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Michelin Reopens Closed Plant in Mexico

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GOIN’ SOUTH – AGAIN

Michelin Reopens Closed Plant in Mexico
Two years after closing its only two tire plants in that country, Groupe Michelin has reopened one of the plants in a new venture that will be a subsidiary of Michelin North America. AutoPartes Internacionales de Queretaro (APIQ), the new MNA group, is already producing BFGoodrich brand passenger tires for the Mexican and export markets.

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Groupe Michelin closed the 25-year-old facility in August 2000, along with an older plant in Tacuba, claiming they were not cost-competitive despite numerous cost-cutting and productivity improvement efforts. The Tacuba plant was sold to outside interests.

The two plants in Mexico, which produced Uniroyal and private brand tires, were acquired in Michelin’s purchase of Uniroyal Goodrich Tire Co. in 1989.

The "new" facility has been retooled to produce BFGoodrich products, at a cost of $3 million. There was no word if or when the plant might produce other Michelin brands.

A Michelin spokesperson said, "Our new operation has new job requirements, different productivity levels, different employee skill requirements and an expectation of a new level of teamwork, all of which are reflected in our new agreement."

According to the spokesperson, MNA made the decision to reopen the plant last December. At the time it was closed, the Queretaro plant produced some 6,000 radial passenger and truck tires per day. MNA did not reveal the plant’s current production level.

APIQ currently employs 100 workers, and employment there will reach 400.

"I’m very pleased that we will be manufacturing tires in Mexico," said Jim Micali, MNA chairman and president. "We are encouraged by Mexico’s industrial development policies, by the availability of the highly skilled work force that our new operation requires, by a labor agreement that creates a new level of teamwork, and by the federal, state and local governments’ positive response to our commitment."

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The MNA spokesperson said that even though tire demand is growing in Mexico, neither MNA or APIQ have plans to add tiremaking facilities in Mexico "at this time."

Penske Cashes Out Losing Hand, Closes 563-Store Chain in Hours
With a sudden swiftness usually only seen on the racetrack, Penske Corp. closed its 563 Penske Auto Center (PAC) locations over the Apr. 5-9 weekend, bringing to an end to its six-year foray into tire retailing and closing the book on Kmart Corp.’s troubled auto service history.

Penske Corp. announced PAC’s closure late on Friday, Apr. 5 giving Kmart, which owned a 36% stake in PAC, little time or opportunity to react. Less than 48 hours later, most of the locations had been dismantled, with tools and inventory loaded onto trailers to be hauled away.

By the time Kmart could get a restraining order in an attempt to prevent Penske from scuttling the entire chain, nearly every PAC location had been stripped bare and 4,000 employees were left jobless. Even Kmart attorney Christina Tchen admitted it was too late. "The eggs are scrambled," she told U.S. Bankruptcy Judge Susan Sonderby, who issued the restraining order.

At Judge Sonderby’s order, Kmart and Penske negotiated an "orderly closing" agreement whereby Penske would help pay to convert the now-empty PACs into useable retail space for Kmart, remove hazardous waste, and back any outstanding warranties. Penske will pay $10 million in salary, severance and benefit expenses to PAC employees, make a $6 million lease payment to Kmart, and waive a $5 million payment due from Kmart.

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Penske was the first partner Kmart lost since the retailer sought Chapter 11-bankruptcy protection Jan. 22. In March, Kmart announced the closing of 283 of its 2,114 stores, which forced PAC to close 63 of its locations.

While many were surprise that PAC closed so suddenly, the writing really had been on the wall since the day Roger Penske took over Kmart’s faltering auto service business.

In November 1995, Penske Corp. paid $112 million for a 64% share of Kmart’s 875-location auto service business, which, at the time, was reportedly losing almost $20 million annually on sales of $360 million or only $411,000 per store. As Kmart made that deal, it was facing a class action suit (later dismissed) by consumers who claimed its service business was deliberately selling unnecessary service and parts.

