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Still a Long Road Ahead for Troubled TiremakerDespite posting the worst losses in the company’s 105-year history, things began to look up for the financially troubled Goodyear Tire & Rubber Co. during a hectic early spring.

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$7.15 billion the year prior.

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Goodyear’s total tire volume was 214.3 million units for 2002, compared to 219 million the previous year. North American unit sales fell 7.2% to 104 million units for the year, primarily due to a 12.5% drop in replacement sales. Total debt tops $5 billion, and its pension is underfunded by some $2.2 billion.

Goodyear restructured its bank loans and credit lines, replacing its existing $2.94 billion unsecured credit package with $3.3 billion in secured credit. The Apr. 1 agreement extends into 2005 and 2006, whereas previous agreements expired in 2003 and 2004.

In exchange for the new financing package, however, Goodyear paid $120 million in bank fees, and it had to put up assets such as plants, inventory and equipment to secure the loans. Additionally, Goodyear pledged to forego dividend payments through at least 2005, and promised not to spend more than $360 million in 2003 or $500 million in 2004 on capital improvements, reports said.

On the labor front, Goodyear got its wish when the USWA decided it would be the target company for this year’s master contract negotiations. Goodyear wanted to be the target company because it didn’t want to have to accept the terms of the USWA’s negotiations with Bridgestone America Holdings and Michelin North America, whose master contracts expire this spring. Goodyear employs some 16,000 union workers, far more than either competitor.

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Though Goodyear’s master contract was set to expire Apr. 19, at press time negotiations were unexpectedly quiet. Information from the USWA said that Goodyear was looking for $915 million in wage and benefit givebacks from union workers and retirees over a three-year period, a position the USWA rejected.

Goodyear officials have stated that it will close tire plants that are not cost competitive with its others around the globe, and that it will sharply increase the amount of tires it imports from overseas for the North American market.

At the same time, the company said that it is looking for further cost reductions across the board, a position many industry analysts feel will involve closing at least two North American tire plants. Officials said they will discuss additional cutbacks after the first quarter earnings report is released Apr. 30.

In other action:

®′ Goodyear cut its stake in Sumitomo Rubber Industries by 85%, earning $83.4 million on the sale of 20.83 million shares of Sumitomo stock. As part of its 1999 purchase of Dunlop operations in Europe and North America, Goodyear acquired a 10% stake in Sumitomo for $100 million. Sumitomo, in turn, bought a 1.4% share of Goodyear for $100 million.

Company officials said the stock sale, proceeds from which were used to pay off debt, will not impact their joint operations or technical agreements. Goodyear is now Sumitomo Rubber’s ninth-largest shareholder with 3.42 million shares.

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®′ Goodyear is looking to sell its chemical division, which posted sales of $938 million in 2002 and a profit of $69.4 million. The company has retained Credit Suisse First Boston to advise it on any sale.

The company said it is only considering selling the division, but most observers feel Goodyear will need to sell the operations to help retire some of its massive debt.

One problem with selling the chemical division, analysts point out, is that 50% of its business is with Goodyear tire operations. Goodyear’s chemical group produces synthetic rubber and other key raw materials used in tires, and sells those goods to Goodyear tire operations and other tire companies. Goodyear’s natural rubber operations would not be included in any sale, said the company.

®′ Goodyear became sole owner of Wingfoot Commercial Tire Systems after its joint venture partner – Arkansas Best Corp. ®“ exercised its put option and sold its 19% share to the tiremaker for $71.3 million.

In September 2000, the two companies created Wingfoot Commercial Tire Systems by combining the tiremaker’s existing commercial tire distribution operations with Arkansas Best’s Treadco Inc. unit. The resulting joint venture had some 170 commercial tire centers and over 60 retread plants across the U.S.

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The agreement allowed Arkansas Best to sell its share of the venture to Goodyear after Apr. 30, 2003, but before Apr. 30, 2004, for a predetermined price.

WTE Attendance Drops 45%; TIA Officials to Decide Show’s Fate

After some six years away, the World Tire Expo returned to its ancestral home in Louisville. But after seeing the abysmal attendance of the 2003 event, many wondered if the conference and trade show would live to see another day.

Total attendance – registered buyers and exhibitors ®“ came in at 1,485, down 45% from the 2001’s show attendance of 2,150, which, in turn, was down 27% from the year prior.

The Kentucky International Convention Center, the new home of the WTE, provided a nice location for the show’s 133 exhibitors, off only eight from 2001’s 141 exhibitors. Traffic on the floor, though, was spotty through all three days of the trade show.

