``The toughest thing about success is that you've got to keep on being a success.''-Irving Berlin Whether it's the music business or the tire business, the above sentiment rings all too true. As the new year totters in, independent tire dealers find themselves in a familiar predicament, struggling to attain-or retain-``success'' (read that to mean ``profitability.'')
As in 1993, they find themselves again facing uncertainty: Will the economic climate be conducive to small businesses? How will the Clinton administration's health plan eventually shake out? Will it be tougher to comply with environmental regulations? Will larger dealerships continue to swallow smaller ones? Can one- and two-outlet dealerships survive?
Once again TIRE BUSINESS conducted its annual year-end survey to gauge how dealers fared last year in a marketplace growing more complicated by the increased cost of doing business and more cutthroat by the encroachment of those ``evil'' discounters.
Results seem to indicate many dealers still are wary of a somewhat anemic U.S. economy, and even the heartiest continue to be plagued by soft profit margins and sluggish growth.
This time around we tried to better ascertain how dealers plan to tackle the new year. Will they increase employment? Add or expand locations? Give pay raises?
And, for the first time, we surveyed salary ranges, from tire service workers to automotive service technicians, all the way up the corporate ladder to CEO.
Among other things, the survey indicated:
While a majority of respondents plan to hold employment at 1993 levels, they also plan to pay their employees an average 4 percent more this year;
Perhaps reflecting current economic conditions, slightly more than half reported they will not increase their company's advertising expenditures in 1994;
Some 42 percent of respondents said their relationships with their major tire suppliers remained about the same during the past year. But that doesn't mean everyone's happy;
Almost 62 percent said tire sales in 1994 will be more important than in 1993, when tire sales improved for 57 percent;
Despite better tire sales, automotive service continues to be a growing profit center for the majority of dealerships, and will play an even more important role in 1994 for 67 percent of them.
From a random mailing of 500 surveys to dealers across the country, TIRE BUSINESS received 72 replies. More than half the respondents operate one-outlet dealerships; the remainder range from two to 200 outlets.
If there are many dealers delighted with their tire supplier relationships, they're keeping the news to themselves. Surveys often elicit negative comments, while respondents satisfied about a subject may simply not respond. This one was no exception.
Some 32 percent of respondents said their supplier relationships improved; almost 26 percent cited a decline.
Pat Duininck, vice president of Royal Tire, a seven-outlet dealership based in St. Cloud, Minn., probably reflected the experience of many when he said: ``Changes in supplier personnel make it difficult to form relationships.''
Another dealer simply wrote, ``I guess we're not as important to them as the Sears, Wal-Marts.''
G.C. ``Curt'' Melton, general manager of Schmelzla Tire & Service Center, Willcox, Ariz., said the company had an improved relationship with Cooper Tire & Rubber Co., its Falls Mastercraft tire supplier, but no change with Goodyear. ``Continuing price increases make Goodyear less attractive annually,'' he said.
``Goodyear is my supplier,'' wrote John E. Busch Jr., president of Busch Tire Co., Palatine, Ill. ``They seem to be leaning to a policy whereby they are looking for more distribution and care less about their loyal dealers.'' The word ``family'' is disappearing from the relationship, he said.
General Tire has taken its licks recently in the news, but the president of a Kentucky dealership praised the Akron-based tire maker, saying it ``has always made an effort to keep us updated and in day-to-day contact.''
Duane Rao, president of Detroit-based Metro 25 Tire Centers Inc., declared: ``You must be a major customer of a rubber company to get any attention today-and I mean a major customer.''
Just over one in four respondents changed tire suppliers last year, while still others added suppliers in an effort to improve product mix-and profitability.
Cooper Tire was the most often mentioned addition. ``We took on Cooper (last) July and have been real happy,'' wrote Dick Matschke, president of Richlonn's Tire & Service in Greendale, Wis.
Stronger tire sales
Sixty percent of respondents reported that retail sales of passenger and light truck tires improved, by an average 7.3 percent-a slight increase over the previous year's results. Sales dropped for 26.7 percent of the participants.
Sales of high performance tires-off somewhat in 1992, when only 41.5 percent of participants reported increases-shot back up for 58.6 percent of respondents, who saw an average gain of 7.2 percent.
Though the local economy in Dayton, Ohio, is depressed due to military cutbacks and General Motors Corp. layoffs, Scott P. Wetterau, a store supervisor for the 12-outlet Grismer Tire Co. there, said the dealership will place more emphasis on tire sales in 1994, particularly by adding new high performance lines.
In the commercial truck tire area, 30 percent said sales were flat, 45 percent saw sales rise by an average 7.0 percent, and about 25 percent said business in that segment was down by an average 13.6 percent.
Custom wheel sales continued to be flat for 46 percent; however, 26 percent saw those sales jump by almost 16 percent.
Service with a smile
As one dealer put it: ``Auto service is the mainstay of my business.''
Because of the horrendous economy typical in many parts of California, Savon Tire & Wheel in Glendale was forced to decrease its employee roster last year, and according to President Dan Michelson, will not add anyone this year. The company is looking to increased service revenues to offset a decrease in profits from tire sales, he added.
Almost 35 percent of survey respondents said they plan to add to their dealership's employment in 1994. And in light of the increasing importance being placed on service to maintain profitability, the most likely new hires are auto service technicians.
