Bigger & Stronger
Cooper Builds Up Commercial Division With Hercules Purchase
The best business deals, they say, are the ones that are clear win-wins for both parties. Such appeared to be the case in Cooper Tire & Rubber Co.’s purchase of Hercules Tire & Rubber Co.’s retread equipment and materials business in early May.
The deal, scheduled to close June 30 and not exceed $8.5 million, gives Cooper’s Commercial Tire Division a larger customer base and a stronger new tire/retread product portfolio. For Hercules, the sale allows it to concentrate on its growing custom rubber compounding business and private brand tire operations.
In the deal, Hercules keeps its Findlay, Ohio, and Guntersville, Ala., plants, which will focus on producing custom-mix rubber. Cooper gains all of Hercules’ tread rubber, retread materials and equipment operations and products, including its Cedco equipment division. Reports said Hercules’ estimated 250 retread product customers would be serviced by Cooper’s commercial group, which includes its Oliver Retread Systems operation.
Last year, Cooper integrated its Oliver retread and Cooper new truck tire operations into one division, headed by Larry Enders, former Oliver president. Enders, now president of the Cooper Commercial Division, and his team have concentrated on consolidating the two groups and formulating a attack plant (see next month’s Tire Review for more).
Heafner unloads rest of Winston unit to PMI
After selling several of its Western U.S. retail outlets to tire dealers and other businesses, Heafner Tire Group sold the remainder of its Winston Tire division to Performance Management Inc. (PMI). In the deal, PMI, which bills itself as a “turnaround artist,” acquired 132 Winston Tire retail locations in California.
While the purchase price was not disclosed, news reports stated that Heafner would receive over $11 million from PMI.
Under pressure from creditors and shareholders alike to improve its financial performance, Heafner has experienced a period of reorganization and contraction after years of growth via acquisition. In 2000, Heafner bought out T.O. Haas, American Tire Distributors and some Tire Centers Inc. locations. In January, Donald Roof was replaced as Heafner president and CEO by Richard Johnson, and Johnson immediately restructured the company’s management.
Over the last few months, Heafner has shed most of its non-California retail operations, selling stores to other dealers and retailers like Purcell Tire, Big O and Brake Masters.
According to Heafner financial reports, Winston Tire has sales of $178 million last year, but Heafner projected Winston would turn under $140 million in sales this year, and would likely lose $10 million as a result.
PMI owns and operates 12 Allied Discount Tire stores in Louisiana, and its president, Bryant Kountz, will serve as chairman and CEO of Winston Tire. Kountz appointed Ron Vines as president and COO, and John Kamlowsky as senior vice president. Vines held management position with Heafner and Sears, Roebuck and Co., while Kamlowsky was formerly with Tire Kingdom Inc.
Terms of the deal call for Heafner to remain as a tire supplier to Winston Tire.
Tire makers announce tire price increases
Goodyear, Michelin, Pirelli, Continental, Bridgestone/Firestone (BFS) and Cooper have all announced price increases for the second half of 2001.
Goodyear added 4% to replacement Goodyear and Dunlop brand tires, 3% on its Kelly brand products and private label tires it produces, and 5% on all Goodyear Aquatred lines and bias-ply light truck tires. Goodyear’s increases took effect June 15.
Michelin North America increased the prices of its Michelin, BFGoodrich, Uniroyal and other branded passenger and light truck/SUV tires by up to 5% effective Aug. 1. The company, which has complained of not being able to hold medium truck tire pricing, did not address commercial products with this increase.
Pirelli Tire North America has raised prices on all of its passenger, performance and light truck/SUV replacement tires by 5%, effective July 1.
Continental Tire North America (CTNA) boosted the prices of its Continental and General brand replacement passenger and light truck/SUV tires up to 5%, effective July 1. CTNA did not address its commercial products.
BFS bumped the prices of its Bridgestone and Firestone brand medium truck and bus tires by 4%, and its Dayton brand commercial products by 3%. The company also hiked prices on its Bridgestone and Firestone brand passenger and light truck/SUV tires up to 4%. All increases are effective July 1.