Still, many exhibitors Tire Review spoke with said they had a good show despite the overall low attendance, suggesting a better quality of show attendee than pure attendance numbers might indicate.

TIA officials said that no decision on the fate of the WTE will be made until the board and officers can meet. However, there was no indication that the WTE will survive, at least in its current format.

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George Bishop, who retired from Truflex/Pang and now serves as a consultant, was honored by TIA as the WTE’s longest continuous exhibitor – having been in every event since the first retreader’s show in 1958.

Former TIA President Steve Disney and current TIA President Tom Raben were honored with the TIA Industry Leadership Award, as was Paul Routhier of J.P. Routhier & Sons on the tire recycling side. TIA Pioneer Award honors went to Frank Hall of Frank Hall Tire Service, and Anne Evans of EER Ltd.

The Friend of the Industry Awards were presented to Ross Kogel Jr., former executive director of TIA and now with Tire Wholesalers Inc., and R. Allan Lassiter of the Virginia Department of Environmental Quality.

Guest speaker for the Industry Recognition Dinner was Mike Singletary, Hall of Fame linebacker for the Chicago Bears, who gave a tremendous talk about the importance of vision, commitment and solid relationships in everyday life and in business.

The WTE’s Retread Appearance Contest was judged by members of the industry media and TRIB Managing Director Harvey Brodsky. Best of Show honors went to: Passenger/Light Truck Retread – Industria del Neumatico SA of Aspe, Spain; Specialty Retread ®“ Recauchutagem 31 of Allobaca, Portugal; Mold Cure Truck Retread ®“ T.M. Tire Co. of Crestwood, Ill.; Precure Truck Retread ®“ (tie) Heintschel Tire & Service of Texarkana, Texas, and T.M. Tire Co. of Crestwood, Ill.

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Bridgestone’s Greatec Gets First Super Wide OE Contract

When super wides first hit the North American market in 2000, most tiremakers took a cautious approach, waiting to see what real interest truck fleets had in the concept. Even after Michelin North America launched its X-One super wide line in 2001, competitors took a sharp wait-and-see stance.

Now Kenworth has jumped in to specify the Bridgestone Greatec super wide as an OE option. Kenworth announced the deal at the recent Mid-America Truck Show.

It is the first North American OE contract for super wides, which have been sold in Europe for a few years.

Kenworth will offer the Greatec, in size 445/50R22.5, on its T600, T800, T2000 and W900 models.

"We have been working with Bridgestone on the development of its super wide tires for over two years, including fuel economy testing and ride and drive evaluations," said David Warren, Kenworth’s marketing manager.

Michelin and Goodyear are actively testing their super wide tires with fleets, while Continental said earlier this year that its version won’t be ready for the North American market until 2005.

Other tire companies are also working on super wide products.

Michelin is actively selling its X-One line through its dealer channel, and through T/A truckstops across North America. Goodyear said it will roll out its super wide product line later this year.

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TIA Closes Virginia Offices, Opens New ‘Office’ In Maryland

The February appointment of Roy Littlefield as executive vice president of the TIA brought more than just a personnel change to the association. As part of agreement to hire Littlefield, the TIA board of directors agreed to move the association’s headquarters out of suburban Washington, D.C., and to Littlefield’s existing offices in Bowie, Md.

Effective May 1, TIA offices in Reston, Va., will shut down. Staff members who worked out of the headquarters will now work from their homes. A new phone system will switch calls to staff home offices.

The moves do not impact TIA’s offices in Louisville. The new headquarter mailing address is 1532 Pointer Ridge Pl., Suite E, Bowie, MD 20716-1874. The new phone number is 301-430-7280, and the new fax number is 301-430-7283. TIA’s 800-876-8372 number remains the same.

TBC Buys Merchant’s and Preps For Future Acquisitions and Growth

TBC Corp. became the continent’s tire retailing giant with the Mar. 26 purchase of Manassas, Va.-based Merchant’s Inc. in an all-cash $72.5 million deal. The acquisition of Merchant’s 112 retail locations gives TBC a total of 883 retail locations across the U.S.

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And TBC took steps to prepare itself for additional acquisitions.

Merchant’s stores, which will be renamed Tire Kingdom, stretch across Virginia, Maryland, North Carolina, South Carolina, Pennsylvania and the District of Columbia.

TBC’s retail operations also include 228 Tire Kingdom stores and 543 franchised Big O locations. In 2002, TBC reported total net sales of $1.1 billion, with retail net sales of more than $500 million. Merchant’s reported retail sales of $150 million for the same year.

