AKRON-Will tire manufacturers ever break with tradition and pay commercial tire dealers in cash rather than credits for their national accounts business? Never say never, but don't hold your breath. The chance of that happening is probably remote, despite the decades-long practice that some dealers claim is cash-strapping their companies and could threaten their very existence.
Robert O'Donnell has been Goodyear's manager of national accounts for four years and an almost 24-year tire industry veteran. Providing dealers with credits toward more product purchases instead of cash has been around as long as he can remember.
And it's that way because that's how national account customers want it, he explained during a recent interview in conjunction with TIRE BUSINESS' special report on commercial dealerships, published in the May 27 issue.
Mr. O'Donnell's working definition of a national account is: a customer looking to leverage purchases for volume sake, while also in need of a consistent or everyday pricing program for new or retreaded tires, tire maintenance or automotive service throughout North America on a daily basis.
That customer seeks centralized billing, though not necessarily centralized purchasing, he noted.
Goodyear actually has a dual approach to national accounts which, despite the ``national'' designation, can also refer to large regional carriers.
The tire maker offers programs to commercial accounts-for-hire carriers, private fleets, utility companies and truck-leasing fleets, for instance-and to what it calls ``consumer'' accounts-such as car leasing and car rental firms.
Besides the logical requirement that a company be credit worthy, both types must fulfill certain volume criteria set by Goodyear: for consumer accounts, the potential for $100,000 in purchases of manufactured products; for commercial, a minimum of $250,000 in potential annual purchases.
However, there is and must be flexibility built into each contract, Mr. O'Donnell pointed out.
A trucking fleet on a national account may make daily purchases from independent tire dealers and be a ``great customer,'' but doesn't necessarily purchase a lot directly from Goodyear.
``So I would not hold their feet to the fire,'' he said, because ``the bottom line is they're buying Goodyear product-that's the important thing.''
The tire maker provides a national account price list covering products and services, and Mr. O'Donnell said dealers participating in the program contractually agree to support it as well as honor the set prices. They do have the option of negotiating prices down-not up. And he insisted that in some markets dealers actually have asked for lower prices in order to better compete.
``National account pricing is the bible,'' he said. ``That's what customers are expecting to pay. However, it's very competitive with the same pricing that dealers advertise on their walls.''
It is because of centralized billing for national account customers that commercial dealers receive credit from tire makers toward more product purchases.
``From the national account's standpoint, it's really their request, more times than not,'' rather than tire industry policy, said Mr. O'Donnell. ``They want one invoice or statement per month.''
A car leasing company, for example, has ``hundreds or thousands of vehicles purchasing something every day,'' he continued. ``The simplicity of a national account program for each vendor is to have centralized billing, with the rationale being one statement (paid with) one check.
``It's always been that way.''
Mr. O'Donnell believes cashless transactions will always be the norm, though he does envision the advent of a type of ``vehicle management card'' for national accounts. It would be similar to fuel credit cards issued by the oil industry and used by trucking fleets throughout the country.
``But it still gets back to centralized billing. Only, instead of, say, Goodyear's billing procedure, it will be a bank doing the billing.''
As long as national account customers want data and want specific vehicle information that they can feed back to their customers, ``I don't know that it will ever change,'' he added.
Car rental firms or companies that lease a fleet of cars, perhaps for their sales or marketing staffs, fall under the umbrella of Goodyear's so-called ``consumer'' national account program. Like the commercial variety, supply points are also Goodyear's dealer network.
``And a lot of our dealers love them,'' Mr. O'Donnell said. ``It allows them to do a lot of mechanical service, and helps their customer base.'' Typically, those national account customers also have personal vehicles, and dealers often land that service business as well, he said.
He estimated that while these consumer accounts might represent between 10 and 20 percent of an independent retail tire dealer's business, some commercial dealers may have up to 50 percent or more in commercial national accounts.
The commercial aspect of the business has ``changed dramatically over the last five years,'' according to Mr. O'Donnell. ``I feel for the independent dealers out there, because it has totally changed their business.''
Small regional or local trucking fleets are being swallowed up by national truck leasing companies and fleet operators. ``That's the dilemma,'' he said.
An organization called the ``Truck Rental and Leasing Association'' currently represents more than 40 percent of all Class 3 through Class 8 vehicle operators, he said. A lot of small companies-and many public and state agencies-have also turned their fleets over to leasing programs.
``Our objective is to serve customers the best we can,'' he stated. ``We're aware of all these issues, and are working on them. But it's an evolutionary, not revolutionary, thing.''
While the credit-instead-of-cash situation is a common complaint among dealers of both consumer and commercial national accounts, Mr. O'Donnell said another issue is delivery commissions for manufactured products-that is, the amount a dealer is issued in credit for handling a transaction with a national account.
``Dealers say the commissions are pretty low. But.*.*.*we also get calls (from dealers) asking us to be a little more competitive to meet a competitive situation. Regardless of what the commission is, many dealers feel it's not enough.''
Negotiated pricing, chiefly for automotive repairs, is another issue. ``And we hear more complaints about service pricing for emergency road service,'' he said.
Goodyear evaluates each of its national accounts annually, Mr. O'Donnell explained, with pricing based, in part, on a company's history and potential purchases.
``The only change I see happening is what's already happening today in the industry,'' Mr. O'Donnell said. That is:
Large carriers are going to get larger; leasing will continue to grow; and private fleets will evolve toward leasing.
In order for tire makers to better serve their national accounts, he sees the development of closer strategic relationships with those customers, especially in regard to tire technology and development.
Often times, he said, rather than wait for a complaint, ``we typically tell them our tires aren't working'' in a certain application, then work to develop solutions.
``Our engineers and technical people are tracking all our tires with fleets. If a tire is not fitting the bill, we're up front with them, and work to change that-whether that means providing a new tire, or a better one.''
With all this sharing of information between manufacturers and customers, ``there are no secrets,'' Mr. O'Donnell noted. ``They know what our tire is doing just as much as we do.''
``And I tip my hat to our field service organization-the independent dealers and our company-owned truck tire centers-for the service they provide our national account customers,'' he added.
``They're very dedicated, and do a super job for us.''