AKRON-If there was an overriding theme to 1995's top events, perhaps it was that consolidation in the tire industry is far from over-it's just occurring at different levels. Whereas the 1980s witnessed a spate of mergers and acquisitions among the top global tire makers, the past year saw significant efforts at consolidation among large retail dealerships, industry associations and trade unions.
It was a year in which there was more than the usual amount of comings and goings among the industry's top executives. Five of the seven leading tire makers in North America had a significant change in leadership at or near the top-only Michelin North America and Cooper Tire & Rubber Co. were exempt.
1995 also brought a certain amount of turmoil to the continent's largest single independent dealership chain, Big O Tires Inc., where a sale of the company is pending, as well as to its largest independent retreader, Treadco Inc., which found itself at loggerheads with its principal retreading supplier, Bandag Inc.
In a more positive vein, tire makers-who generally were experiencing growing profitability themselves-took steps to improve relations with their independent dealers, announcing policies and/or programs designed to enhance dealers' competitive positions-and their bottom lines.
A review of some of the year's top stories follows:
In a drama continued from 1994, the third time proved to be the charm for a group of Big O management and dealers led by President Steven P. Cloward, whose third offer to purchase the dealership franchiser was approved about mid-year.
The publicly held company had been put on the block due to a shareholder initiative in 1994, and the Cloward group's first bid-of $18.50 per share-was made that December to counter an $18-per-share bid from AKH Co. Inc., a large California-based dealership.
Unable to secure adequate financing, the group was forced to withdraw that bid in February, but came back in April with a new proposal at $16 per share. This the Big O board rejected as too low. The deal finally was struck when the Cloward group upped its offer to $16.50 per share, or about $55 million.
The transaction, returning Big O to privately held status, is expected to be concluded sometime during the first quarter of 1996.
In the interim, the company held a stormy dealer meeting Feb. 12-15 in Las Vegas that witnessed the temporary resignation of Mr. Cloward, the formation of a Big O dealer association and the ultimate restructuring of Big O management. Mr. Cloward remained president, but the office of chief executive was split three ways: among Mr. Cloward, Big O Chairman John E. Siipola and Vice Chairman Horst K. Mehlfeldt.
Beginning with Continental General Tire's January dealer meeting, at which the company, playing off the Republicans' ``Contract with America,'' announced its ``Contract with our dealers,'' tire makers reaffirmed their commitment to their independent dealers at a succession of dealer meetings. And the efforts seemed to go beyond the usual rhetoric.
Goodyear, for example, announced several new programs and strategies, including a new customer service center, simpler and more flexible marketing and advertising programs and a pledge to provide independent dealers with products not available to other distribution channels.
Michelin Americas Small Tires unveiled its ``Alliance'' program, whereby participating dealers would offer multiple MAST brands-Michelin, BFGoodrich, Riken and Kleber-in outlets with a common design and retail format. The program was being tested in three markets prior to a national rollout.
The concept of a single annual trade show for the tire industry, on the agenda of joint talks between the NTDRA and the American Retreaders Association in November 1994, gained momentum throughout 1995.
And one individual emerged as the chief catalyst moving the discussion forward: NTDRA President James Faught.
Responding to suppliers' concerns about attendance and the expense of exhibiting at multiple shows, and to increasing competition from the Automotive Aftermarket Industry Week shows, held each fall in Las Vegas, Mr. Faught appointed a task force to explore the concept.
At the same time, Mr. Faught made it clear he favored creating a ``tire/rubber industry week'' that could include a consolidated tire industry trade show, educational sessions and individual company and association meetings.
The NTDRA-led task force scheduled two days of meetings in Cleveland in early November, to which it invited representatives from all segments of the industry. The ARA ultimately declined to attend, due to concerns about the agenda, which had been established without its input.
As a result, the Cleveland meeting was shortened to one day, and discussions between the ARA and NTDRA were held in early December and were to continue in 1996.
Though his term of office expired at the NTDRA convention in October, Mr. Faught has vowed to see the trade show issue through to its conclusion.
As 1995 dawned, the longest work stoppage in the history of the rubber industry was sputtering to a close.
Though members of the United Rubber Workers union officially remained on strike against Bridgestone/Firestone Inc. and Pirelli Armstrong Tire Corp., both tire makers had hired what they considered permanent replacements for the striking workers and were returning production to prestrike levels.
The URW, its strike fund dwindling, was working hard to keep morale up among the strikers, while looking to enhance its bargaining power through a merger with another union.
The strike against Pirelli Armstrong ended abruptly in early March, following a ruling against the company by the National Labor Relations Board regarding unfair labor practices. The URW offered to return to work uncondi-tionally, and the company began rehiring the strikers and prepared to resume contract negotiations.
At Bridgestone/Firestone, the final straw came in early May, when workers at the company's tire plant in Decatur, Ill.-one of four URW locals still on strike against BFS-voted unilaterally to return to work. The union's resolve collapsed, and it ordered the remaining strikers to return to work unconditionally May 22, 10 months after the strike had begun.
