GREENVILLE, S.C.-While some people predict a diminished future for small and medium-sized independent tire dealerships, Carlos Ghosn sees only opportunity. The president and CEO of Michelin North America revealed in an interview Nov. 29 that the Greenville-based tire maker currently is conducting pilot programs in three U.S. markets aimed at helping such dealerships become more competitive and profitable.
``The idea behind the pilot programs is to make sure that we are developing our business with the small- and medium-sized tire dealer on a solid basis,'' said Mr. Ghosn, who remains bullish on the future of these dealerships.
``I think they're going to be there (in the future),'' he said. ``I think a lot of them are going to develop as long as they know how to partner with companies like Michelin, which is a global and multi-brand player and willing to help them build a competitiveness in the market.''
Using information gathered from statistical analyses about where the company is doing business, Mr. Ghosn said Michelin has determined that the independent dealer channel offers it the highest opportunity for growth in the U.S.
``Definitely, there is an opportunity for us to grow with the small- and medium-sized tire dealer,'' he said. ``And we can grow with them as long as we are addressing all of their needs. And one of them-and the most important one-is to be competitive and profitable.''
Mr. Ghosn was careful not to reveal too much about the company's plans for these dealerships until the programs are ready for broad-scale implementation, most likely in late 1995.
``We're cautious because we know that, in the past, we were seen as not very attentive to the needs of the small and medium tire dealer,'' he said. ``We want really to change this perception, but based on facts and experiences and real business-not based on some overall declaration.''
While declining to provide details about the company's plans or even where the pilot programs are taking place, Mr. Ghosn did say Michelin has been working on the project since the beginning of this year, proceeding from the objective of first understanding dealers' needs and then developing programs to address those needs long term.
The company already is taking steps to improve dealer margins by developing Michelin-brand tires designated for different channels of distribution. ``This helps to reduce the conflicts between the channels and ultimately (improves) the profitability of the independent dealer,'' he said.
And, he added, the company will use its Kluber and Riken lines as part of its strategy with small-and medium-sized dealerships.
Mr. Ghosn said 1994 has been a good year for Michelin North America, which should finish the year at the ``solid break-even'' level on sales of about $4 billion.
Overall, the tire maker maintained its share of the U.S. replacement passenger and light truck tire market in 1994, he said, while the Michelin brand gained ground significantly.
``Where we had a decrease was in private brands,'' he said. ``And this decrease was due to our difficulties to supply all the needs of our customers.''
He attributed this problem to what he called ``instability'' in the tire plants it acquired in the 1990 purchase of Uniroyal Goodrich Tire Co., which impacted productivity and morale.
This instability, he said, resulted from changes made at each of the plants during the past three years to improve quality, productivity and efficiency. Changes included closing two plants and shifting production to the remaining five, going to seven-day operation and rotating shifts and adjustments to the standards of production.
Michelin undertook these changes plant-by-plant, completing them in July 1994, with their implementation at the company's Fort Wayne, Ind., facility.
But with some plants still not up to speed in 1994, the company couldn't meet demand during the year and even outsourced some entry-level private brand lines to fill certain supply requests.
But even with this outside production, Michelin lost sales opportunities, primarily in private brands, Mr. Ghosn said, and was unable to complete some orders.
Next year should be different. For the first time since the Uniroyal Goodrich acquisition, all the U.G. plants will be operating under the new work rules and standards.
As a result, customers should see a ``much better order fill rate in 1995 in Uniroyal, Goodrich and private brands,'' Mr. Ghosn said.
The ``unstable'' plant situation also has impacted the company's bottom line the past couple of years, Mr. Ghosn continued. ``We had to pay a price to make all the changes,'' he said. ``But we did it, because we did not want to compromise our long-term competitiveness for short-term relief.''
By the end of 1994, Michelin will have completed a cost reduction plan announced in May 1993 that eliminated more than 3,000 jobs in North America.
Although no similar large-scale cost-cutting moves are planned for 1995, the tire maker will continue its search for improvements in productivity and cost-competitiveness.
Still, with strong replacement and original equipment demand forecast for 1995, higher plant productivity, improved cost structure and better sales and marketing efforts, the company expects a profitable year.
Michelin does have one more major move to complete in 1995-the relocation of its small-tire business unit, Michelin Americas Small Tires, to Greenville from Akron, culminating next August. Announced in June, the relocation is the final step in the reorganization and merging into Michelin of the former Uniroyal Goodrich operations.
This move, which will bring the company's replacement divisions together, will enhance teamwork and cross-functional efforts, making the company more effective, Mr. Ghosn said.