AKRON-The problems facing commercial dealerships are still out there: fierce price competition on new tires; low profit margins on manufacturers' national account programs; delinquent accounts receivable. Worse yet, there are new ones creeping around the corner: price competition is affecting retreads and stingy customers are demanding more value at a cheaper price.
Still, the largest independent commercial dealerships in North America continue to boost sales.
That's the consensus following TIRE BUSINESS' fifth annual survey of North America's largest commercial dealerships.
The survey found 19 of the top 21 dealerships increased their commercial sales figures over 1992 levels.
They have done so by adapting their operating procedures, trimming corporate fat and removing themselves from price competition as much as possible.
In the commercial business ``you have to work smart, work hard and build good service business with customers,'' according to Ron Bennett, president of Service Tire Truck Centers. The Bethlehem, Pa.-based company has made steady sales gains in recent years and boosted sales by 11 percent to $30 million in 1993.
Working smart and hard has resulted in a number of unusual programs at some of the largest dealerships.
Tire Centers Inc.-the largest independent commercial dealership in North America with 1993 sales of more than $145 million-combats market-specific price competition by giving control to managers in each of its 105 commercial-only and combination commercial/retail outlets.
The company gives its managers ``a lot of authority to run their (outlets), kind of like independent businessmen,'' said Vice President Richard L. Hall. ``They make the decisions in their market as far as pricing and which truck tire brands to carry.''
Pricing is one of the major concerns for most independent dealers, the survey suggested. In 1993, dealers began to experience increased price competition on retreads as well as new-tire sales, many dealership officials noted.
``There are more people in retreading and less people who are cognizant of how much it costs to produce a retread,'' Southern Tire Mart President Thomas M. Duff explained.
Universal Tire Inc. Senior Vice President Steve Hawkins also said that retreading has become especially competitive in the recent past. To combat the ``nominal'' growth of the new-tire and retread markets, he said the company is becoming more aggressive with its pricing and sales efforts.
``Everybody's trying to carve their market out of a relatively flat pie that's not growing'' and ``barely keeps pace with inflation,'' Mr. Hawkins explained.
``Everybody'' includes the tire manufacturers, who continue to whittle away at independent dealers' market share and profits with aggressive national account programs that are targeting smaller and smaller firms.
Those programs are wreaking havoc on Canadian businesses as well, according to Archie F. Stroh, senior vice president and general manager of Kal Tire Ltd.
``We continue to talk to our customers to try to improve our service,'' Mr. Stroh said, noting his company tries to ``make the best'' of national account programs. ``We can deal with the customer better than (manufacturers) can because we deal with (the customers) night and day.''
The story is only slightly different at Universal Tire.
``We're not totally anti-national accounts...they're probably good for dealers,'' Mr. Hawkins said. ``The problems are with what I call `special' or direct-bill accounts with suppliers and tire makers. ``They reduce the delivery commissions to the delivering dealers...so thin that you really can't afford to warehouse the product, deliver merchandise and do the paperwork,'' Mr. Hawkins said. ``We're seeing more of that than we'd like to see.''
He admitted ``the three major tire makers are pretty aggressive in that area. They will go direct to the end-user-the major fleets across the country-and compete on a price basis to the point where...it becomes their customer, not ours.''
With pricing low, many dealerships have cut back on acquisitions and have, instead, put their money into new equipment or outlet expansions-focusing more and more of their business on two areas that are still making money-retreading and mechanical services.
Manassas, Va.-based Merchant's Inc. has used the improving economy to renew an emphasis on the service side of its commercial business, adding some front-end alignment equipment to its six commercial locations in Maryland, Virginia and North Carolina.
Service now makes up about 20 percent of the company's commercial volume, according to Robert Dorsey, Merchant's vice president, commercial.
Similarly, Universal Tire has spent the past two years installing truck alignment equipment in each of its 10 commercial-only and combination commercial/retail locations.
And Vernon, British Columbia-based Kal Tire has recently completed a four-year computer upgrade project that has given the company the ability to record and track sales and marketing data in a central location.
The system is expected to lower operating costs, according to Kal Tire's Mr. Stroh.
Tire Business Staff Reporters Kathy McCarron and Sigmund J. Mikolajczyk contributed to this story.