TBC paid approximately $57.5 million 30 days after the deal closed, and will pay an "additional consideration" of up to $15 million in future years based on the performance of the acquired stores.

TBC also signed new financing agreements to provide funding for the Merchant’s acquisition, and for future acquisitions and other "growth initiatives." JP Morgan is providing $208 million line of credit to replace an existing $143 million facility. The five-year deal includes $21 million in revolving credit and term loans of up to $87 million. Prudential Capital Group provided an additional $50 million of long-term capital.

Yokohama Building Automated Plant

Yokohama Rubber Co. is building a new tire plant at its Shinshiro Minami facility that will feature its new highly automated modular tire production system. Construction of the high tech facility should start this spring, with the plant scheduled to open in early 2005.

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The new plant is designed to produce ultra-high performance tires with 18-inch or greater wheel diameters, and will feature a production system that integrates "everything from rubber mixing, forming and building to vulcanizing," according to the company, using "advanced, space-saving techniques."

Yokohama says its new modular system will be capable of specialized small lot production, a feat currently possible with Michelin’s C3M system and Pirelli’s MIRS process.

The $43 million facility will have an initial capacity of 300,000 units per year, increasing to 750,000 tires annually once full operational.

Zeon 2XS Blasts Cooper Into UHP Arena

Cooper Tire jumped into the ultra-high performance market with the launch of its new Zeon line in early April. The first Zeon tire – the W-rated Zeon 2XS ®“ was introduced to dealers and the media during a ride-and-drive event at Cooper’s test facility near San Antonio.

The Zeon 2XS is the first in what Cooper says are "aggressive plans to launch several additional performance lines" in coming months, including tires covering the all-season ultra-high performance, sport truck performance, sport truck touring and sport compact tuner segments.

Benefiting from technology gained from its Avon tire division’s performance background, the Cooper Zeon 2XS features a "coupled" silica/carbon black tread compound and V-shaped directional tread design for wet and dry traction, handling and resistance to hydroplaning; and a "performance apex" in the sidewall to reduce flex for "crisp handling and responsiveness," said Cooper.

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Twin steel belts and a spiral wound nylon cap ply add durability and high-speed stability, the company said, while a rim protector helps prevent wheel scrapes. The Zeon 2XS will initially be available in 29 sizes covering 16- to 18-inch wheel diameters. Cooper said that 19- and 20-inch sizes are being developed.

Bandag unloads 25 Commercial Centers, 12 Retread Plants

During the mid-1990s, Bandag and the major tiremakers went on a major buying spree, swallowing up dozens of commercial tire centers in order to protect their distribution turf.

After three straight years of declining sales and net losses, Bandag has begun unloading portions of its Tire Distribution Systems division, a subsidiary set up to run its acquired commercial locations, retread shops and retail stores. In three separate transactions, Bandag sold off a total of 25 commercial tire centers, 12 retread plants and seven retail stores, with a buyer option for 10 more commercial centers and five retread plants.

While terms of the transactions were not announced, the locations involved in the deals accounted for one-third of TDS’s annual sales, but only a fraction of the subsidiary’s net loss. For 2002, TDS posted total sales of $364.9 million and a net loss of $11.4 million, while the sold locations accounted for $105.9 million in sales but only $200,000 in losses.

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TDS lost $11.1 million in 2001 on sales of $398.9 million, and posted a $2.5 million loss in 2000 on sales of $399.1 million. TDS itself represents about one-third of Bandag’s total annual sales.

Southern Tire Mart, based in Columbia, Miss., acquired 14 commercial centers and six retread plants in Louisiana and Mississippi, and took an option on five retread plants and 10 commercial centers in Texas. The option can be exercised during an 18-month period beginning 18 months after the close of the deal.

Trans American Holdings, based in Ft. Smith, Ark., and a Bandag dealer since 1996, bought five commercial centers and three retread plants in Arkansas.

Best One Tire & Service, founded by Paul Zurcher of Zurcher Tire Co. in Monroe, Ind., acquired six commercial centers, three retread plants and seven retail stores in Tennessee. Independent dealer members of the Best One group will operate the locations.

treadways launches dealer marketing program

Treadways Corp. has launched its own dealer marketing program – Treadmasters ®“ a comprehensive nationwide retail tire and automotive service program. The program will feature a complete range of Pirelli brand high performance and light truck/SUV tires, as well as one of Treadways’ private brand lines, which include Laramie, Eldorado, Jetzon, Telstar and Centennial.

