FORT SMITH, Ark.-Five months after announcing a venture with Bridgestone/Firestone Inc. to develop an experimental mold cure retreading facility, Treadco Inc. has learned its primary supplier, Bandag Inc., will not renew eight of its franchise agreements. Treadco President J.J. Seiter said he believes the Bridgestone/Firestone venture ``played a big part'' in Bandag's decision.
In a statement, Bandag said its decision to not renew the franchise agreements when they expire in the summer of 1996 was a difficult one, but ``is consistent with efforts by Bandag to ensure end-user customers will get ongoing consistency and quality in the products and services they receive.
``Bandag believes that consistency and quality can best be delivered by independent tire dealers who are fully committed to the Bandag system. . . .''
Treadco, which is Bandag's largest customer and the largest independent truck tire retreader in North America, operates a total of 26 Bandag precure franchises. The agreements on the remaining 18 franchises, which permit Treadco to use Bandag's proprietary retreading process, materials and equipment, are due to expire by the fourth quarter of 1998.
``Will they renew them? I don't know,'' Mr. Seiter said. ``That will be answered as time goes on.''
According to Mr. Seiter, Treadco learned of Bandag's decision in a letter in which Bandag noted that developments over the past several months ``have posed an inherent conflict of interest.''
He added that he has been concerned about the Bandag relationship, particularly the multiple price increases over the past year that have been difficult to pass on.
Mr. Seiter said much of the difficulty with Bandag goes back to March, when Treadco announced it was putting in a mold cure retread plant in St. Louis using tread rubber and technology supplied by Bridgestone/Firestone.
After informing Bandag of that development, Treadco has had very little communication with the company, Mr. Seiter said. ``As time went on I got the feeling things were not going well with Bandag.''
In May, Mr. Seiter called Bandag asking about the future of the eight franchise agreements that were about to expire. He got his answer the week of Aug. 21.
Treadco will not be significantly affected by the development and had been preparing for such a possibility so it wouldn't ``be hung out to dry,'' Mr. Seiter said.
``We don't think we'll miss a beat. We'll be able to service our customers with no disruption.''
Industry analyst Harry Millis said he believes Treadco ``felt that they are strong enough. . . to go ahead without (Bandag).''
``My guess is they thought that through, because they are pretty good planners,'' he added.
Mr. Seiter would not elaborate on plans for the affected plants nor reveal whether Treadco plans any legal action against Bandag.
In recent months, Treadco has branched out from using the Bandag system exclusively, opening a retreading facility in Las Vegas in May that employs the Hercules/Cedco precure process. It also is preparing for the October startup of the St. Louis mold cure facility.
``We were careful we didn't infringe on the franchise agreements with the St. Louis and Las Vegas shops,'' Mr. Seiter said.
The affected plants-in Fort Smith, Little Rock and Pine Bluff, Ark., as well as Texas and Louisiana-are all in localities where Treadco operates other retread facilities, he stressed.
Mr. Millis said he was surprised Bandag took as ``drastic'' a measure as not renewing the agreements following Treadco's decision to use other retreading processes. Bandag might have hoped Treadco would back away from its new ventures once faced with the non-renewals, he said.
``Here was a very major franchisee who was going off into other directions,'' Mr. Millis said. ``No 1., Bandag felt that (Treadco) could not focus their full attention on Bandag and, No. 2, that (the new ventures) set a very poor precedent'' for other Bandag franchisees.