Cooper Tire & Rubber increased prices on all its passenger and light truck/SUV tires by up to 5%, starting July 1.
NLRB rules against Titan as cutbacks and layoffs persist
Titan International’s financial and labor troubles continue, with reports of layoffs and cutbacks at most of its plants, and a significant National Labor Relations Board (NLRB) ruling against the Quincy, Ill.-based company regarding its now three-year long battle with the United Steelworkers of America (USWA).
In late April, NLRB’s appeals panel unanimously upheld a February 1999 finding by an administrative law judge that Titan violated federal labor laws in dealing with striking workers at its Des Moines, Iowa, plant. Workers at that plant went on strike in May 1998. Titan reportedly will appeal the NLRB ruling in federal court.
The original NLRB administrative judge’s ruling ordered Titan to “cease and desist” from transferring or threatening to transfer jobs and equipment from the Des Moines plant, threatening to replace workers represented by the USWA, invoking a final offer without having reached an impasse in negotiations, and cutting insurance coverage for workers on leave at the time the strike began.
If upheld on appeal, a process that could take years, Titan would also be forced to restore production at the Des Moines plant to pre-strike levels, unconditionally rehire striking employees, and compensate those employees for loss of earnings during the now three-year long strike.
Last October, Titan filed a $240 million federal racketeering suit against the USWA and more than 2,300 individuals, charging the union used illegal tactics – including bomb threats, personal property damage, and false workers’ compensation claims ®“ in an attempt to cripple the company.
April news reports out of Natchez, Miss., said Titan had reduced the workforce there to less than 20 workers, and was apparently boarding up the plant. Titan had earlier reduced the plant to just a rubber mixing operation, but continuing poor farm and construction market conditions forced Titan to halt all production there.
Meanwhile, Titan apparently exercised an option to purchase the plant property from the city for $100. Titan owned the plant equipment, but had been leasing the plant and land from the city. By exercising the purchase option, according to USWA officials, Titan can close down or move the facility as it chooses.
Other USWA reports say Titan has reduced staffing and cut work weeks at its Des Moines facility and at its new plant in Brownsville, Texas.
Kumho’s Shin says innovation will lead way
In one of his first visits to the U.S., the well-traveled management veteran Hyung-In Shin served as president of Kumho Tire USA. This past April, Shin came back to these shores as president of world-wide Kumho Tire Inc., and as the keynote speaker for the 20th Tire Society Conference, an annual gathering of hundreds of tire engineers and scientists.
In his address, Shin suggested that future growth of the tire industry and in consumer confidence are firmly in the hands of the tire scientists of today and tomorrow.
“Our industry is facing a difficult and uncertain future – consumers no longer trust us the way they once did. It will take time and effort for us to repair the damage that has been done. Only when we have demonstrated our commitment to a new standard of quality that embraces safety and environmental stewardship, will we regain the goodwill of our customers.”
“I believe that technology is the absolute means for leading quality. At present, the management environment of the tire industry is rapidly changing. To cope with these ever-changing circumstances and maintain corporate continuance and profit-creation, restless technology innovation must be encouraged. Engineers and scientists like you will be the leaders in this innovation.”
Shin, who was named president of Kumho Tire Inc. in 1997, served as president of Kumho Tire USA from 1987 through 1992. Prior to that, he held management positions with Kumho operations in the United Kingdom and Panama.
In his various positions, Shin said he has always emphasized three key points to his charges. “First, I stress the need to be a champion for change. In order to become a leader in today’s ever-changing competitive circumstances, one should lead change, not just follow.
“Second, I emphasize to them to think ahead. Leading behavior comes from leading thought. By thinking ahead we can create opportunities rather than wait for them to happen.
“The last is something that cannot be over-emphasized and is somewhat treated lightly in the process of pursuing progress – strictly focus on providing world-class quality and value for your customers.” Shin said that ®world-class quality and value® has always been his management ®catchphrase.®
“So, what must we do to ensure that we embrace change, think ahead and maintain our focus on providing quality and value to our customers?” Shin said.