Since Penske Corp. and Kmart created Penske Auto Centers, the so-called "largest independent tire dealer" in North America had closed some 300 stores and never averaged more than $500,000 in annual per store sales. "This company always lost money," said David Lynch, attorney for PAC. "This company was never profitable."

In early 2001, Kmart and Penske extended their PAC agreement by 10 years – and then recapitalized PAC for a reported $40 million.

Even while it was supposedly losing money, PAC talked often about expansion. This past September, PAC President and CEO James Wheat announced plans to add 30 to 40 new PAC locations in 2002, including a few stand-alone stores.

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There were indications that PAC’s closing had been in the works for a few weeks. All 563 stores in 44 states displayed pre-printed signs apologizing for the closing, which included an 800-number consumers could call. PAC employees reportedly received store closing instructions and termination papers before the closing was even announced that Friday. And Penske Corp. quickly dismantled stores across the country within hours.

Goodyear was PAC’s primary tire supplier, providing both Goodyear and Penske branded tires. Though Goodyear wouldn’t say how much business it will lose with the PAC shutdown, Goodyear took a $10 million write-off in its first quarter financials.

"Goodyear has enjoyed a long relationship with Penske Corp.," Goodyear said on Apr. 8. "They are a valued customer, and we look forward to continuing our relationship with Penske in their other areas of business."

Cooper-Pirelli and Continental-Toyo End Respective Tire Alliances
Two tiremaker alliances, born out of the globalization of the industry, came apart in April as Cooper and Pirelli ended their three-year venture and Continental and Toyo broke a 10-year-old technology sharing agreement.

Mutually deciding it was time for "a new approach," the Cooper-Pirelli sales and distribution alliance in the U.S. will end July 1. In a joint release, the companies said that while "the results of the alliance were generally positive," the two companies wanted to pursue separate "brand strategies."

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While some technology and manufacturing aspects of the original agreement will remain in place, Pirelli will reassume sales and customer service responsibility for its own brand. Cooper will continue to produce some Pirelli product for U.S. sale, and will manage logistics support for Pirelli Tire North America (PTNA). Pirelli may produce some Cooper performance tires in the future, as well.

PTNA has put sales and customer service teams in place, and will begin calling on dealer customers in the next few weeks. PTNA is moving into its new headquarters in Rome, Ga., this month, and plans to begin tire production at its new automated facility there in July.

The Continental-Toyo co-operative effort was ended nine months early at Conti’s request, according to reports out of Europe. In recent months, Continental had signed a run-flat technology development deal with Bridgestone Corp. – which both parties are looking to expand – and a separate distribution and technology agreement with Yokohama Rubber Co.

It is not expected that the breakdown of the Conti-Toyo agreement would impact the GTY plant in Mt. Vernon, Ill., a joint venture between Continental, Toyo and Yokohama.

‘Merged’ Association Moving Ahead With Shows, Retreaders, Training
The merged TANA/ITRA will press ahead with two major conference/trade shows in 2003, including the World Tire Expo in Louisville next spring. That announcement was part of a multi-item update on the merger of the tire industry’s two major trade groups issued in mid-April.

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Though a new name has yet to be chosen for the merged association, the new group will debut July 1. TANA and ITRA memberships approved the merger earlier this year.

Conferences and trade shows planned for 2003 include the World Tire Expo on Mar. 27-29 in Louisville, the International Tire Expo on Nov. 5-8 in Las Vegas, the OTR Tire Conference on Feb. 20-22 in Phoenix, and a scrap tire/rubber recycling conference in Ocean City, Md., Sept. 26-28.

In the merger update to membership, TA NA/ITRA executive vice president Ross Kogel said that the internal operations of the once separate associations have already been combined. The new association’s administration, finances, government affairs and trade show planning will be handled at its headquarters in Reston, Va., while training, publications (the association will have eight), graphic design, fulfillment and other functions will be handled at the Louisville office.

New bylaws for the combined association have also been completed by a joint committee of TANA and ITRA board members. It will be presented to the joint Board of Directors in June for approval. A new membership dues structure has also been approved and will be sent to members "well in advance" of the July 1 merger.

