GLEN ELLYN, Ill.-Are tire makers' prices to ``national accounts'' unfairly low compared with those charged dealers, as many contend? Or are such allegations of unfair national account pricing just so much ``sour grapes'' traceable to the fact that tire manufacturers are selling to the big truck leasing companies and other high-volume purchasers, while independent dealers are not?
Lloyd Renfro, executive director of the Illinois State Tire Dealers & Retreaders Association and a former dealer himself, contends that independent dealers have good reason to complain about the inequities of manufacturers' national account pricing.
In the case of some major brands, Mr. Renfro believes, it's likely no independent dealership, regardless of its size, can buy tires-let alone hope to resell them-as cheaply as truckers are getting them under national account programs with vehicle leasing companies.
Yet if independents should buy back the tires sold to national accounts so as to gain access to these same low prices, they risk termination of their status as an ``authorized dealer,'' as Bridgestone/Firestone Inc. reminded its dealers by letter June 8.
According to Mr. Renfro, more than 40 percent of the over-the-road trucks in use today are leased, and virtually all the leasing companies have direct deals with manufacturers under which their lessees can buy tires under national account prices and be billed by the leasing firm.
``...When I saw what the lessee paid and compared it with the dealer's cost,'' said Mr. Renfro, writing in his July newsletter, ``I was convinced something is the matter someplace.''
Seeking to determine if the cost figures he'd been shown were representative of dealers as a whole, Mr. Renfro turned to other ISTDRA members-those whose large purchasing volume should earn them the maximum discount-and asked their lowest cost for an 11R22.5, load range G, in each of three major brands: Goodyear, Bridgestone and Michelin.
Three large-volume Goodyear dealers all cited the same lowest cost for a Goodyear G-167A-$270.
By comparison, he said, the price a trucker would pay for the same Goodyear tire on national account was $252.15-nearly $18 below the dealers' cost.
Additionally, Mr. Renfro pointed out, the dealer who sold this tire to the lessee and put it on national account also would receive a commission of $15.
Thus, what Goodyear was netting on the deal was at least $33 less than what the tire maker would have received from a similar transaction through a million-dollar-a-year dealer account.
And remember, said Mr. Renfro, the lessee can get the national account price even if he buys just one tire, whereas the $270 dealer price is available only to those whose volume places them in the maximum discount category-and then only with the purchase of 16 or more tires.
It is also reasonable to assume, Mr. Renfro said, that the leasing company's actual cost is less than the price it bills the trucker/lessee.
Moreover, the prices published for dealers are valid only until the manufacturer's next increase, whereas those printed on the lessee price sheets are guaranteed until Dec. 31, 1994.
In the case of the equivalent Bridgestone tire, an M711, the lowest cost reported by three dealers fell within $2.20 of each other and averaged $252.
The price charged truck lessees for the same tire is $253.17, Mr. Renfro said, and the dealer billing it on national account receives a $25 rebate. This makes the net received by the manufacturer through the national account at least $24 less than a similar sale through one of the largest-volume Bridgestone dealers, he said.
Independent dealers apparently would fare somewhat better in regard to the purchase price of a Michelin XZA 1 Plus. Dealer cost in this case was reported at $262, compared with $279.48 to the lessee, and the servicing dealer receives a $30 commission for mounting and installing the tire, according to Mr. Renfro.
Nevertheless, Michelin would pocket $12.52 more by selling the same tire through an independent dealer rather than under a national account program.
Struck by what he considers the inequity of such pricing, the ISTDRA executive director mailed copies of his article to federal lawmakers as well as the National Tire Dealers & Retreaders Association.
Mr. Renfro said he appreciates the fact that tire-making is highly competitive and that manufacturers need to be aggressive in order to survive.
``It's just disappointing that they (the manufacturers) have to go to these lengths to move their tires, and that they can't do it through the independent dealer,'' he told TIRE BUSINESS.
Contacted by TIRE BUSINESS, Goodyear responded with a statement taking ``strong exception'' to Mr. Renfro's article.
National account programs have existed in numerous industries for many years, the Goodyear statement said. ``In addition to paying delivery commissions, these national account programs provide participating tire dealers with added service, parts and retreading opportunities they otherwise would not have received.
``Goodyear is working with its dealers to ensure that its national account programs meet the needs of all parties,'' the company said.
Meanwhile, C.D. ``Tony'' Hylton III, spokesman for the NTDRA, said Mr. Renfro's article raises an ``interesting question'' concerning tire company pricing.
Mr. Hylton said that, to date, the NTDRA's members have not indicated ``widespread concern'' over national account pricing. He suggested dealers might want to bring up the subject at the ``Town Meeting'' session Sept. 8, during the NTDRA convention in Dallas.
The NTDRA's traditional position, Mr. Hylton said, ``has been that the tire companies have a right to have national account programs, and we would hope they don't abuse them to the detriment of independent tire dealers.''
Mr. Hylton declined to speculate whether Mr. Renfro's examples constitute such abuse, saying he didn't know enough about the specifics of the cases cited.
A spokesman for Bridgestone/Firestone Inc. said his company's philosophy has been to ``put as much business as possible on the dealers' books.... We have the best record of any company in the industry in that regard.''
The spokesman said BFS in 1993 removed the names of more than 600 companies from its national accounts list and turned them over to dealers. The company has continued streamlining the list during '94, he added.
One tire company official, speaking on condition of anonymity, explained that tire company pricing to independent dealers is ``volume-based'' and therefore more structured and uniform throughout the market.
By contrast, he said, the national account market is ``account-based,'' meaning that tire makers must competitively bid for this business account by account.
In tire manufacturing, he said, plants must operate at or near capacity to be efficient.
This fact gives national accounts-with their vast purchasing volume-tremendous leverage when bargaining with tire makers.
``Whenever there's excess capacity in the industry,'' he said, ``we're all out there...battling for more sales and sometimes cutting prices in order to get them.
``It's unfortunate. But that's the way this business works,'' he lamented, adding that an individual tire company-not unlike the individual tire dealer-can't alter the realities of the marketplace.