“First is recruiting bright and resourceful people who possess vision and a challenging spirit. Second, top management should focus corporate resources on these researchers to provide suitable tools, training and encouragement to perform the creative activities necessary to make new breakthroughs and capitalize on them.
“Third, we must accept and learn from the mistakes incurred during the research process in order to create a boundless environment for R&D and boost innovative thinking.”
Finally, Shin suggested company management must “provide a clear guiding principle for the direction of R&D,” and create an ®atmosphere of open discussion, because harmonious communication is essential for researchers to find the solutions together.®
Recall Round II
Ford Recalls Firestones; BFS Calls for Explorer Investigation
Editor’s Note: This is a recap of events related to Ford’s recall of some 13 million Firestone tires through June 6. Additional up-to-the-minute information is available on our Web site at www.tirereview.com.
The headline-grabbing battle royal between Ford and Bridgestone/Firestone Inc. (BFS) started as whispers to the New York Times, became a bitter business split, and then escalated into an acrimonious corporate war, complete with charges and countercharges questioning the safety of certain Firestone tires and Ford’s top-selling Explorer.
The first three weeks of Ford’s effort to recall over 13 million Firestone Wilderness AT tires world-wide ended with BFS filing a formal request that the National Highway Traffic Safety Administration (NHTSA) undertake a full-scale investigation of the Explorer.
In filing for the investigation, BFS cited the findings of an Ohio State University mechanical engineering professor, who conducted an apparently independent study that allegedly found that “certain models of the Explorer will experience an ‘oversteer’ condition following a tread separation on a rear tire, a clearly foreseeable event,” a situation that ®the average driver® will overreact to, leading to unexpected rollover accidents. ®This must be regarded as a highway safety defect within the meaning of NHTSA’s charter,® according to Dr. Dennis Guenther, the Ohio State professor.
“Based on his initial findings, Dr. Guenther concluded that the Explorer as tested is defectively designed in that it has an inadequate margin of control to permit control by average drivers in the foreseeable event of tread separation during normal highway driving in most load and turning circumstances,” said BFS in its prepared statement. ®This makes the Explorer’s handling imprecise and unpredictable in foreseeable circumstances, such as tread separation where precise and predictable handling is essential to safe vehicle control.®
Dr. Guenther conducted identical tests on a number of popular SUVs, according to BFS, including a 1996 Ford Explorer 4-door 4×2, 2000 Ford Explorer 4-door 4×2, 2001 Jeep Cherokee 4-door 4×2, and 1996 Chevrolet Blazer 4-door 4×2. Testing was performed at the Transportation Research Center earlier this year.
According to BFS, his continuing investigation found that the Explorer has less than half the understeer designed into the vehicle as the Jeep Cherokee and Chevrolet Blazer. “Virtually all passenger vehicles are designed for understeer®ƒso the vehicle can be easily controlled by the average driver. Car designers can increase or decrease the amount of understeer in a vehicle by adjusting spring rates, shock absorber stiffness, frame stiffness, roll damping, tire properties, tire pressure, weight distribution, and other component functions.”
“The Explorer loses much of what understeer it has when it is loaded to the vehicle design limit while the Cherokee and the Blazer do not,” according to Dr. Guenther.
Citing “real world data,” Ford officials dismissed BFS’s charges. ®You can talk about testing data endlessly,® Ford said. ®We are replacing Firestone Wilderness AT tires because they have elevated rates of tread separation in the real world. Real world data also shows the Explorer is among the safest vehicles on the road. The Explorer performs the same as competitive SUVs before, during and after a tread separation. This problem does not exist with Goodyear tires.®
The Detroit Free Press quoted Ralph Hoar, director of SafetyForum.com, a group of product liability attorneys, as saying, “This is not likely to produce a defect investigation, though that’s not to say it shouldn’t. A NHTSA investigation would only result if there was a specific part that was defective and they could fix it. But here, BFS is saying the whole Explorer is defective, so the only way NHTSA could fix things is to take Explorers off the road, and that’s just not politically feasible.”
