DETROIT—The Rao Group, the base of operations for the Metro 25 Tire marketing group, sold its Rao Wholesale division to K & M Tire of Delphos, Ohio, Oct. 21. The wholesale division represented half of the Rao Group's volume, according to President Duane Rao. Rao Group operates more than a dozen Metro 25 retail stores in the Detroit market and the MetroCell communications business.
Mr. Rao said a ``serious situation'' led to the sale of the wholesale division founded by his father, Leonard, but he declined to elaborate.
Ken Langhals, owner of K & M, said he believed the Detroit wholesale division was struggling.
``We had been looking to expand into Detroit for a number of years,'' Mr. Langhals said, when he began discussions with the Rao Group after learning it was interested in exiting the wholesale business.
K & M, founded in 1970, operates two warehouses, one each in Delphos and Toledo, Ohio. While not disclosing sales and volume figures, Mr. Langhals said the Detroit warehouse will boost his company's overall sales by about 30 to 40 percent.
The Detroit warehouse is about 40 percent larger, in sales and volume, than K & M's next largest operation in Delphos. The Toledo warehouse is slightly smaller than the Delphos facility, he said.
With the Detroit operation, the company will have a distribution base of about 4,000 dealers, Mr. Langhals said.
K & M will continue to run the wholesale and commercial tire operations set up in the Detroit warehouse, Mr. Langhals said. But the wholesaler will add its Firestone, Bridgestone and private brand lines to the operation's current offering of Michelin Americas Small Tires products.
Mr. Langhals expects to succeed where Rao Wholesale struggled because K & M will have more volume purchasing power with three warehouses and thus offer lower prices to dealers. And the distributor will deliver a broader range of products, he said.
As K & M expands, it is also following the trend of other wholesalers by offering added services to its dealers.
K & M has begun providing its dealers co-op advertising and training through the tire manufacturers. ``We'll offer it to dealers at cost just to win their business and help them make a profit,'' Mr. Langhals said.
Meanwhile, the Rao Group has moved its headquarters from its former Detroit warehouse to its MetroCell and Metro 25 offices in Sterling Heights, Mich. Mr. Rao said the sale of the warehouse will not affect the 130-member Metro 25 Tire retail cooperative or his own retail division.
K & M will assume some distribution to Metro 25 dealers and the cooperative, which is nearly all retail. The cooperative also obtains products directly from manufacturers, according to Mr. Rao.