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TANA/ITRA has already started two new training and education efforts, and plans to "make a major announcement in late 2002" about its first program.

TANA/ITRA also formed a Retreaders Council, which will focus on issues specific to retreaders and the retreading industry. Retreader members of the ITRA and TANA boards will be members of the new Council. The Council was formed early specifically to address the upcoming NHTSA study on the performance of retreaded tires vs. new tires, said the association.

"We want to be absolutely sure that the new organization provides even a stronger voice for retreaders," said Steve Disney, TANA president. Independent retreaders will make up the majority of the council, and ITRA president and retreader Tom Raben, will chair the group.

2001 Shipments Were That Bad; More of the Same Expected in 2002
Expecting little or no growth this year, but hopeful of a rebound in tire shipments in 2003, the Rubber Manufacturers Association (RMA) released its final U.S. tire shipment figures for 2001. As expected, the 2001 results showed a whopping decline of 6.6%, or some 21 million consumer and commercial units, compared to the record-setting 2000 results.

Total tire shipments for 2001 reached 300 million units, and RMA analysts expect little improvement this year before the market rebounds by an expected 4.7% to 316 million units for 2003.

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Growth of 10.6% in the high performance segment and 10.2% in the P-metric light truck/SUV segment – attributable to Ford’s tire recall – helped offset harsh declines in standard passenger and medium truck tires. And while high performance shipments should continue double-digit growth this year, the RMA expects P-metric light truck/SUV shipments to drop by 15% this year because of demand shifts forced by various Ford and Bridgestone/Firestone recalls since August 2000.

OE passenger tire shipments decreased 9.4% to 54.6 million units last year, and are expected to decrease another 2% this year, said the RMA, before rebounding to 56 million tires in 2003. OE light truck/SUV shipments fell 16.1% to 6.2 million units in 2001. Tire reclassification efforts by the RMA have hampered its efforts to predict 2002 results.

Recall-related "borrowing" in 2001 will impact replacement passenger tire shipments in 2002 and 2003. Last year, shipments dropped 4.1% to 190.8 million units, and the RMA expects shipments to remain level this year before increasing 4% in 2003. Replacement light truck/SUV shipments dropped 8.2% last year, but are expected to jump 4.8% in both 2002 and 2003.

OE medium truck tire shipments suffered a dramatic 38% or 2.2 million unit drop in 2001, falling to just 3.4 million tires. No growth is expected this year, said the RMA, but the segment could increase 16% in 2003. The medium truck tire replacement side decreased 9.6% to 13.6 million units in 2001. A "mild" rebound of 1% is anticipated this year followed by a 6% jump in 2003.

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Heafner Changes Name and Strengthens Financial Picture
It will be an all-American day for Heafner Tire Group on July 4 when the Charlotte-based tire and wheel distributor changes its name to American Tire Distributors that day. The name change was one of a series of moves Heafner made in mid-April to improve its financial picture and punctuate its role in the tire market.

"Our new name, American Tire Distributors, reflects the national reach of our business and clearly communicates our focus on distribution," said Richard Johnson, president and CEO. "We’re no longer a group (of formally individual companies) but a unified, innovative company focused on serving tire dealers across America."

Heafner Tire Group grew via numerous acquisitions of other companies between 1997 and 2000, including California Tire, CPW, Itco, T.O. Haas and Merchants Tire’s distribution operations, ironically named American Tire Distributors. It was that flurry of acquisitions that helped create some of the financial problems Heafner has faced in recent years. Since Johnson was named president and CEO in January 2001, the company has shed its retail operations, most notably by selling the now bankrupt Winston Tire operations in May 2001, and consolidated the rest of its distribution business.

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In a separate move, Heafner retired some $122 million in bonds, which increased shareholder equity by about $59 million to $18 million, and reduced long-term debt by 32%.

