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February 20, 1995 01:00 AM

POWER STRUGGLE: DEALERS BACK BIG O MANAGEMENT; BOARD SPLITS CEO POST THREE WAYS

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    LAS VEGAS-The turmoil that has engulfed Big O Tires Inc. since at least mid-1994 over shareholder mandates and the company's possible sale spilled over into its annual dealer meeting. In the end, it produced a new power-sharing management triumverate to run the retail tire franchiser. In a conference with the somewhat ironic slogan ``Rising Above,'' there were more spins than a roulette wheel. Some 320 dealers witnessed a mind-boggling series of events-and gambles, including:

    Big O President and CEO Steven P. Cloward's resignation Feb. 13 after saying he was led to believe he lacked the support of dealers;

    The appointment by the company's board of a new president and a chief executive;

    Formation of a Big O dealers' association-named ``Big O Dealers of America''-to give more power and a unified voice to dealers concerned over the operation of the company;

    A nearly unanimous vote of support by the new association for the embattled Mr. Cloward;

    Mr. Cloward rescinding his resignation, leaving Big O with two presidents and CEOs; and

    The eventual reorganization of Big O's management structure.

    The conference, held Feb. 12-15 at the MGM Grand hotel in Las Vegas, saw the introduction of three new tires and some minor additions and improvements to the company's marketing and advertising programs, which remain largely unchanged from last year.

    Big O's revamped warranties and Cost-U-Less competitive tire pricing program are reaping great benefits, dealers were told, and that should translate to healthy increases in net income and sales for the company's annual fiscal report for 1994.

    But that news was all but overshadowed by the tumultuous series of events that produced more intrigue than an Agatha Christie mystery.

    In the end, the Big O board of directors wielded a knife that several well-placed sources said essentially cut Mr. Cloward's power while boosting the board's influence.

    In the restructuring-announcedFeb. 15 after a second day of frantic, practically non-stop meetings of Big O's board, management, dealers, and various combinations of those groups-the board approved the formation of an Office of Chief Executive.

    While Mr. Cloward will retain the title of president, he will share operational duties with John E. Siipola, Big O chairman, and another board member, Horst K. Mehlfeldt, a former senior vice president and CFO of General Tire Inc., who becomes Big O's vice chairman.

    The Office of CEO will report to the company's board, which essentially will not change in the restructuring.

    Following the board's decision, Mr. Siipola issued the following statement:

    ``The objective of this program is to realign the organization to achieve aggressive growth and to enhance the value of our company. I believe this restructuring program is an opportunity to improve our operations for the benefit of our shareholders and our franchised dealers.

    ``We intend to increase our market share by adding retail outlets in new geographic areas while helping our franchised dealers grow in established territories. We will take steps to reduce our overhead while working to increase our return on assets, our growth rate of earnings, and the profit potential of our dealers.''

    Earlier that day, in an emotionally charged closing address to dealers, Mr. Cloward explained the board's then-proposal to him. He acknowledged recognizing the extreme pressures on the board to fulfill its fiduciary responsibilities as well as maximize both shareholders' and dealers' profitability.

    At times Mr. Cloward dabbed tears from his eyes as he told dealers they-and their company-``don't come any better than what we have.'' And he again thanked dealers for their support, saying, ``Regardless of what transpires...I urge you to support this company in whatever shape or form it takes. But don't lose sight of that pearl which is yours.''

    It was, for Mr. Cloward, at least the second time that week that he had to address dealers eagerly awaiting an update on what was transpiring around them.

    The previous day, Feb. 14, an at-times-heated gathering of dealers, management and board members had ensued.

    Looking drained after another day of meetings and strategizing, Mr. Cloward had stepped to the podium flanked by grim-faced management team members. He outlined some of the company's failures, but mostly its ``many'' successes, reaffirming that any changes were always made with the best interests of Big O-and especially its dealers-in mind.

    If he didn't have their support, Mr. Cloward said, he couldn't continue as their leader. As he began to say, ``I've had 16 good years with...,'' his voice choked to a whisper and he left the auditorium to thunderous applause and a standing ovation from dealers.

    Then members of Big O Dealers of America were asked by their officers to ratify the formation of the new association-and vote on whether or not to support Mr. Cloward and the management team which, according to several sources, was prepared to step down en masse unless they received a vote of confidence.

    A short time later, Mr. Cloward got his answer.

    His determination renewed, he told TIRE BUSINESS: ``I've got 100-percent support of the dealers. Now if the board wants to fire me, they've got a real fight on their hands!''

    The board, faced with what dealers and management said was ``overwhelming support'' for Mr. Cloward and the team, then began the negotiations that produced the management reorganization.

    Mr. Cloward later reiterated to TIRE BUSINESS his desire to again mount an effort-likely comprising of himself, management, the company's ESOP members and possibly dealers-to purchase Big O and return the publicly held company to private status.

    Just how that will be accomplished is not yet known. Earlier this month, Big O announced that a group of dealers and management headed by Mr. Cloward had withdrawn its offer of $18.50 per share to buy the company, although it had appeared the buyout plan was on a fast track to completion.

    In a separate interview during the Las Vegas conference, Mr. Cloward told TIRE BUSINESS unresolved problems between management and dealers led to the deal's souring. But he was optimistic another-for an as-yet-undetermined amount-would be put together soon, and that several sources of financing for the buyout were waiting in the wings. Big O's becoming a publicly held corporation in 1987 was, he admitted in retrospect, ``a mistake.''

    Many of the actions at the convention were precipitated by a successful proxy battle waged last summer by Big O's second-largest stockholder, Kenneth Pavia, who was displeased with the allegedly lackluster performance of the company's stock. The outcome was a mandate to examine all avenues for maximizing shareholder value-including the possible sale of the company.

    Mr. Pavia still is playing an active role in Big O and, Mr. Cloward believes, is looking for ``an exit strategy.''

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