Gone In Name Only
‘New’ BFAH Gets $1.3 Billion Infusion
In a whirlwind two days, Bridgestone/Firestone Inc. (BFS) technically ceased to exist, it reported anticipated 2001 losses exceeding $1.6 billion, and its parent company gave it a $1.3 billion cash infusion. And amid the flurry, financial experts and attorneys suggested the moves were an attempt to dodge pending liability suits resulting from the recall of some 20 million Firestone brand tires over the last 18 months.
In a major reorganization on Dec. 1, BFS ceased to exist. In its place is Bridgestone/Firestone America Holding Inc. (BFAH), a holding company over autonomous units Bridgestone/Firestone North American Tire LLC (BFNT), BFS Retail & Commercial Operations LLC (BFRC), BFS Diversified Products, LLC (BFDP), and Bridgestone Metalpha USA Inc. (BMU).
“We must put our company in the best position to obtain cost-effective financing for the long-term and to permit management at the operating level to focus on their respective core businesses,” said John Lampe, who will serve as chairman, president and CEO of BFAH.
BFNT will handle all tire development and manufacturing, as well as OE sales and replacement market wholesaling in North America. Lampe will be chairman and CEO, and Isao Togashi will serve as vice chairman and president. Latin American subsidiaries are owned directly by BFAH, but will report to Bridgestone/Firestone Latin America, headed by BFAH Executive Vice President Mark Emkes.
BFRC will manage all company-owned retail and commercial centers in North America, as well as credit card operations. Larry Magee is chairman, president and CEO of the Bloomingdale, Ill.-based company.
Headquartered in Carmel, Ind., BFDP includes building and industrial products, synthetic and natural rubber production, and textiles. Bob McNally is chairman, president and CEO. Bridgestone Metalpha USA manufactures the steel cord used in tires. Headquartered in Clarksville, Tenn., BMU’s president is Tora Toraiwa.
The day after the reorganization, Bridgestone Corp. committed a “capital infusion” of $1.3 billion to BFHA effective Jan. 1, 2002. BFHA said the cash, coupled with ®enhanced access to more cost-effective financing through its reorganization and debt restructuring,® gives it a firm foundation for the future.
BFHA will post a loss of $1.66 billion for 2001, thanks to costs associated with the recalls and charges related to the closing of its Decatur, Ill., plant. BFHA is expected to finish with $7.4 billion in total sales, down slightly from 2000’s $7.5 billion. Bridgestone Corp. said its worldwide sales would reach $16.95 billion for 2001, down from $17.11 last year, but net profit would reach $145.28 million, up from a predicted $80.71 million.
Meanwhile, some financial and legal experts speculated that BFS’s reorganization – its second in the last 18 months ®“ may be intended to deflect millions in product liability claims. “This is an increasingly common legal technique used by large corporations to shield themselves from legal liability and make it difficult for people who have been harmed to collect any money at all,” Bloomberg News quoted Georgetown University law professor Heidi Li Feldman. ®The timing of this move makes it seem as if (BFAH) may be positioning itself to seek bankruptcy protection.®
BFAH claimed the reorganization was designed to streamline decision-making, avail itself to certain tax advantages, and acquire better lending rates. “The LLC provides no more enhanced protection from liability than a corporation,” said BFAH spokesperson Christine Karbowiak, countering Feldman’s assertion.
Goodyear NA Tire Split into Four Groups in Reorganization
Goodyear Tire & Rubber Co. hopes the recent restructuring of its North American Tire group, with four separate business units – consumer replacement, consumer OE, commercial, and farm and retail ®“ will bring about better financial and operational results.
John Polhemus remains president of the overall group. Jim Vogel was named vice president of consumer tires, and Ted Fick, previously executive vice president of Hino Diesel Truck, was brought in as vice president commercial systems to oversee all commercial OE and replacement business. Vogel will manage the replacement side of the consumer business, while Bryan Kinnamon, OE vice president, continues to oversee the consumer OE business.
Mark Pillow, previously marketing director of farm tires, was named director of farm tires, and John Peer will continue as director of retail operations.
The new structure also includes dedicated resources in the field to service the individual segments. Polhemus said that improved customer service and responsiveness was the driving reason behind a reorganization of the consumer field support structure into East and West regions. The eight current regional offices in the U.S. will be closed in the next six months, and functional support operations centralized in Akron.
Conti’s Financial Troubles Will Mean Changes, Spark Takeover Rumors
The financial news is not bright for Continental AG and its Continental Tire North America (CTNA) subsidiary, and new Conti Chairman Manfred Wennemer has publicly said that restructuring, plant closings and layoffs will likely come.
In late October, Continental AG said its 2001 profit would be down considerably compared to last year, and expects the “unsatisfactory development” at CTNA will continue in the fourth quarter. CTNA posted a $69.77 million loss through the first nine months, compared with a profit of $25.37 million a year ago. The parent firm said the loss was due to price competition, higher material and energy costs, and inefficiencies.
Continental said that the slowdown in the U.S. economy will have an effect on its 2001 results, but full-year revenue is expected to come in at more than $9.97 billion. “Overall, Continental’s current operating result will clearly weaken in comparison to the previous year and is likely to be further burdened in the fourth quarter by necessary restructuring measures,” the statement read.
Continental’s latest financial news, coupled with it heavy debt load from acquisitions, its weak stock price, and the decline of the North American tire market, brought heavy conjecture that the company was ripe for takeover. European tire magazines Tyres and Accessories and Neue ReifenZeitung, as well as investment house HelabaTrust, have openly speculated that Conti could be a takeover target.
Wennemer, appointed chairman in September, said the company faced tremendous challenges. “This situation is forcing Continental to change the emphasis of its established course as a system supplier for chassis systems,” he said.