Two days later, Heafner announced a sale-lease back deal involving three of its 62 warehouses. The company sold warehouses located in Lincolnton, N.C., Charlotte and Greenville, S.C., for $15 million to W.P. Carey & Co., a real estate investment banking firm based in New York City, then signed 20-year lease agreements on the sites. The move frees up capital Heafner plans to use for other areas of its business.

New Cooper Campaign Aims at "Younger, Broader Audience"
Taking a more youthful approach, Cooper Tire & Rubber Co.’s new national advertising campaign – themed "Don’t Give Up a Thing" – mixes slice-of-life scenarios and a touch of humor to highlight consumer confidence and product affordability, the company said.

Using national cable television and consumer magazines, Cooper’s new campaign specifically targets a "younger, broader audience," the company said. TV spots feature a father and daughter discussing "contrasting styles" while buying tires for her car. Another spot focuses on a young man battling a storm while trying to get home in time to let his dog out.

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The "Don’t Give Up a Thing" theme was developed to "emphasize the performance, confidence and longevity" of Cooper tires, said the company.

"Cooper always has been a leader in providing dependable, affordable aftermarket tires that perform and wear well," said Patricia Brown, Cooper’s vice president of advertising and communications. "With this campaign, we’re taking that message to a much broader audience in a friendly way that positions Cooper as a brand consumers can trust."

Broadcast spots began airing in April, and consumer magazine ads will begin in June.

Who Was 2001’s Winner in Tire Industry? Finland’s Nokian
Fluctuating raw material costs and rapidly declining sales indeed did do a number on the financial performance of the world’s major tiremakers in 2001. Only three tiremakers – Continental AG, Sumitomo Rubber Industries and Nokian – posted increased sales last year, and only one (Nokian) ended up with better sales and profits than the year prior. And only one publicly traded distributor – TBC Corp. – showed significant balance sheet growth in 2001.

The biggest declines were reported by Goodyear, Bridgestone/Firestone Americas Holding Co. (BFAH), and strike-riddled Titan International, which all suffered slumping sales and profit results.

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Company by company, here’s a round-up of 2001 financial results (2000 results are shown in parentheses):

Bandag – Sales: $964.9 million ($996.1 million); Profits: $43.8 million ($60.3 million). TDS – Sales: $398.9 million ($399.1 million); Profits: -$11.1 million (-$2.5 million). Bridgestone Corp. – Sales: $17.5 billion ($18.6 billion); Profits: $967.4 million ($1.5 billion). BFAH – Sales: $7.4 billion ($7.5 billion); Profits: -$1.68 billion (-$510 million). Continental AG – Sales: $10.04 billion ($9.33 billion); Profits: -$231.2 million ($189.4 million). Continental Tire North America – Sales: $1.56 billion ($1.62 billion); Profits: -$291.0 million (N/A). Cooper – Sales: $3.15 billion ($3.47 billion); Profits: $18.9 million ($96.7 million). Goodyear – Sales: $14.1 billion ($14.4 billion); Profits: -$203.6 million ($40.3 million). Goodyear North American Tire – Sales: $7.15 billion ($7.11 billion); Profits: $107.8 million ($260.7 million). Groupe Michelin – Sales: $14.13 billion ($14.1 billion); Profits: $931.9 million ($1.1 billion). Nokian – Sales: $379.4 million ($360 million approx.); Profits: $33.2 million ($25.0 million approx.). Pirelli SpA – Sales: $6.7 billion ($6.9 billion); Profits: $593.7 million ($760.0 million). Sumitomo Rubber – Sales: $3.23 billion ($3.14 billion); Profits: -$53.6 million ($39.7 million). TBC Corp. – Sales: $1.0 billion ($902.7 million); Profits: $21.0 million ($18.7 million). Titan International – Sales: $457.5 million ($543.1 million; Profits: -$34.8 million ($4.5 million).

Marangoni Chooses Nashville, Sweatman to Head Relocated Unit
After two years of search and speculation, Marangoni North America decided to move its corporate headquarters to Nashville, taking office and warehouse space in the long-closed Pirelli-Armstrong plant in suburban Madison, Tenn.

