Industry Report - Tire Review Magazine

Industry Report

Continued Poor Results Cause Goodyear to Change Management

s Plus; now has 540 stores

Where the electronic age made the world that much smaller, nearly constant consolidation continues to shrink the North American tire landscape. The latest – and perhaps the most stunning ®“ move came in early July when two good personal friends ®“ Tom Gegax and Larry Morgan ®“ combined their empires, creating one of the single largest and most broad-based independent dealer chains in history.
Morgan Tire & Auto Inc., with more than 400 locations, purchased Team Tires Plus Ltd., which controls some 140 franchised and company-owned stores. The result is a 540-plus chain that covers nearly half the U.S. with reported total sales of $750 million.
Gegax, co-founder and chairman of the Burnsville, Minn.-based Team Tires Plus, is now chairman of Morgan Tire & Auto, and will remain in his Minnesota offices. Morgan is now the CEO, and will remain at the company’s Clearwater, Fla., headquarters. Larry Brandt, formerly president of Team Tires Plus, is now president of Morgan Tire & Auto, but will be based in Burnsville with Gegax.
Team Tires Plus locations will retain their name. Morgan Tire & Auto operates its stores under a variety of names – Olson Tire, Avellino’s Tire, Hibdon Tire, Wheel Works and Michel Tire ®“ representing the numerous dealerships its has purchased in recent years. It is expected these outlets will be renamed Team Tires Plus over time.
Ironically, just days before the Morgan Tire/Team Tires Plus deal was announced, Morgan Tire & Auto purchased four Oklahoma City retail stores from Team Tires Plus, while Team Tires Plus opened two new outlets in Wichita and unveiled plans to enter the Denver market. There was no word how the larger purchase of Team Tires Plus will impact those smaller deals.
And just the month before, Morgan Tire & Auto announced a lease/purchase plan in which it will convert the service areas of 28 CSK Auto Inc. locations in the San Francisco area to Wheel Works outlets (see July 2000 Tire Review).
The Morgan Tire/Team Tires Plus deal comes on the heels of the June announcement that TBC Corp. was buying the 148-store Tire Kingdom chain in the southeast. The $45 million cash deal gave TBC Corp. control of over 600 owned and franchised stores and reported combined total annual sales approaching $1 billion.
Morgan Tire & Auto’s purchase of Team Tires Plus could bring some interesting changes on the tire company side of the equation. Team Tires Plus is a Michelin alliance dealer, while Morgan Tire & Auto has a strong, long-standing relationship with Bridgestone/Firestone. Morgan Tire & Auto had also carried Michelin, but was dropped by the tire maker when it would not join its alliance program. Plus, Morgan and Gegax were among the founders of the Tire Alliance Group, one of North America’s largest dealer buying cooperatives, which handles numerous other tire brands.

After Haas deal, Heafner gets Merchant’s ATD operation

Heafner Tire Group has purchased Merchant’s Inc.’s American Tire Distributors (ATD) wholesale division, gaining nine distribution centers and 200 employees in the transaction. Heafner, which recently bought T.O. Haas Tire Co. in Nebraska, gains ATD’s warehouses in Virginia, North Carolina, Maryland, Pennsylvania, West Virginia and New York in the deal.
Heafner’s purchase of T.O. Haas Tire gained it 30 retail locations, a retread plant and four warehouses that serve nine midwestern states.
“I am extremely excited about this combination. Together with the T.O. Haas merger, Heafner has been able to establish platform distribution operations in the two areas of the country we were not servicing previously,” said Donald Roof, president and CEO of Heafner. ®These two transactions greatly expand our service geography and the capabilities we bring to the independent tire dealers in this country.®
Jim Matthews, who oversaw Merchant’s ATD operations, will serve as president of Heafner Tire Group-ATD Division, as well as serving on the executive committee of Heafner. ATD will operate as a separate division of Heafner Tire Group through which Heafner will continue to expand and consolidate the industry in the northern part of the U. S., according to Roof.
The move, according to Merchant’s CEO Michael Riggan, will allow the Manassas, Va., dealer to better focus on its core business. “For many years, we’ve tried to divide our resources and energies between the retail/commercial customer and independent tire dealers. This change will allow us to focus 100% of our attention on the retail/commercial customer and will allow us to aggressively grow and strengthen our retail business,” said Riggan.
Merchant’s goal, according to Riggan, is to double “the size of the retail chain over the next three years” through expansion in its existing markets and opening locations in geographically contiguous markets. Currently, Merchant’s has 116 retail stores and five commercial tire centers. And the company has undertaken a store remodeling program designed to make Merchant’s locations ®more customer-focused than ever before.®

Beverly Tire, Hercules form Canadian partnership

Canada’s Beverly Tire Group Ltd. has formed a strategic alliance with Hercules Tire Canada, creating an interchange of tire brands that both parties hope will broaden their market opportunities. The deal is limited to southern Ontario only. Goodyear Canada owns a 49% interest in Beverly Tire, which it purchased in January 1999.
The Flamborough, Ontario-based Beverly Tire operates 26 locations and a Goodyear retread plant in Ontario. Hercules Tire Canada, headquartered in Woodstock, Ontario, has four warehouses and more than 1,000 customers across Canada.
Under the agreement, Beverly Tire will sell Goodyear-branded tires – passenger, light truck/SUV, farm and OTR ®“ to Hercules Tire Canada, owned by Hercules Tire & Rubber Co. in Findlay, Ohio. Hercules, in turn, will sell Hercules-branded tires and other private brand passenger and commercial tires to Beverly Tire.
“This alliance has something for everyone,” said Bill Farmer, president of Beverly Tire. ®It allows us to fill some voids in our product offering, and provide our customers with a more complete line of products at every price point.®