Joe Wootton, owner of Brakes Plus in Hobbs, N.M., added one technician in 1993, and plans to add two more this year, though he cited his most pressing problem as finding ``qualified techs.''
Service-derived profits-flat for 26 percent of respondents-rose an average 10.2 percent for 57 percent. Auto service sales grew by an average 13.1 percent for two-thirds of the respondents.
On the grow
Three-quarters of the survey participants did not expand facilities in 1993, and 62 percent said they wouldn't expand this year. But there were some exceptions.
Cathy and Paul Brackbill, operators of Bellhaven Tire & Auto Center Inc., Charlotte, N.C., said their tire-derived profits were up 20 percent in 1993, as were service-derived profits. Consequently, the dealership moved to a larger location last year, and this year plans to add two more service bays and two employees.
Expansion also is in the cards for Meier Bros. Tire Supply, a wholesale business in Ashkum, Ill. Sales manager Marty Ruhaak said the company expanded its wholesale operations into neighboring Wisconsin last year, and in 1994 will be adding delivery drivers, customer service representatives and warehouse staff.
The Andersons Tireman, a six-outlet dealership in Toledo, Ohio, opened a new store with six new employees last year, and added another four employees elsewhere ``due to an increase in sales,'' according to Randy Jones, general manager. The company is looking to add another outlet in 1994.
A regulatory quagmire
Like death and taxes, most dealers have grown to accept the increased operating costs imposed by ever-expanding government environmental regulations. True, they don't have much choice.
Almost 63 percent of survey participants said they haven't experienced any difficulties in complying with regulations but, lamented Larry Lutz, president of Lilburn, Ga.-based Lilburn Tire: ``It's rather expensive for a small business to comply when you have a low profit margin.''
Those who have had problems cite the usual culprits: ``Scrap tires-no place to go,'' wrote Rusell Arendsee, president of Brookings Tire Center Inc. in Brookings, S.D. Others noted that regulations often are unclear and the paperwork necessary to keep in compliance is burdensome, not to mention customers aren't too happy having to pay added costs for disposal.
``Government harrassment is the worst I have seen it in 16 years,'' bemoaned one respondent.
Ingram Tire Co. in South Hill, Va., had enjoyed free scrap tire hauling and disposal by its county. Then last year it faced a new county charge of $1 per tire. The company gets rid of 8,000 to 10,000 scrap tires annually.
``It got so expensive,'' said President David Beane Jr., ``that I bought my own tire splitter and truck.'' That cost about $8,000, which he anticipates recouping in two years. While other area dealers charge customers a disposal fee, Mr. Beane said he doesn't, instead choosing ``to build the cost into my profit margin.''
A 'private' affair
No doubt about it, customers seem to have some definite ideas about what makes them happy. ``They want price and quality,'' said William Calhoun, owner of Cal's Tire Service, Magalia, Calif.
That's probably why there's no letup in the popularity of private brands, which are ``a good product at a better price,'' he noted.
``People initially shop price,'' said Timothy C. Given, store manager for Super Tire in Niles, Ohio, ``but the sales will be made because of other factors: quality of product, service and personality.''
Private brands are neither better nor worse than flag brands, he continued. ``It's up to the salesman to build the image of the private brands he sells. Brand name tire purchases will be based on who sells the tire cheaper, since all other things are equal.''
As one dealer succinctly put it, ``They're cheap,'' though it's unclear if he meant private brands-or the customers who buy them!
While 42 percent of the survey respondents called their local economies ``average,'' the remainder were split, with 29 percent each labeling economic conditions as ``favorable'' or ``depressed.''
Scaling back of the country's defense budget has led to military base closings, which have devastated some areas, especially already hard-hit California.
Tom Deane, president of Bill Deane Inc., Campbell, Calif., was forced to close two outlets last year. He cited cash flow problems and the economy. An expected naval base closing-with loss of approximately 1,600 jobs-also has affected the business of a Big O Tires Inc. dealership in Napa.
Experiencing a very different climate is Purcell Western States Tire, which operates out of Phoenix as part of Potosi, Mo.-based Purcell Tire & Rubber Co.
Vice President Gene Kobar said the dealership last year set in motion expansion plans that began with its move from an ``antiquated'' commercial-retail center into a new site that also includes a wholesale operation.
Adding ``Purcell'' to its name last year allowed the dealership to take advantage of Purcell's recognition by the trucking industry as a service expert, Mr. Kobar said. The company also expanded its tire offerings, adding Toyo, Michelin and BFGoodrich to its longtime Goodyear line-up.
Currently, the dealership is relocating and expanding its small retread plant ``in order to better serve customers throughout Arizona and the Southwest,'' he said. It also plans to add service technicians and sales people, and hopes to add outlets in the Phoenix and Tucson markets, as well as expand into new ones.
Ask a tire dealer about obstacles to operating a successful business, and replies will run the gamut, from ``government interference,'' discounters and a shortage of well-qualified employees, to ``growing consumer skepticism about mechanical service.''
After carefully considering increasing his dealership's advertising expenditures, Daniel Rieco, president of Perky's Tire Inc. in Hatboro, Pa., called advertising a ``waste of money'' and said ``word of mouth is best.'' Then he mused that maybe he would instead just ``buy more business cards.''
Perhaps B.D. Beebe, president of Tequesta Tire in Tequesta, Fla., summed up industry concerns most tersely. His biggest problem? ``The fools in this business selling product at or near cost.''