The Walnut Grove, Calif., tread marketer moved its corporate headquarters to the facility effective Apr. 1. Marangoni may open a warehouse and begin production of its precure RingTread tread stock in the leased space sometime in 2003, but no date has been set.

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In addition, Bill Sweatman was named president and CEO, taking over for Jack Woodland, who was named chairman of the company but will remain in California.

The former tire plant was closed by the then Pirelli Armstrong Tire Co. in 1996. Rubber mixing company Dylan Custom Mixing bought the entire facility in 2000, and is leasing part of the facility to Marangoni.

Since announcing its intentions to produce tread stock in the U.S. over two years ago, Marangoni looked at numerous potential locations throughout the South, but the project was put on hold by the parent company.

Raybestos Launches Effort to Educate Consumers
Brake Parts Inc., the manufacturer of Raybestos brand brake pads and components, launched its largest-ever advertising campaign earlier this year to educate consumers about brake safety, product quality and regular maintenance.

Introduced in January, the program runs through June with more than 600 TV commercials broadcast on 11 networks. Larry Pavey, president of Brake Parts Inc., said the effort is an "aggressive, proactive" step in educating consumers about the role quality brake parts play in driving safety, which has become even more important as consumers try to extend the life of their vehicles.

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"The combination of unperformed maintenance, and lower-quality and lower-priced brake products has threatened growth in our industry and further damaged its image," Pavey said. "Low-quality brake parts oftentimes perform poorly, causing noise, pulling and inconsistent stopping. We believe that everyone in our industry must work to overcome these obstacles.

"This message will help consumers understand the importance of maintaining their vehicles with top quality brake parts. This is a commitment to both the Raybestos product and our industry."

One specific target of the campaign is women. In order to reach this audience, the Raybestos spots will be shown on such cable networks as Lifetime, Home & Garden TV, the Discovery Channel, and the Learning Channel.

The commercials will also run during NASCAR and IRL races, and other sports events on ESPN, CBS, FOX and NBC.