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The Treadmasters program will be marketed by Treadway’s TreadXpress, Jetzon/Telstar and Centennial divisions, and will be offered to dealers throughout the U.S., Canada and Mexico.

The program will include preferred tire pricing, a retail credit card, nationwide tire and auto service warranties, a roadside assistance program, and a range of dealer marketing tools, including advertising support funds and POS materials. In addition, the program will afford dealers discounts on oil, batteries, shop equipment and more. Consumers will also have access to a member locator at www.treadmasters.com.

"We are very pleased to have a high quality manufacturer, like Pirelli, as part of our new Treadmasters program," said Dan Wire, Treadways’ CEO. "The Pirelli product is a perfect fit for this program because of the excellent profit opportunities that it offers to Treadmasters dealers. Pirelli has an excellent product line, leading edge technology and exciting marketing plans, and we look forward to working with them as both of our companies grow our business in the future."

Right to Repair Law Gaining Head of Steam

While some in the automotive aftermarket say that automakers are now fully cooperating and making vital service information available to independent repairers, including tire dealers, top industry associations and members of Congress are still pushing hard for formal legislation to compel automaker cooperation.

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Last fall, the Alliance of Automobile Manufacturers, the Association of International Automobile Manufacturers and the Automotive Service Association (ASA) announced they had reached an "agreement" regarding independent repairer access to service information and diagnostic tools. Other trade groups, including TIA and the Automotive Aftermarket Industry Association (AAIA), who were not involved in ASA’s negotiations with automaker groups, came out against the agreement, noting that the deal is non-binding and has no penalty clause. TIA, AAIA and others continue to call for formal Right to Repair legislation.

The Motor Vehicle Owners’ Right to Repair Act of 2003 has already garnered the bipartisan support in the House, including 23 Democrats and 15 Republicans. A companion bill has also been introduced in the Senate. Last year, 54 representatives co-sponsored the act and industry associations expect that number to grow this year.

Of special interest to tire dealers is access to OEM service information on their individual tire pressure monitoring systems (TPMS), mandated to be on all passenger vehicles beginning in 2004. In a letter to the ASA last year, TIA said its largest concern is that ASA, automakers and the government are "ignoring the need of independent tire dealers and automotive service providers to be given the information necessary to install, service, maintain, recalibrate and fix these TPMSs."

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Of note

­®′SEMA’s sixth annual International Auto Salon will be held Apr. 25-27 at the Los Angeles Convention Center. Go to www.ias2k3.com for ticket or exhibiting information.

­®′Kumho Tire USA’s new Web site – www.kumhotireusa.com ®“ features extensive dealer marketing tools, a tire selector guide for up to plus-10 fitments, and various other consumer tire information features.

­®′Seven new 16- and 17-inch, V- and Z-rated sizes have been added to the Bridgestone Potenza RE950 line.

­®′Reports say Groupe Michelin will cut 1,200 workers from its operations in Spain as part of a $200 million restructuring program.

­®′Maxxis International is the official tire sponsor of the inaugural Dodge Tour de Georgia, a 600-mile professional bicycle race throughout the state.

­®′RMA is backing the Class Action Fairness Act now before Congress, designed to reduce frivolous class action lawsuits by forcing interstate suits into federal court.

­®′Osborn & Barr Communications is now the marketing communications agency for Michelin North America’s ag tire group.

­®′Tirecraft Auto Centers, with nearly 170 locations across Canada, acquired Du-All Tire in Edmonton.

­®′Michelin’s Uniroyal brand has a new consumer Web site – www.uniroyal.com ®“ featuring a dealer locator, tire care and safety information, an e-mail tire service reminder, and product information.

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­®′Bridgestone/Firestone’s new Firestone Destination LE, designed for ride comfort and traction for light trucks and SUVs, comes with a 60,000-mile limited treadwear warranty and is available in a range of 15- to 17-inch sizes.

­®′Bridgestone B380RFT and Dunlop SP 4000 DSST run-flats in size P225/60R17 are OE options on the 2004 Toyota Sienna AWD minivan.

­®′Both the RMA and TIA are seeking changes to NHTSA’s TREAD Act tire labeling regulations in regard to the placement of a TIN on both sides of a tire or retread.

­®′Chuck Ramsey, president of Bridgestone/Firestone North American Tire’s Commercial Tire Group, retired Apr. 1. No permanent successor was named by press time.

