilton in Louisville. Special guest speaker is NFL Hall of Famer Mike Singletary of the Chicago Bears.

Of Note

­·Bridgestone/Firestone’s Warren County, Tenn., truck tire plant produced its 20 millionth tire Feb. 6.

­·Tire dealers in the northwest are battling a Washington state legislature proposal to charge those who buy studded winter tires an additional $15 per tire, claiming such tires damage roadways.

­·Tire Centers Inc. has joined TRIB and enrolled all of its locations.

­·AAA members in Florida, Georgia and parts of Tennessee are eligible for a 10% discount on •Cooper brand tires purchased as AAA-approved facilities or at participating Cooper dealers.

­·Falken’s new Azenis-branded performance parts program, which includes branded custom wheels, has been renamed Factory Tuned.

­·Federal-Mogul acquired Honeywell’s Bendix brake friction business in exchange for •Honeywell receiving court protection from future asbestos-related liabilities.

­·Michelin’s Laurens Proving Grounds in Laurens, S.C., will be expanded after the tiremaker bought 253 adjacent acres for just under $1 million.

­·Toyo is the official tire of the National Auto Sport Association’s 2003 race series.

­·Hankook Tire America’s Web-based "Win Free Tires" consumer giveaway, featuring its Ventus and Dynamic lines, was called a "success" by the company. See www.hankooktireusa.com for details.

­·Arnco – Jack Keith named technical representative.

­·BL Systems CEMB USA – Stephen Schwertly named director of sales.

­·Bridgestone/Firestone North American Tire – Named Kurt Danielson director of commercial marketing.

­·Cooper Tire & Rubber – Named John Holland to board of directors ®ƒ Kerry Barnett named regional credit manager.

­·Goodyear Tire & Rubber – Karen Burke named vice president of Six Sigma and quality ®ƒ Susan Arnold named to board of directors.

­·Hercules Tire & Rubber – Kevin Breen named director of sales and marketing ®ƒ Deborah Wise named marketing coordinator ®ƒ Bruce Campbell named director of commercial sales.

­·International Marketing – Kenny Walker named regional sales manager.

­·Michelin North America – Appointed Phil Romba public relations manager.

­·Mohawk Rubber Sales – Brent Cauldwell named sales associate ®ƒ J.B. Bates appointed sales representative.

­·Rotary Lift – Eric Howlett appointed president

­·Toyo Tire (USA) – Travis Roffler named national director of sales ®ƒ Sonny McDonald named ultra-high performance sales manager.

­·On Feb. 10, a Florida jury ruled defective a Firestone ATX tire that separated causing a Ford Explorer rollover accident. The jury, however, said the tire was only 20% at fault and awarded just $55,400 in damages to the driver, who suffered only minor injuries.

­·Goodyear and Arkansas Best Corp. cut the potential sale price of Arkansas Best’s 19% share of Wingfoot Commercial Systems by $2.1 million; Arkansas Best can sell its share between Apr. 30 this year and Apr. 30, 2004.

­·The Supreme Court rejected an attempt by the Big Three automakers to limit their asbestos-related liability by moving such lawsuits out of state courts and into U.S. Bankruptcy Court.

­·Kelly-Springfield is now the title sponsor of the Conference USA men’s basketball tournaments in 2003 through 2005.

­·Treadways Corp. opened a new 55,262 square-foot warehouse on Feb. 1, to support its Sumitomo and TreadXpress divisions.

­·Standard & Poor’s put Groupe Michelin on its credit watch list due to concerns over potential underfunding of the company’s pension fund.

­·American Tire Distributors opened a new 70,000-square-foot warehouse in Des Moines, moved into its new Mobile, Ala., distribution center in early February, and will open a new warehouse in Springfield, Mo., by mid-year.

­·Monro Muffler & Brake purchased 10 stores in Charleston and Columbia, S.C., from Frasier Tire Service for $1.3 million.

­·Pirelli Tire North America became the second U.S. tire company to add an online tire registration feature to its Web site – www.us.pirelli.com.

­·Firestone Agricultural Tire Division plans a new 850,000-square-foot distribution center in Des Moines, opening in early 2004.

­·Solideal Industrial Tire acquired Nashville’s Bush Industrial Tire.

­·Johnny Unser, nephew of Indy 500 winners Bobby and Al Unser, has been hired by Cooper Tire as a technical consultant for its UHP tire program.

­·News reports say Goodyear Dunlop Tyres UK is considering discontinuing tire production at its Wolverhampton plant.

­·Maxxis International was the title sponsor of the Maxxis Pennsylvania On/Off Road Rally, held Mar. 7-10 in the Laurel Mountains.

­·Hankook’s Ventus Z211 was selected as the spec tire for the SCCA’s Mazda Miata North American Cup Series.

­·Calling one of the tiremaker’s consumer ads "offensive," Sears dropped Falken as a supplier; Falken said Sears’ action will have a minor impact, and will now focus on independent tire dealers.

­·In January, the Supreme Court let stand a Seventh Circuit Court of Appeals denial of class-action status for millions of uninjured Ford Explorers and Firestone tire owners who were seeking compensation for alleged financial loss.

­·Kwik-Way award Sicam as its Wheel Supplier of the Year.

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