of note

  • Bridgestone/Firestone Chairman, President and CEO John Lampe was quoted in Japan’s Nihon Keizai Shimbun as saying the company expects to post a net profit in 2002.
  • News reports said some 85% of Pirelli’s workforce joined in a mid-April one-day nationwide strike protesting government laws that allow workers to be fired or laid off at will.
  • Continental AG bought the remaining 40% stake in DaimlerChrysler’s Temic microelectronic unit for a reported $189.8 million, renaming the company Conti Temic. Continental took 60% share in Temic last year.
  • In cost-cutting moves, Michelin is closing its Reno C3M plant, combining the operations with its other C3M plant in Greenville, S.C. MNA is also closing a steel wire plant in Sandy Springs, S.C., by 2004.
  • Though some aspects of their respective suits against each other have been dropped, Bandag’s suit against Michelin Retread Technologies was scheduled to go to trial May 6. Bandag expects to have spent nearly $30 million on its legal action against MRTI.
  • A mistrial was declared in a $72 million Texas suit against Bridgestone/Firestone and U-Haul over a 1999 Ford Explorer rollover accident, when the judge said BFS’s attorney "misstated" the role marijuana use played in causing the accident.
  • On May 2, a federal appeals court overturned Judge Sarah Evans Barker’s decision that allowed millions of owners of Explorers and Firestone tires to sue the companies, even though none of those in the class-action suit suffered injury or property damage in any accidents.
  • Canada enacted regulations similar to those in the U.S. that will force diesel engine makers to reduce sulfur emissions from 500 parts per million to under 15 PPM by 2006.
  • Continental AG will close its tire factory in Traiskirchen, Austria, by the end of July after turning down a purchase offer from Austrian industrialist Mirko Kovats.
  • Former Goodyear executive and current Borg Warner chairman, John Fiedler, was nominated to the Cooper Tire & Rubber board of directors.
  • Scarborough, Ontario’s Superior Tire Corp., owned by TANA officer Paul Hyatt, hosted a gala event Apr. 5 to celebrate its 60th anniversary.
  • For 2001, Goodyear’s employee pension fund was $1.04 billion short of anticipated obligations, and $400 million behind in the U.S. alone, which the tiremaker will have to make up.
  • The Dallas Morning News reported in early April that Ford paid an ex-engineer to deny he knew of severe stability problems with the now-defunct Bronco II while he worked for Ford.
  • Federal Judge Sarah Evans Barker will allow 121 South American victims of rollover accidents to sue Bridgestone/Firestone and Ford in U.S. courts.
  • Ex-Ford CEO Jac Nasser received some $18 million in compensation last year, despite leading the company to a $5.45 billion loss for 2001.
  • A National Research Council study called for NHTSA to use actual road tests instead of its static formula-based five-star rating system to determine a SUV’s propensity to roll over in an accident. NHTSA says its system gives consumers enough information.
  • Lawton, Okla., area voters approved a sales tax hike to help fund expansion of Goodyear’s tire plant there. The new project includes a 175,000-square-foot addition for an IMPACT production line, and another 325,000-square-feet of warehouse space.
  • Newly designed www.Mobil1.com Web site includes information on lubricants, car maintenance, and travel tips.
  • After a 16-month investigation promoted by citizen groups, NHTSA found no design defects in Firestone Steeltex R4S, R4S II and A/T tires.
  • Yokohama Rubber Co. now has an 80% stake in Hangzhou Yokohama Tire Co., the tire manufacturing and sales company it founded in China in 2001. Production is projected at 750,000 tires a year beginning in 2003.
  • Greg Fedo of Greg’s Tire Center in Independence, Mo., and Chris Usher of Usher Tires in Yucca Valley, Calif., were among 15 finalists in Carquest’s Race to the Race Promotion, top prize being a new Corvette.
  • Canadian Tire opened a new 106,000-square-foot distribution facility in Kirkland, Quebec, to serve its 133 stores in Quebec and the Maritime provinces.
  • Monro Muffle & Brake bought out Kimmel Automotive, which had 34 retail tire stores in Baltimore and Tidewater, Va., and three commercial centers and one retread plant.
  • New Brunswick’s Coast Tire & Auto Service bought two commercial tire centers and a retread plant from Goodyear Canada. In return, Goodyear bought a 49% share of Coast Tire, which now has 19 locations.
  • Goodyear’s Wingfoot Commercial Tire Systems sold a retread plant and a commercial center in Virginia to Colony Tire, based in Edenton, N.C.
  • Michelin boosted the treadwear warranty on its 27-size Cross Terrain SUV line to 65,000 miles.
  • Bridgestone/Firestone is promoting its Firestone brand’s historic place in trucking history with its "Ship By Truck" promotion, targeting truck drivers and small fleets.
  • Saying it could find no safety defects, NHTSA closed its investigation of 2.7 million P235/70R16 General Ameri*500 tires.
  • Goodyear has begun work on a $4.7 million expansion of its Asheboro, N.C., plant, which produces steel wire for tire beads, and hose and conveyor belt reinforcement.
  • Automechanika 2002 is scheduled for Sept. 17-22 in Frankfurt, Germany. Registration information is available at www.automechanika.messefrankfurt.com.
  • Falken Tire was named the official tire for the 2002 NOPI Nationals Super Show, and will again sponsor the annual Pikes Peak International Hill Climb.

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did you know…

31
Percentage commercial property and casualty insurance premiums rose in March 2002, matching February’s increase, according to the Wall Street Journal.

21,927
Average cost, in dollars, for a new passenger vehicle in 2000, according to MEMA.

15.6
Millions of replacement passenger tires shipped in January, up 9.4% over January 2001, according to the RMA.

.988
Millions of replacement medium truck tires shipped in January, up 24.5% over January 2001, according to the RMA.

23.8
Percent OE medium truck tire shipments were down in January vs. the same month in 2001, according to the RMA.

69.2
Combined 2001 world-wide sales, in billions, by Bridgestone, Goodyear, Michelin, Continental, Cooper, Sumitomo, Pirelli and Nokian.

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