AKRON-Despite stiff price competition on new tire and retread sales and the increased cost of doing business, most of the firms included in TIRE BUSINESS' sixthannual survey of North America's largest commercial dealerships had healthy years in 1994. Overall, the top 22 dealerships in North America increased their commercial sales by an 8 percent.
But many of the problems that have plagued profitability in the past continued to dog dealerships last year. More than 90 percent of the dealerships surveyed said price competition was the same as or worse than the previous year.
``Even with a supply problem and improved economy, (many) dealers continue to give everything away,'' lamented J.D. Chastain, president of Phoenix-based Redburn Tire Co.
Accounts receivable and price hikes that were difficult to pass on to the end user also reduced profitability, according to the surveys.
``If the competition understands that the (manufacturers') price increases must be passed to the end user, it will eliminate the biggest problem,'' said Bob Hofmann, vice president and general manager of Five Brothers Inc., Walnut, Calif.
Price competition currently is being fueled by a sluggish first half of the year, said Jerry Bauer of Bauer Built Inc. of Durand, Wis.
``This year start ed slow. . . that creates anticipation; that creates fear. People get nervous and they start discounting,'' Mr. Bauer explained. Still, he said his company's margins are ``high'' after last year's company-record-breaking year for sales and profits.
Overcoming those problems, particularly collecting delinquent accounts and developing new business, takes money, Jerry Fletcher, president and CEO of Fletcher's Cobre Tire, pointed out.
``The commercial portion of our business is really the most difficult to make a profit at,'' Mr. Fletcher said.
Still, the Phoenix-based dealership is in an ``aggressive'' growth mode and is targeting the easternportion of the United States for additional off-the-road business, he said.
Probably one of the most consistent answers from dealers in the survey is their insistence on growing their businesses despite difficult operating conditions.
Nearly 80 percent of the dealerships surveyed said they intend to expand or add equipment this year, up from 67 percent in last year's survey.
Expansion and change is simply a fact of life in the commercial business, according to J.W. Brewer President Alex Brewer.
``In this business you've got to be thinking of something different to do to stay ahead of the competition. It's going to take imagination,'' he said.
His Wheatridge, Colo.-based commercial dealership has done just that by continuing to add service equipment and trucks. For the past three years, the company has also cut transportation and administrative costs by placing an entire retread shop at the site of one of its largest accounts, C.R. England in Salt Lake City.
The growth strategies of the larger dealerships will continue with a trend toward consolidation, Mr. Fletcher said.
``My guess is in the next five years we'll have 15 to 20 commercial and off-the-road dealers that are the main players,'' he said. ``. . . The dealers in the $5 (million) to $10 (million) range will want to be in with a larger company.''
Mr. Brewer agreed that the number of commercial dealers will probably shrink in the future.
``This year is going to be a little tougher year than everybody had expected,'' Mr. Brewer predicted. ``I think (the market) will settle down for a while.''