For its part, BFS stuck by its permanent replacement workers, showing little inclination to rehire the former strikers.
In July, the URW merged into the larger and more powerful United Steelworkers of America union, which tried to bring pressure to bear on BFS, taking its protest to Bridgestone Corp. in Japan and to the National Tire Dealers & Retreaders Association convention and trade show in New Orleans-and the BFS retail dealer meeting that immediately preceded it.
The union got a boost in late November, when the NLRB converted the BFS strike from an economic action to an unfair labor practice strike and ordered the company to rehire all remaining union members who had participated-about 1,100 of the original 4,000 who went out on strike, according to BFS, which said it will appeal the NLRB ruling.
In August, seven of North America's largest independent tire dealerships-with combined annual sales approaching $400 million-announced the formation of a retailing alliance dubbed Tire Alliance Groupe.
The founding members were: Don Olson Tire & Auto Centers, based in Clearwater, Fla.; Michel Tire Co., Cincinnati; Parnelli Jones Inc., Ventura, Calif.; Somerset Tire Service Inc., Bound Brook, N.J.; Tires Plus Groupe Ltd., Burnsville, Minn.; Tire Warehouse Central Inc., Keene, N.H.; and Town Fair Tire Centers Inc., East Haven, Conn. (Town Fair has since dropped out.)
TAG, which in October hired ex-Goodyear exec Barry Robbins as its president and CEO, said it will focus initially on joint purchasing of tire- and automotive-related products, including its own private brand line, and eventually plans to take advantage of volume purchasing in areas such as computer software and insurance.
The group also plans to add members to cover most of the U.S. and create nationwide warranty, marketing and advertising programs.
The growing disaffection between Bandag and its largest franchisee broke out into the open in late August, when Fort Smith, Ark.-based Treadco revealed that Bandag had decided not to renew franchise agreements for eight of Treadco's Bandag retread plants, putting the future of the remaining 18 in doubt as well.
The rift began earlier in the year, when Treadco-which had been a 100-percent Bandag retreader-decided to open facilities using other processes. In mid-year, Treadco opened a plant in Las Vegas that uses the Hercules/Cedco precure process-a move that was intended to support Treadco's entry into the Southern California market.
But according to Treadco's then-President J.J. Seiter, the action that really soured the company's relationship with Bandag was the announcement in March that Treadco would open a mold-cure retread plant in the St. Louis area in conjunction with Bridgestone/Firestone, using equipment developed in Japan by Bridgestone. The plant's grand opening was Dec. 5.
For its part, Bandag said only that it preferred to work with retreaders ``who are fully committed to the Bandag system. . . .''
Then Treadco signed an agreement with Oliver Rubber Co. to supply the eight plants slated to lose their Bandag franchises, as well as any other Treadco plants that might suffer a similar fate in the future.
The next salvo in the escalating battle between Bandag and Treadco caught most observers by surprise. On Oct. 20, Mr. Seiter and two top Treadco vice presidents abruptly resigned to take newly created positions as ``directors of dealer development'' at Bandag. It was widely rumored that Bandag lured the three with generous compensation packages, and Treadco later claimed that Mr. Seiter's totaled $1 million.
Treadco quickly filed suit, charging that Bandag was deliberately and systematically trying to ``destroy'' its business by luring away key employees and soliciting Treadco customers to transfer their business to other Bandag franchisees.
Acknowledging that it already had lost six large fleet customers representing about $3 million in annual sales, Treadco in mid-November sought court permission to immediately terminate all its franchise agreements with Bandag-but without having to sell its equipment back to Bandag.
At year-end, no date for a hearing on Treadco's request had been set.
In late September, Kmart Corp. announced it had sold its more than 860 automotive service centers in the U.S. to Penske Corp. for approximately $112 million.
The deal created a new company in the tire and automotive service business, Penske Auto Center Inc., likely to be a much more formidable competitor than Kmart.
Roger S. Penske Sr., chairman and CEO of Penske Corp., said the company plans to offer a number of new services at the former Kmart auto centers and he ``expects to grow this business fairly dramatically''-doubling sales within three to four years. The Kmart centers had revenues of $360 million in 1994.
Penske also named Goodyear the sole tire supplier to its auto centers, supplanting Michelin North America, which had been Kmart's principal tire supplier.
Other major stories covered during 1995 include:
Bridgestone/Firestone developed a prototype ``active'' computer chip, embedded in truck tires, that provides ``real time'' information on temperature and inflation pressure;
An industry task force on ``zipper'' failures in all-steel radial truck tires developed guidelines and training materials-including two videos-to help avoid injuries among tire workers;
General Motors Corp. began covering tires under the bumper-to-bumper warranty for all its 1996-model cars and light trucks;
The U.S. Justice Department's antitrust division is investigating possible price-fixing by tire manufacturers; and
The National Association of Attorneys General issued a report on the auto repair industry, making numerous recommendations to prevent consumer fraud.