Some experts noted that BFS’s call for a NHTSA investigation is a high-risk strategy that could have a devastating impact if it backfires. If NHTSA concludes that there is nothing wrong with the Explorer, or decides not to investigate, BFS could be left holding the bag.
The latest rounds of Congressional hearings on tire safety issues are scheduled to start June 18.
A copy of BFS’s report on Dr. Guenther’s analysis is available by calling 877-201-2373.
While everyone is calling this a recall, Ford’s action is officially a “voluntary owner notification program,” which it claimed was a ®necessary precautionary measure aimed at preventing potential problems from occurring in the future.® It is not a government-mandated recall as was last year’s action by BFS. And this tire replacement effort is being conducted by Ford at its expense.
In this program, Ford is replacing all 15-, 16- and 17-inch Firestone Wilderness tires on 1991-2002 Ford Explorers, Explorer Sport SUVs, Sport Trac SUTs, F-150 pickups, Ranger pickups, Expedition SUVs, Bronco SUVs, Mercury Mountaineer SUVs, and Mazda B-series pickups and Navajo SUVs.
Should NHTSA conclude, as Ford contends, that those 13 million tires are defective, NHTSA could order a recall. That would make BFS financially and legally liable, and could also include all Wilderness AT tires on non-Ford vehicles.
When Ford’s action was announced, consumers were directed to replace their Firestone Wilderness AT tires at any Ford/Lincoln-Mercury/Mazda dealer for free replacements, or buy replacements and apply for a refund (up to $110 on 15-inch and $130 on 16- and 17-inch) from Ford. More than a week after the May 23 announcement, Ford struck separate similar deals with Goodyear, Michelin and Continental Tire North America, effectively including their dealers in the program. At press time, it was possible that other dealers could be added.
Consumers can go to any of Goodyear’s 5,000 dealers, the 11,000 “retail points of sale” that handle Michelin products, or Continental dealers to get free replacements. Ford’s authorized list of Goodyear, Michelin and Continental replacement tires is available at the www.goodyear.com, www.michelin.com and www.ford.com.
Goodyear, Michelin and Continental operations in North America – all vying to pick up the Ford OE business BFS is leaving behind ®“ have reportedly doubled production to meet the demands of Ford’s tire recall, recalling laid off and vacationing workers, adding shifts and buying tire molds. Cooper Tire & Rubber, on the other hand, according to news reports, wasn’t included in Ford’s plans, and Cooper was focusing its production on meeting “current customer needs.”
BFS’s move to end its relationship with Ford impacts only North and South America – for now ®“ and won’t actually take effect until the various OE contracts between the two companies expire or are cancelled by Ford.
Just days before it recalled over 13 million Firestone tires, Ford had to recall 52,000 of its troubled 2002 Explorer – this time for severe tire slashes caused by its own assembly conveyor. Ford officials said the non-Firestone equipped Explorers and Mercury Mountaineers made at its Louisville, Ky., suffered slashes described as being nearly an inch deep and between seven and nine inches in length. Ford referred to the cuts as “cosmetic” in nature. Explorers made by Ford in St. Louis did not suffer tire damage. That recall came just a month after Ford recalled 56,652 units to fix rear liftgate windows. From January through April, Explorer sales dropped 22% compared to the same period last year, even while overall SUV sales in the U.S. climbed 9%.
Because it’s their recall, Ford is responsible for disposing of the millions of tires it is trying to replace. Ford has instructed its dealers to cut up the take-offs or drill holes in them, and has presumably told Goodyear, Michelin and Continental to instruct its dealers likewise. Still, because it is not a government-mandated action, there is nothing Ford can do legally to force compliance, and it’s possible that thousands – if not millions ®“ of the removed Firestone Wilderness ATs could find their way back onto vehicles.