Duro Tire opens new facility in Georgia

Duro Tire and Wheel Inc. (Hwa Fong U.S.A.) has opened a new 102,000-square-foot combination manufacturing facility and warehouse in Covington, Ga. The new plant/warehouse will have the capacity, according to Duro officials, to manufacture Duro-branded wheels as well as mounting complete tire and wheel assemblies. The facility opened in mid-July, and the company expects wheel manufacturing to begin in early September. fills out board of advisors, an Internet tire exchange focused on commercial tires, has completed its board of advisors. The advisory group is comprised of experts from the tire industry, as well as financial and Internet arenas, and will provide the company with consultative assistance on business strategy, information technology and staffing.
Named to the board were: Doug Bade, partner with Deloitte Consulting; Jordan Feiger, vice president and general manager of severe service vehicles for International Truck & Engine Corp.; Donald Haider, professor at the Northwestern University’s Kellogg Graduate School of Management; Bob Sabath, senior manager at Deloitte Consulting; Danny Sickafoose, owner of Chicago Bandag; Dr. Nandu Thondavadi, chairman of Mascon Information Technologies; Phil Raben, co-owner of Raben Tire Co.; and Patrick Duininck, president of Royal Tire Inc.

Pirelli opens new age of tire development, manufacture

Automated tire manufacturing reached a new, super high tech level when Pirelli SpA unveiled the first of its new Modular Integrated Robotized System (MIRS) facilities in early July during a special press event in Milan, Italy. Not only has the Italian tire maker introduced a space- and processing-efficient tire manufacturing system, but it has also created a means to manage the entire operation – even the entire company ®“ via the Internet.
According to Pirelli, its launch of MIRS at the company’s Bicocca Milan facility also marked the beginning of “e-Pirelli,” a company-wide initiative that ®permits online management of the entire company business cycle,® including purchasing, marketing, research and development, design, logistics and manufacturing. Pirelli’s Internet-based business management system will be in place within three years, according to the company.
Pirelli’s Bicocca Milan MIRS installation is the first of five the company plans over the next three years. Other MIRS plants will be installed at unnamed locations in the U.S., Germany, the United Kingdom and Asia. Pirelli is investing more than $550 million, including structures and ancillary services, in its MIRS project.
The five MIRS facilities will increase Pirelli’s worldwide production capacity by 10 million units annually, a 25% increase, and will not replace any existing manufacturing capacity, according to Pirelli.
Pirelli would not reveal details of either robotics or software technologies, and will not share the information with or license it to competitors.
The Bicocca Milan MIRS facility will focus on production of Z- and V-rated performance tires for OE and replacement market sales, as well as a run-flat tire. The company said its expects OE fitment of MIRS-produced tires this year.
In addition, this fall Pirelli plans to use its MIRS technology to produce a new tire called Cyber, which Pirelli said is “an intelligent tire capable of interfacing with the user.” The company provided no other information on Cyber or its technology, or even if Cyber would feature embedded computer chip technology.
MIRS is based on “the concept of a highly flexible mini-factory that can be strategically located according to market demand,” said Pirelli. Because MIRS requires only 350 square meters of floor space – 80% less floor space than traditional manufacturing ®“ Pirelli can place a MIRS facility virtually anywhere, including within an auto maker’s manufacturing plant, allowing it to produce tires on demand and specific to a customer.
Key to the effectiveness of MIRS is its unique, concept-to-production software system, which completely integrates tire design, product and process development, prototyping, and final manufacturing. Part of a global online system, Pirelli engineers can input “defined product specifications” and the software automatically designs all needed construction drums and curing molds, selects needed raw materials, defines the path drivers for MIRS robotic system, and manages the entire work cycle, according to the company. This integration, said Pirelli, allows it to modify design specifications on the fly, and produce prototype tires almost instantly.
Totally robotic and software-driven, the entire production cycle – from compounding to finished product ®“ is completed by MIRS without human intervention or storage of components. MIRS produces one complete tire every three minutes, according to Pirelli, and size, design or construction specifications can be changed in minutes.
Robotic arms handle specially designed building drums, passing them from one station to the next, according to the company. Extruders apply strip rubber reinforced with steel cords with a “circumferential and axial deposition motion” onto the drums. Beads, sidewall plies, undertread and final tread are applied in a similar fashion. A carousel arrangement of six curing presses revolves around an axis, synchronized with the building process to maintain continuous production.
The integrated software controls every aspect of MIRS, including all robotic movements, provisioning of materials, selection of the construction drum, tire building, curing, and laser-aided quality control, said Pirelli.
Pirelli intends to use its Bicocca Milan MIRS facility as the test bed for “further development” of its MIRS process, and for training of system operators, development of prototype products, and further development of the complex software systems used to command and monitor each MIRS installation. Any future software updates will be developed at Bicocca Milan and transmitted via the Internet to others MIRS facilities, said Pirelli.
Pirelli is working toward using MIRS to manufacture motorcycle and truck tires, and plans to have two prototype lines in production by 2002. ®′

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