Goodyear and Michelin to Tackle the Run-Flat Market Together
Two of the biggest players in the world tire market have reached a cooperative technical agreement to supply auto manufacturers and consumers with new choices for run-flat systems.
Goodyear and Michelin have agreed to cooperate in the research and development of advanced run-flat technologies through a joint venture. By teaming up through R&D, the tire makers are looking to accelerate the availabilty of run-flat systems to auto makers, and consequently, consumers.
Goodyear and Michelin will both bring their run-flat technologies together in a joint venture company that will be headquartered in the Netherlands.
Goodyear will license its extended mobility technology (EMT) and pressure monitoring system patents to Michelin. In turn, Michelin will license the PAX System to Goodyear.
PAX is Michelin’s system that combines the safety of a run-flat, the handling of a performance tire, the comfort of a touring tire, strength of support and the fuel economy of a “green” tire.
“The chairman of Michelin (Edouard Michelin) and I are delighted to be here to announce licensing agreements and a joint venture agreement between two of the world’s largest tire companies – Goodyear and Michelin,” said Goodyear Chairman, CEO and President Samir Gibara from a joint press conference in New York.
Benefiting from the alliance are Michelin and Pirelli, which has adopted PAX technology for its own run-flat tires, and Goodyear and Dunlop in both Europe and North America. The Sumitomo brand remains outside of the agreement at this time.
According to both companies, the tire makers believe the PAX system is the best platform for incorporation of future tire concepts into new vehicle designs. “When Michelin invented the PAX system, we knew we had a winner,” said Edouard Michelin, chairman and CEO of Groupe Michelin. ®We knew it had great potential to become the standard of tires for the 21st century.
“Today I am even more pleased, because Michelin’s vision for the future is shared between two of the world’s largest tire manufacturers – Goodyear and Michelin. Together, through our joint venture, we will take the tremendous potential of PAX and make it more available to car companies than Michelin could have done alone.”
The agreement between both companies – which swung into motion a year ago ®“ pertains solely to research and development. There will be no sharing of revenue. The agreement also represents the only joint relationship between the companies, with no other sharing of information planned in the future.
“What you see here today is very unusual,” said Gibara of his press conference with Eduoard Michelin and Goodyear’s relationship with the French-based tire maker. ®You may even want to store this in your memories for posterity, because you may not see this again soon.®
Multiple dealerships sold as industry consolidation continues
May and June were busy months as the tire industry’s primary distribution channel continued to consolidate. Nearly 200 individual outlets changed hands in a flurry of late spring activity, with some locations being bought by tire marketers and others by larger dealers.
The biggest deal of the year came when TBC Corp. gained control of 148 Tire Kingdom locations in Florida and southern Georgia. TBC paid $45 million in an all-cash transaction to acquire the stock of TKI Holdings Inc., a private holding company that owned the Tire Kingdom name, marketing rights and certain physical assets.
It was not clear if the purchase price included the real estate upon which the 148 retail stores and two distribution centers are situated.
The purchase gives TBC, parent of 457 owned and franchised Big O Tires locations in the Midwest and West, a strong retail presence in the Southeast. In 1999, Tire Kingdom posted sales of some $224 million; coupled with TBC’s 1999 sales of $743.1 million, this could make the now-larger TBC a billion dollar company in 2000.
According to statements released by TBC, Tire Kingdom “feels there is the current potential to open 40 to 60 additional stores within Florida and contiguous states,” expansion that would ®require only a minimal additional investment.®
One major beneficiary of this deal is TBC’s private brand tire operations; Tire Kingdom’s current sales mix is 25% major brands and 75% private or associate brands, according to the companies. It is expected that based on territorial issues, TBC’s Multi-Mile, Cordovan and recently rejuvenated Sigma lines could become Tire Kingdom staples.
Del-Nat Tire Corp., better known as a private brand tire marketer, joined the fray by buying two single-store dealers in northern Indiana – Merrillville Tire in Merrillville, Ind., and Hebron Tire in Hebron, Ind., in a partnership deal with Dwight Fouts Tire Inc., a Del-Nat stockholder based in Kokomo, Ind. Del-Nat has formed an acquisition team, and will consider other similar partnership purchases in the future.
Down in Greensboro, N.C., Snider Tire Inc. bought Cate-McLaurin Co. Inc., which operates a single commercial center in Columbia, S.C. Terms of the sale, to be completed by July 1, were not announced. Snider Tire operates 12 commercial tire centers and seven Bandag retread plants.
Finally, Morgan Tire & Auto Inc., with nearly 400 retail locations in 15 states, has spread its wings further with the planned lease/buy acquisition of 28 retail tire stores in northern California. In the deal, Morgan Tire & Auto will convert 28 CSK Auto Inc. auto service centers in the San Francisco area to its Wheel Works name. Morgan will be subleasing the facilities and buying certain undisclosed assets from specialty auto parts retailer CSK Auto Corp. CSK wants to focus on auto parts retailing, and has some 1,100 stores in 19 western states.