While not elaborating, Wennemer said “We will focus to an even greater extent on profitability, results and cash flow than we have done to date, and consider the reduction of our financial debt as one of our most urgent priorities.”
He added that Conti will concentrate on profitable businesses and “ongoing efforts to a shift of all the responsibility for profit-and-loss to the business units will also be a part of this approach.” The company is not ruling out further restructuring.
“All parts of the company are under examination,” Wennemer said. ®The time of major acquisitions is past, and the company will set greater priorities on cooperations and partnerships for its geographical expansion and will increase the range of its product portfolio towards electronically controlled shock absorbers and electric steering. We see our future quite clearly in control and networking competence and not in the manufacture or pure assembly of these components.®
TANA, ITRA Announce Merger Plan,
Member Votes In By February
The opening day of the International Tire Expo started with a bang as the Tire Association of North America (TANA) and the International Tire & Rubber Association (ITRA) announced plans to merge the two organizations. The proposed merger, which took most by surprise, must be approved by the membership of both groups.
Because both are non-profit associations, the merger vote requires only the approval of two-thirds of those members actually casting ballots. TANA members have been mailed ballots and supporting information, and the result of their vote should be known by Feb. 1. By Kentucky law, ITRA members must vote on the merger at a membership meeting, but only approval by two-thirds of those members in attendance is required. It was expected that ITRA’s vote would also be completed by the end of January.
If approved, the actual merger would not take effect until July 1, 2002. Ross Kogel, currently executive vice president of TANA, will become head of the new association. Kogel said the combined association will likely have a new name, but none has been discussed.
ITRA’s board of directors approved the merger plan on Oct. 11, and TANA’s board followed on Oct. 29, though both sides said merger discussions had been going on for the last two years.
Nick Hodel, past president of TANA, said, “Both boards think this is the right move. We still have lots of things to go over. But with the available information, training, meetings and conventions, membership benefits, certification programs, consultative services, technical advice, representation in Washington, this new organization can really help tire businesses.”
“We’re creating an organization that will offer tire dealers, retreaders, repairers, and tire and rubber recyclers the training, certification, educational programs, representation in Washington and improved trade shows that they need,” said ITRA President Tom Raben.
While the merger will certainly result in a streamlined structure and eliminate duplicated services, the boards admit there is still a lot of unresolved issues, chief of which is the continuation of two separate trade shows. For now, said merger planners, both trade shows would remain in place.
Just days before the merger announcement, ITRA set the dates and location for its 2003 World ITRA Expo – Mar. 27-29 at the new Kentucky International Convention Center in downtown Louisville.
Initially, under the merger plan, the boards of both associations would meld to create one board. Over the next two years, the size of the board would be reduced to 36, with 10 new directors elected annually to three-year terms. The joint Executive Committee would be comprised of both current Executive Committees. New TANA President Steve Disney would become the merged association’s president, followed by Raben in November 2002. TANA treasurer Tom Wright will serve as treasurer, with former ARA president Terry Westhafer serving as assistant treasurer.
The “new” association will be headquartered in Reston, Va., but will maintain offices and training facilities at ITRA’s current Louisville home.
All current planned conferences and training efforts will remain in place, as will the publications currently produced by TANA and ITRA. Existing awards, Halls of Fame, contests, annual meetings, social events and other “traditions” will also be maintained.
Cooper Settlement Plan to End Multiple Class Action Lawsuits
Avoiding costly protracted product liability cases, Cooper Tire & Rubber Co. reached a settlement on a series of class action lawsuits filed against the company over the past year. Cooper will take a one-time charge of $55 million to cover the settlement costs.
While still requiring final approval by New Jersey Superior Court in Middlesex County, which is overseeing the nationwide settlement, the agreement calls for Cooper to provide a free replacement tire against separations for all steel-belted radial tires it produced from 1985 through 2001, including associate and private brand products. In addition, Cooper must make modifications to its in-plant final inspection procedures, and launch a consumer tire education program.
Key to Cooper was to not be bogged down by endless liability suits. “One of the best outcomes is that we can end the distraction of protracted litigation and devote our resources to customer issues,” said Tom Datillo, chairman, president and CEO.
No cash awards will be made to the plaintiffs or any member of the established class, and Cooper denies any wrongdoing or legal liability. According to Cooper, “there was never a claim of personal injury or property damage involved in the lawsuits.”
The court has already begun notifying consumers of the proposed settlement, and class members may comment on, or object to, the terms by Jan. 15, 2002. Final approval of the settlement plan is expected on Jan. 29, 2002.
A call center and a Web site have been established, allowing class members to obtain settlement details or request other information. The toll-free phone number is 877-370-2493, and the Web site is at www.coopertirelitigation.com.
ITRA Begins Regional Tech Training Efforts in Akron and Chicago
Continuing with its intensive commercial tire technician training efforts, the International Tire & Rubber Association (ITRA) announced the first two regional training seminars it will hold in 2002. ITRA also offers training options at its Louisville, Ky., headquarters.
The first two regional Commercial Tire Service Technician Training & Certification Seminars will be held on Akron on Jan. 16-17, and in Chicago Feb. 20-21. The events consist of two single-day classroom sessions. Additional seminars will be added throughout the year.
Designed to “train the trainer,” each classroom session will include live demonstrations and industry videos, as well as new computer-generated presentations on wheel fastener torque and clamping force.
The fee is $225 for those without ITRA’s 250-page Commercial Tire Service Manual, and $150 for those who have a current copy. The session fee is the same for ITRA members and non-members alike. All sessions include lunch. Cut-off dates for pre-registration for the Akron and Chicago sessions is Jan. 10 and Feb. 14, respectively. There is a $25 additional fee for on-site registration.
For more information call 800-426-8835, e-mail [email protected], or visit the ITRA Web site at www.itra.com.