KAMUELA, Hawaii-Continental General Tire's commercial dealers received a generous helping of good news from their supplier during the company's International Dealer Meeting, Jan. 12. In what he termed a ``report to shareholders,'' Thomas J. Reese, executive vice president of the company's commercial tire division, told attendees at the Kamuela meeting the division is making money and well on its way toward achieving the goals it set for itself five years ago.
Likening dealers in the audience to corporate shareholders who vote by means of their tire purchases, Mr. Reese compared the division's greatly improved situation today with what it was 60 months ago when he signed on to head the operation.
At that time, the company's Mount Vernon, Ill., tire plant, built in 1974 and its largest single capital investment, was only producing at about 70 percent of capacity and ``didn't earn a penny until 1994,'' Mr. Reese said.
Despite millions of dollars invested in capital improvements by Continental A.G., the company's German parent corporation, ``we were depreciating equipment that was still in crates,'' said Mr. Reese, recalling his first visit to the Mount Vernon plant.
The company's truck tire inventory was then turning over a scant 2.5 times annually. And lack of an acceptable steering tire for over-the-road trucks was costing sales and customers.
Dealers and division associates were asking: ``When are we going to release a steering tire,'' recalled Mr. Reese. ``Not until it performs,'' he told them.
``The chances for this division. . . , the chances of continuing to sell you products were running out,'' he reminded his dealer audience.
``But I'm delighted to say that the fellows did a fantastic job with the technology in Mount Vernon, coming forward (in 1990) with the outstanding S380 (steer tire),'' which became highly popular with dealers and customers alike.
As for the plant itself, Mr. Reese said he was happy to report that both Mount Vernon and Bryan, Ohio, the division's two largest tire production facilities, are profitable and running at 100 percent of capacity today. Both also have received ISO 9001 certification.
Mr. Reese said CGT had asked local union officials in Bryan: ``If we can fill up the plant will you give us a good day's work? ``They did that and then some,'' he told the audience. And today, the firm's Bryan facility is ``one the industry's best-kept secrets,'' turning out slightly more than 30 percent of the bias off-highway tires sold in North America.
Much of the credit for filling up these plants, Mr. Reese said, goes to the division's export customers, particularly those in Canada and Mexico, whose increased purchases made full utilization possible. CGT will continue to support its export channel, he said.
Promising dealers to ``bare our soul and tell you shareholders what we're doing,'' he went on to declare that the day is past when CGT could look to Continental or to commercial banks to maintain its financial viability.
He called the $100 million capital infusion the company announced at its San Francisco dealer meeting in 1994 ``a nice kiss.'' But, he added: ``I think it's time we started giving a dividend back to our parent.'' And today, the division is paying that dividend back ``in spades,'' he told dealers at the Hawaii gathering.
Meanwhile, Mr. Reese said, other profits generated by the division are being plowed back to fund needed capital improvements, including expansion.
``We are going to take Mount Vernon to a level unheard of,'' Mr. Reese said, explaining that the company plans to double the plant's output within the next five years. ``To do that we need cash,'' he said.
Rick Armstrong, director of product planning and logistics, told dealers the division's increasing capacity and other arrangements will result in greater product availability, beginning this year.
``I believe we're now in a position to better service your requirements,'' he told dealers. For one thing, inventory levels are running 70 percent higher than a year ago and the division has received a full commitment from Continental's European operations to supply 17.5-inch tires, which had been in short supply.
Mr. Armstrong said the company now is developing products ``to replace tires we haven't introduced yet''-working ahead on a four- to five-year basis.
During the third quarter of this year, he said, CGT expects to introduce the second of two new drive-axle tires intended to replace the company's D440 tire. The new D460 will be a ``closed shoulder'' tire designed to complement the D450 drive tire introduced during the fourth quarter of 1995.
Plans also call for the debut, early in 1997, of the HS45 premium, steer-axle truck tire, intended to replace the Continental HS41, Mr. Armstrong said.
Meanwhile, dealers were told that CGT during 1996 will expand on its ``Fly Conti-Fly General'' marketing promotion introduced in 1995. Under the newly expanded program, called ``Dealers' Choice,'' dealers receive a free coach-class ticket for each 250 tires purchased on either Continental Airlines or newly added United Airlines. Free first-class tickets also are available for every 500 tires bought.