­®′Groupe Michelin’s 2003 Challenge Bibendum, set for Sept. 23-25 in Sonoma and San Francisco, Calif., will feature competition and testing of commercial vehicles.

­®′Big O Tires is taking over seven former Penske Auto Centers, attached to Kmart stores in Michigan, and will add eight other Michigan stores by the end of May.

­®′Pirelli SpA has begun producing the Diablo Corsa motorcycle line at its MIRS facility in Milan, the first non-car tire ever produced by the system.

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­®′Bridgestone Corp. is building a $102 million passenger and light truck tire plant in Jiangsu Province, its third plant in China, which will open in late 2004. It will also triple capacity at its truck tire plant in Shenyang to 1 million units/year and nearly double capacity at its passenger tire plant in Tianjing to 4.6 million units/year by next April.

NHTSA ruled that it would now term any safety improvement or enhancement campaign by automakers as a formal safety recall.

­®′Ford and GM have theirs, now DaimlerChrysler has jumped into the tire program fray with its Mopar Tire Works program, a two-level effort that lets car dealers buy Continental, Goodyear, Michelin, BFGoodrich and Uniroyal tires at "competitive prices."

­®′Federal-Mogul’s 2003 TEC technical education program will include nine multi-day vehicle service workshops at its St. Louis training center and three in-field seminars. Detailed course descriptions, schedules, fee information and enrollment procedures available at www.federal-mogul.com/training or by calling 888-771-6005.

­®′Kumho Tire is the official tire supplier for the Formula 3 Euro Series, and will supply its Ecsta Formula 3 tires for pre-season testing and for all 20 races in the series.

­®′Cooper has signed Johnny Unser as a technical consultant for its UHP and race tire product lines.

­®′TIA is backing Association Health Plan legislation now in Congress that could significantly reduce trade association member medical insurance costs.

­®′Goodyear and TRW Automotive signed a five-year agreement to study tires, braking, suspension and steering systems to accelerate product development for vehicle manufacturers.

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­®′Goodyear re-launched its www.goodyearag.com and www.goodyearatv.com Web sites for its ag and ATV tire customers.

­®′Hankook Tire Co. Ltd. won its first North American OE contract with an unnamed U.S. automaker, and has taken over the mini-spare contract for the Ford Escape.

­®′Pirelli SpA has begun producing Metzeler brand premium passenger tires for sale in Europe.

Toyo Tires is now the official tire of the NHRA Summit Sport Compact Drag Racing Series, and the title sponsor of the 2003 United Rockcrawling and Off-Road Challenge.

­®′Hercules Tire & Rubber is now carrying Parnelli Jones Dirt Griptz light truck tires. Hercules dealers can also now buy Hercules and Ironman industrial tires through United Solideal.

After 33 years, R.J. Reynolds is giving up its title sponsorship of the NASCAR Winston Cup Series.

­®′Charles Ingram, a FedEx driver from Jackson, Ga., was named Goodyear’s 2002 Highway Hero in its 20th annual event. Ingram pulled two injured passengers from a burning car near Atlanta last October.

­®′OK Tire Stores, with 229 locations across Canada, celebrates its 50th anniversary this year, and eyes having 300 stores by 2006.

­®′Michelin North America is reducing operations at its 86-year-old Winnsboro, S.C., textile plant, and will be eliminating some 130 jobs there.

­®′News reports say Groupe Michelin plans to turn its Chinese joint venture with Shanghai Tyre & Rubber Co. into its largest global production base by 2006, and will expand and upgrade the factory to produce light truck and passenger tires, primarily for local sales.

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­®′Yokohama Tire Corp.’s Salem, Va., plant earned ISO 9000-2000 certification.

­®′To better control its raw material costs, Bridgestone Corp. is building a $34 million carbon black plant in Rayong, Thailand, with an annual capacity of 40,000 tons or 40% of the company’s global needs.

­®′Dunlop is the official tire of the NOPI Drag Racing Association 2003 Fast and Furious race series.

­®′Falken Tire’s Factory Tuned performance product line is the new sponsor of the Pikes Peak International Hill Climb, through 2005.

­®′Sure Tire has added the Summit Trail Climber SLT, with 16 different 15- to 18-inch sizes; the Heritage Trail Track CLT, for commercial applications; the Heritage Performance TR, with 24 different 13- to 16-inch sizes; and the Summit Ultra Max HP, with 20 sizes.

­®′World carbon black demand will hit 8.6 million metric tons by 2006, says the Freedonia Group, with two-thirds earmarked for tires, up from 7.3 million metric tons in 2001.

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