In addition, reports say CSK will be strengthening its current commercial sales relationship with Morgan Tire & Auto. East of the Mississippi, CSK has an existing partnership with Advance Auto Parts, leading to some speculation that Advance will pick up additional business from Morgan Tire & Auto. The deal gives Morgan Tire & Auto some 53 tire and service centers in the San Francisco area and 395 total locations across the U.S.
CGT cleans house in consumer tire group realignment
Citing a need for a consistent direction, Continental General Tire Inc. (CGT) has cut three executives from its Passenger/Light Truck Division. Chris Dickson, vice president of the unit, Dennis DeLeonard, director of PLT marketing, and Tom Bruning, director of PLT replacement sales were all let go, effective May 31.
In addition, the company has begun a complete review of its Passenger/Light Truck Division operations and financial results.
“I have been unhappy for quite some time with the bottom line results,” Bernd Frangenberg, CGT president and CEO, said in published reports. ®I’ve been leaning on this management team to really improve on the bottom line. Unfortunately, it hasn’t happened to the degree that I asked.®
Dickson, who Frangenberg brought to CGT from Continental AG in Europe, was replaced by Tom Roydhouse, who previously served as senior director of replacement sales and marketing for CGT’s Commercial Division. Roydhouse will report directly to Frangenberg, but will receive sales and marketing “direction” from Commercial Division Executive Vice President Tom Reese.
“I believe these organizational changes will enhance the synergies between the Passenger/Light Truck Division and the Commercial Division. As the same time, they will strengthen the entrepreneurial benefits, while maintaining two strict, distinct divisions,” said Frangenberg.
Frangenberg said it was time to progress forward and build a solid customer base, and move away from pushing special low price sales. He also said CGT would form a “consistent marketing strategy” so that independent dealers and mass merchandisers know whom to deal with.
“It is important that we refine our organization to meet our growth needs and the changing needs of our customers,” Frangenberg said.
Mike Barker will fill the Commercial Division position vacated by Roydhouse. Roydhouse will be responsible for choosing replacements for both DeLeonard and Bruning, according to CGT.
Frangenberg said CGT expects an easy transition between Dickson and Roydhouse, a tire industry veteran who has built relationships with many of the company’s dealers. Reporting to Roydhouse will be Jim Mayfield, national director of mass retailers, Bill Stewart, sales service manager, and Tom Colelli, manager of sales and operations.
TANA offering low-cost, comprehensive training course
The Tire Association of North America (TANA) has released a new series of training and testing courses specifically for tire technicians. The first course in the TANA Tire Technician series covers mounting, demounting and balancing procedures for passenger and light truck/SUV tires.
The TANA Tire Technician training module includes a CD-ROM training program, a training manual and a 91-question test. The technician studies the CD-ROM and training manual, which covers tire and wheel terminology, service, wheel assembly, balancing, and radial tire repair. Then, under supervision, the technician takes the test and mails it to TANA for grading. Those receiving a passing score qualify as TANA Tire Technicians and will receive a patch and certificate.
“The purpose of creating this program is to offer the first in-store training and testing program for tire dealers and their employees,” TANA President Tom Wright said. ®Training and testing tire technicians will prevent injuries, increase the level of professionalism, and help dealers find, train and retain employees.®
An April 1999 survey done by TANA reported that 93% of tire dealers thought a passenger and light truck tire training and certification program was “important.” However, the same survey showed dealers wanted a program that cost less than $400.
Course materials (CD-ROM and training manual) cost $49.95, and copies of the test are $19.95 each. For ordering information, contact TANA at 703-736-8082.
TANA is also looking to add a regional hands-on training course to supplement the passenger/light truck tire training module. The new program was developed by TANA’s Training Committee, which includes dealers Paul Dvorak , Bob Malbera, Sherry Marcoe, Larry Sisson and Tom Wright, and John Buettner, TANA’s vice president of training and technical services.
Firestone OE tires eyed in NHTSA probe
The National Highway Traffic Safety Administration’s (NHTSA) Office of Defects Investigation has opened a formal investigation into whether certain Firestone brand OE light truck/SUV tires may be prone to tread separations or complete failure. The investigation, which opened in early May, was the result of some 90 consumer claims – including reports of four deaths and 27 injuries ®“ concerning Bridgestone/Firestone Inc.’s Firestone ATX, ATX II and Wilderness radials.
The tires are OE on certain Ford models, including the Explorer, Ranger and F-150 pickup truck – three of Ford’s most popular vehicles. The investigation, according to reports, is not restricted to OE tires as some of the complaints concerned replacement tires on those vehicles.
Bridgestone/Firestone said it will “cooperate fully” with NHTSA’s investigation. The company notes that more than 47 million Firestone ATX, ATX II and Wilderness tires have been sold, and these tires have ®provided many billions of reliable service to the motoring public since 1990.®®′