COLUMBIA, Miss.-Southern Tire Mart Inc. may well become the third-largest truck tire retreader in North America when it acquires Michelin North America's Modern Tire Service operation in May. The pending sale also will mark Michelin's exit from the retail tire business in the U.S. Terms of the deal were not disclosed. Michelin has owned Modern Tire Service since 1966.
Michelin announced March 31 its intent to sell Modern Tire, its only remaining company-owned U.S. dealership, comprising seven retail/commercial locations in Texas, including four retread shops.
According to Thomas Duff, president of the Columbia, Miss.-based Southern Tire, the purchase negotiations were initiated on both sides: Michelin wanted to pull out of retailing; Southern Tire didn't want to have to compete with its supplier's stores.
Southern Tire entered Texas two years ago, Mr. Duff said, and had begun competing with Modern Tire in the Dallas market.
The addition of Modern Tire will boost Southern Tire's sales 50 percent, and the dealership expects to achieve $90 million in sales this year, Mr. Duff said. Southern Tire currently operates three retail stores, 18 commercial outlets and eight commercial retread plants in Mississippi, Louisiana, Tennessee and Texas.
The acquisition also will increase Southern Tire's presence in Texas, where the dealership has been focusing its expansion plans. Southern Tire has four outlets in Dallas and San Antonio; Modern Tire will provide the dealership footholds in Fort Worth, Abilene, Waco, Austin and Laredo, Texas. Plans call for phasing out the Modern Tire name in a year.
As for Michelin, divesting its last remaining U.S. dealership is ``consistent with the direction taken by Michelin in North America to focus its development in the truck tire market through independent truck tire dealers and retreaders,'' a spokesperson said.
``Michelin doesn't see any viable advantage in being involved in retail or commercial operations selling directly to consumers and fleets,'' he continued. ``.*.*.*(T)o have maintained a presence in the distribution of truck tire products through the operations of company-owned stores would in fact only confuse and create conflicts with (our) independent dealers who operate their own stores.''
The impact of the acquisition will probably be most significant in retreading, where TIRE BUSINESS ranks Southern Tire 10th-largest among North America's truck tire retreaders and Modern Tire Service, 20th, based on 1994 tread rubber consumption. The combined operations would have captured the No. 3 spot, behind giant retreaders Goodyear and Treadco Inc. of Fort Smith, Ark.
TIRE BUSINESS also ranks Southern Tire the 11th-largest commercial dealership in North America, based on 1993 commercial sales of $44 million.