AKRON-Five years after acquiring Uniroyal Goodrich Tire Co., Michelin North America is putting the finishing touches on a multi-brand retail program aimed at improving the profitability of itsindependent tire dealers and distributors. First revealed in broad terms to TIRE BUSINESS in an interview last December with Michelin North America President Carlos Ghosn, the new program, called Alliance, is the outgrowth of a series of strategic moves the company has made in merging the former U.G. Tire operations into its own.
These moves, along with a statistical study of the U.S. tire market, have prepared the way for Michelin to develop the new retail program, which seeks to use the strengths of its multibrand tire offerings to partner with dealers and distributors in their local markets, based on individual needs.
``We just want dealers to sell tires and be focused on selling tires,'' explained Mike Severide, manager of strategic dealer programs for Michelin Americas Small Tires (MAST).
Although still in the initial pilot stage, Alliance, in essence, is an effort by MAST to help its retail dealers make more money by simplifying their dealings with the tire maker, allowing them to concentrate on selling more Michelin, BFGoodrich, Kleber and Riken brand tires.
Dealers who elect to participate in the program will offer these brands as their main lines and will designate their stores as Michelin Americas Tire Centers.
All such stores will feature an identical gray-and-blue interior decor and carpeting and have common identification signs outside.
Initially, Michelin will test the Alliance program in three cities, beginning with New Orleans, then followed by Pittsburgh and San Jose, Calif. About 50 independent dealers will participate.
In a recent exclusive interview with TIRE BUSINESS at the company's Akron headquarters, MAST executives-President David Schaub, Executive Vice President of Sales and Marketing Hubert Hannezo and Mr. Severide-discussed the still-evolving project.
The program, they said, capitalizes on the consolidated strengths of Michelin and U.G. Tire to provide dealers with a supplier that's easier and simpler to do business with, that can meet all their needs, cover all price points and, as a result, improve their profitability.
It's a program that has ``its roots in long-term partnership, commitment, serving the market and multibrand,'' Mr. Schaub added.
``It says that we can't be (just) some small piece of the (dealer's) business.''
In developing Alliance, Michelin recognized that independent dealers control 50 percent of the replacement tire market and that it's important for the company ``to be with the dealer group,'' Mr. Schaub said.
``Therefore, the issue became how, and with what tools, to work the multibrand program for the betterment of the dealers and for our company,'' he said.
In creating Alliance, Michelin focused on trying to make its programs simpler, Mr. Severide said.
With Alliance, dealers will have only one customer service representative, one invoice and receive multibrand shipments of tires from one truck.
By getting tires faster, a dealer will have less inventory commitment so he can turn tires faster-``and all that means profitability for him,'' Mr. Severide said.
As Alliance participants, dealers will receive multibrand merchandising displays and have a significant voice in developing an advertising program for their local markets.
Michelin also will provide training locally to help dealers sell more tires and become better managers.
``We want to give the dealer a complete, totally integrated marketing package so he can go out and sell tires in the marketplace,'' Mr. Severide said.
The program will work, according to Mr. Hannezo, because Michelin is decentralizing its activities, giving more authority to regional sales people at the local level.
``Implementation (of Alliance) should take place at the local and regional levels,'' he said.
Mr. Schaub said the evolution of Alliance is analogous to putting together the pieces of a puzzle.
Before Michelin could even consider offering this type of retail program to dealers, it first had to undertake a number of steps to create an effective multibrand operation, he said.
These steps included:
Combining, in 1993, the company's four sales forces (for the Michelin, BFGoodrich, Uniroyal and associate brands) into one group to handle all the company's tire lines, then reorienting the sales force by distribution channel;
Taking steps in 1993 and 1994 to control brokerage wholesaling, which affects pricing and ``undermines anything you want to do in a consistent program,'' Mr. Schaub explained;
Differentiating its product lines by channel;
Changing the work rules in the U.G. Tire factories to boost productivity and quality;
Merging the different information systems of Michelin and U.G. Tire into one;
Consolidating the company's three customer service groups-which previously served U.G. Tire, private brands and Michelin-into a single organization; and
Relocating and consolidating the U.G. Tire and Michelin warehouses so they would be of geographic location and physical size to handle the company's multi-brand tire lines.
With the pieces of the multibrand organization falling into place, Mr. Severide said Michelin implemented a regional planning process in late 1993 and commissioned a study of 68 U.S. markets ``to develop a program for the independent tire dealer from the market up.''
The Alliance program evolved from that study.
A key element of Alliance is the multibrand product screen Michelin has to offer. The tire maker aims to replace the dealer's current product lineup with its own complete multibrand line of tires.
To ensure that it has the right products in place, the company will help the dealer assess the particular needs of that location, according to Mr. Severide.
Michelin will implement the Alliance program slowly-market by market-with its regional sales representatives playing a key role in determining when and which dealerships should be a part of the program.
The manner in which Alliance is set up makes it adaptable to the needs of each particular market, Mr. Hannezo said.
``It can fit a dealer with 15 points of sale in a particular city,'' he said.
``But it can fit six dealers with one point of sale in a particular city. It could be a retailer or it could be a distributor.''
The company still hasn't spelled out the screening process for admitting dealers and distributors into the Alliance program, a MAST spokesman said.
And, explained Mr. Severide, ``There's no sense in putting something out there until we feel good about it.
``There's only one person who can make that judgment-the independent tire dealer in the marketplace.''