MALDEN, Mass.-In an effort to return some of its tire production stateside, Galaxy Tire Inc. has purchased a 23-percent stake in Condere Corp. to finance the expansion at Condere's Fidelity Tire Manufacturing Co. subsidiary. The Sept. 27 transaction, terms of which were not disclosed, will allow Fidelity to add tire presses and other manufacturing equipment at its plant in Natchez, Miss., increasing production capacity for the Galaxy line of mostly bias-ply tires for specialized/niche off-road markets-as well as for other customers.
Galaxy said it wants more of its tires produced domestically to reduce the lead time on deliveries and to secure control over production and distribution.
About one-sixth of Galaxy's $60 million in annual sales is generated with U.S.-made tires-produced by Fidelity, Specialty Tires of America Inc. and Continental General Tire Inc. ``We would like to bring back half of our production overseas to Fidelity,'' said Bryan Gans, Galaxy's executive vice president.
Fidelity expects the purchase of large-tire presses and machinery from Continental General Tire to boost its capacity by 100 tires per day. The machines should be on-stream in 1997, according to Dennis Terwilliger, Condere chairman, president and CEO.
Since Fidelity already produces bias and radial commercial, industrial and farm tires, Galaxy views the new relationship as ``a good fit,'' Mr. Gans said.
``About a year ago we started working with (Fidelity). But to buy extra press capacity, they needed a capital infusion,'' Mr. Gans said.
Thus, Galaxy agreed to buy newly issued common stock in Condere, Fidelity's Hamden, Conn.-based parent, which also operates 13 ServisFleet truck tire centers and TTS Corp., a truck tire emergency service.
The Sept. 27 purchase makes Galaxy one of the largest shareholders in Condere, whose sales topped $120 million last year.
However, other than overseeing production of its tires at Fidelity, Galaxy ``will not be involved with management at this point,'' Mr. Gans said.
As the relationship grows, Galaxy hopes the ServisFleet outlets will handle more Galaxy tires than the few ``odds and ends'' they now sell, he said.
The Galaxy brand got its start in 1985, when President and CEO David Gans bought off-the-road tire molds from a closed BFGoodrich plant and placed them in various plants around the world. Galaxy tires now are produced by 15 factories in a dozen countries.
Galaxy production currently makes up about 4 percent of Fidelity's sales. After the expansion, Galaxy tires will grow to about 10 percent of sales, according to Mr. Terwilliger. Overall, private-brand customers claim more than half of the plant's production, with 40 percent devoted to Fidelity's own tire lines. The expansion is expected to grow every segment of the business, Mr. Terwilliger said.
Fidelity will be supplanting Galaxy production from South Africa. Mr. Gans said that's because of the long lead times and the high cost of shipping.
Another reason for increasing tire production in the U.S., Mr. Gans said, is that as a designated ``overseas supplier,'' Galaxy must maintain a large inventory for its original equipment customers. OE orders make up 30 percent of Galaxy's business.
Galaxy is bucking the trend among private brand marketers, most of whom are looking for less-expensive, overseas tire suppliers. But, Mr. Gans explained, most private branders don't service the OE market and can afford to make price their top consideration.
For OE customers, however, ``quality is the most important issue,'' he said. ``If we were looking for low price, we would stay overseas.''
Galaxy considers its brand a premium tire, and some of its OE lines, such as one being produced for John Deere Co., ``cannot be manufactured overseas. It is too technically difficult,'' Mr. Gans said.
With Fidelity producing OE tires for Galaxy, ``it will assure Galaxy's original equipment customers a more secure, stable source of supply.'' Fidelity also will produce a number of European sizes for distribution through Galaxy Europa in Germany.
In the replacement market, Galaxy has been ``plagued with product shortages,'' Mr. Gans said. And importing tires has created long lead times for new products. ``We don't know the demand in the market until the sales start. By the time we increase production, there's a three- to four-month delay until we ship. We have run out of numerous sizes,'' he said.
As Galaxy shifts more of its production to the Fidelity plant, ``we'll be able to react in a matter of weeks and have a much better fill rate.''
Since its inception, Galaxy Tire has been carving a niche by building specialized tires for off-road equipment. ``Others will not invest in specialty tires (production) for it's a small market,'' Mr. Gans said.
The company also hopes to increase its OE business, which didn't exist 2 1/2 years ago. ``We've only touched the tip of the OE market,'' Mr. Gans declared.
``It is difficult to get dealers to take on Galaxy'' due to its high-end price, Mr. Gans said. ``When you go to manufacturers and show the tire quality, it's an easier sale. A lot of OE sales pull tires through the replacement market,'' he added.