Michelin, Sumitomo Announce Massive Distribution Partnership - Tire Review Magazine

Michelin, Sumitomo Announce Massive Distribution Partnership

A focus on better service, faster delivery and a coast-to-coast footprint is driving the new partnership between Michelin North America Inc. and Sumitomo Corporation of Americas. The newly announced 50-50 partnership creates the second largest wholesale distribution network in the U.S., and includes Mexico.

With shared vision of expanding their tire wholesale distribution footprints across the U.S. and Mexico, with faster deliveries of more products to more customers, Michelin North America Inc. (MNAI) and Sumitomo Corporation of Americas (SCOA) have joined forces in a 50-50 partnership, announced today. The move brings together the fourth and fifth largest wholesale tire distributors in the U.S. to create a new wholesale distribution powerhouse, NTW. NTW will become one of the operating companies of SCOA’s TBC Corporation. The joint venture creates the second-largest player in the wholesale tire market in the United States. The deal is expected to close in late March 2018, subject to customary approvals.

The agreement will combine the North American replacement tire distribution and related service operations of both organizations. This includes 144  TCi Tire Centers (owned by MNAI) and Carroll Tire Company distribution centers (owned by SCOA) in the United States, 43 TBC de Mexico distribution centers, and more than 2,400 North American TBC-affiliated retail locations. Brands included are: Tire Kingdom Service Centers; NTB Tire & Service Centers; Merchant’s Tire and Service Centers; Midas; TBC Brands; R.O. Writer, and Big O Tires.

“Our focus has been on finding ways to better serve our customers, the independent dealers, by increasing our breadth and depth of both geographic coverage, our breadth and depth of product offering, and basically to improve our service levels both within the dealers [network] and also to our direct customers,” said Scott Clark, chairman and president of MNAI in an interview with Tire Review. “In looking for ways to do that, we had discussions with Sumitomo Corp. They shared the same vision that we did. And one thing led to another…. For us, it’s really for us it’s about how do we [best serve] in this environment we’re in today, where consumers are increasingly demanding about service, and the category is increasingly complex – how do we better serve and provide more service options to our to our customers. That was really the genesis of it; that’s how it came about.”

The move provides a number of strategic benefits for both organizations, including the ability to better serve both tire dealers and consumers that purchase their tires online, combining distribution, reach and speed to better serve an evolving customer base.

When asked what he believes to be most valuable to tire dealers about the newly announced joint venture, Clark said, “You’ve got increasing geographic market coverage; we go from 79 markets to 92 right off the bat with plans to grow into additional whitespace markets. You’ve got a much broader array of breadth and depth of products, and by that I mean across multiple price points. We combine both Carroll Tire and TCi together – even other product categories outside of passenger and light truck into medium truck, earthmover, agriculture and more, so we [can] get into a much broader array of products. And then the other opportunities include improved service [to dealers]. They’ll have many more points of contact in each region, much greater warehouse space and greater frequency of delivery. So those are the those are all the items that I think are critically important to better serve dealers.”

Michelin as a corporation has shown a passion regarding the future of mobility. According to Clark, the new partnership supports what’s to come.

“There’s another part of it around the future mobility around fleets and the ability to service fleets, particularly passenger fleets, as we think in the future about autonomous vehicles,” shares Clark. “We think partnering with somebody who has a retail network… is one opportunity we like to see in the future in this relationship. But really it’s about fundamentally improving our service both to independent dealers so they can sell product when consumers wants [the product] and then, also, to [support] many of our direct customers.”

Their partners at SCOA share that vision.

“This joint venture further supports our mobility strategy in this new, dynamic era in the automotive landscape,” said Sam Kato, senior vice president and general manager of the Auto and Aerospace Group at SCOA, in a released statement. “In addition to the competitive edge this joint venture provides in the distribution arena, we believe Michelin’s successful experiences in mobility services will add value to TBC. SCOA will continue to pursue investments which support our goal of integrated mobility solutions, such as this.”

Through the joint venture, TCi Wholesale and TBC will be combined. Based upon the enterprise value of each business ($160m for TCi Wholesale and $1,520m for TBC), Michelin would contribute a cash payment of $630 million to SCOA and TCi Wholesale to equalize ownership in the JV. The joint venture will be managed under the direction of a six-member board of directors. Upon closing of the transaction, MNAI and SCOA will each appoint three members of the board.

Erik R. Olsen will lead the organization as CEO. Prior to the joint venture, Erik R. Olsen was president and chief executive officer of TBC. TBC will continue to be headquartered in Palm Beach Gardens, Fla. Don Byrd will lead the newly formed NTW wholesale business as president and COO. Prior to his appointment, he was president and COO of TCi.

 

To download the infographic detailing the joint venture forming NTW, right click on the photo in this post and save the image.

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