AKRON—Many tire dealerships across the country are looking forward to a year of increased sales and profits, much like they experienced in 1996, according to a TIRE BUSINESS survey. Tire sales and profits didn't always fare as well as vehicle service sales and profits for the 55 dealers surveyed, but they were generally optimistic about their businesses' futures and their local economies.
Rising operating costs and burgeoning government regulations continue to be major concerns for dealers across the country as they enter 1997.
But the apparent shortage of qualified, reliable employees was an overriding concern for dealers in the Central and South Atlantic states.
``A concern that affects profitability is finding good employees, particularly auto techs,'' said Steve Akridge, executive director of the Virginia Tire & Automotive Service Dealers Association.
``It's a constant problem,'' added Harvey Kelley of Kelley's Tire & Appliance Center in Andalusia, Ala., who was in the process of looking for a service manager. ``We operate by the Golden Rule here. It's hard to find those kind of people. It's just as difficult to find good, honest people as good, qualified people.''
As varied and diverse as the United States is, so were dealers' views of the economy and degree of future sales and profit growth.
While most dealers said their local economies were healthy, some areas were suffering from large corporate layoffs or factory closings—and a few dealers were able to weather the effects of a depressed economy and/or increased competition.
The following is a breakdown, by region, of how survey respondents fared in 1996 and what they expect for 1997:
Boston's Dorchester Tire Service Inc. reported a ``respectable sales increase, considering the local economy.'' Owner Alan Saks said the local economy is weak for the tire business ``and the discount clubs are catching up to us.''
The region has been ``behind the times'' in regard to the warehouse club phenomena that has spread across the U.S., but now that is changing as these discount operations move into his market, Mr. Saks said.
``There's no growth in our economy, so you have to steal business away. That's what the clubs are doing,'' he said.
Other survey respondents from the region feel competitive pressure from mass merchandisers and their low tire and service pricing.
``(Mass merchandisers) do not do top-notch work. You cannot do Cadillac service at Yugo pricing—(that's) bad for the whole industry,'' lamented Eamonn Kirk of Kirk's Tire & Auto, Montague, N.J.
Mr. Kirk and several other dealers in the region closed 1996 with higher sales and profits than in 1995—an 11-percent increase in tire vehicle service sales on average, with a 6-percent rise in profits.
But four respondents experienced a dismal year, particularly with shrinking profits from tires, and said their greatest accomplishment of 1996 was ``staying in business''—citing problems with cash flow, competition and poor economic conditions. Areas of New Jersey and New York, in particular, are dealing with downsizing and layoffs by major corporations.
Overall, most of the respondents anticipate continued growth this year. Dorchester Tire plans to physically grow by expanding the number of service bays as a way to compete.
The commercial side of the business continues to be the company's strength, according to Mr. Saks, and he admitted his automotive service operation has been weak. So, having outgrown its three bays about eight years ago, Dorchester Tire plans to add five more auto service bays this year in an effort to beef up undercar service sales, which currently make up about 20 percent of the firm's retail sales.
Despite the incursion of discount clubs, Dorchester Tire will continue to compete with ``service, service, service—get them in, get them out,'' Mr. Saks said. ``People don't want to sit in a dealership all day.''
In the small town of Mount Airy, N.C., Charles Goad of Parrish Tire Co. also faced the incursion of large discounters last year—two automotive parts chains and a Wal-Mart store.
To compete, his store revamped its inventory by conducting its own test-marketing of parts lines and brands and then stocking those that sold well.
In weekly newspaper ads ``we feature specialty and high performance tires, which Wal-Mart doesn't have, and promote cheaper lines of brands Wal-Mart does carry,'' Mr. Goad said.
Aside from the tough competition, the local economy was favorable in 1996 and Mr. Goad expects the trend to continue this year.
Dealers in the Southeast generally enjoyed increased vehicle service sales, which jumped an average 16 percent, while profits from those sales climbed 13 percent. But tire sales fell an average 6 percent from 1995 levels.
The Summer Olympic Games in Atlanta last year didn't provide the anticipated boost to the state economy, according to the Georgia Tire Dealers & Retreaders Association. Corporate layoffs and job relocations have adversely affected parts of Georgia, while other areas are home to new industry.
South Carolina's economy has been stable, and dealers there don't antici-pate much change in sales or profits this year, according to the South Carolina Tire Dealers & Retreaders Association.
``Our state's economy is good right now,'' said the Virginia Tire & Automotive Service Dealers Association Executive Director, Mr. Akridge, although assaults on the tobacco industry could have a negative impact.
As in 1996, Mr. Akridge said the membership of his association expects increased auto service sales but no change in tire sales or profits.
Kelley's Tire & Appliance Center expects increased sales this year due to the opening last year of its second store in Andalusia, Ala.
The original store, as its name implies, sells appliances in addition to tires and some undercar services. But to stay competitive, the Goodyear dealership had to expand its automotive service business, and its new Tire Shak outlet, opened last summer, offers more complete mechanical service, including engine diagnostics and tune-ups.
Not stopping there, Mr. Kelley is looking at setting up a partnership to open another location this year about 100 miles away in a growing area near Mobile, Ala.
Though it operates in a small, rural county, Kelley's Tire faces significant competition from Wal-Mart, Expert Tire and several independent dealerships. But from a service standpoint, ``they cannot touch us—we back up our products and work,'' Mr. Kelley said. ``We believe in service and service and service.''
Like Mr. Kelley, most survey respondents from the Central U.S. enjoyed a prosperous 1996 and expect similar results this year. In the region, vehicle service sales and profits jumped 15 and 11 percent, respectively, on average in 1996, while the comparable increases from tires were 13 and 11 percent.
Central region respondents were optimistic that 1997 tire and auto service sales will increase, along with service profits, but they were less hopeful of earning higher profits from tires.
Dealers in Minnesota and the Dakotas had a somewhat different experience, according to the North Central Tire Dealers & Suppliers Association. Despite an overall favorable economy, dealers in that region generally saw their profits erode, though tire sales were unchanged from 1995 and revenues from automotive service increased.
NCTDSA members foresee no changes in their profits and tire sales, though they do expect auto service sales to continue to increase, the association reported.
Rapid Tire in Laurel, Mont., suffered a drop in auto service revenues last year after losing its service manager and deciding to drop the engine repairs and computer diagnostic services it had offered for nearly 10 years.
Explaining his decision, owner Ed Horning said, ``It's hard to find qualified people, and I had come to the point where we had to spend a lot of money on equipment.''
Rapid Tire operates in a small town outside Montana's largest city, Billings, and so competes with the discount chains in the area. But Rapid Tire competes ``strictly with service,'' Mr. Horning readily asserts. ``We don't give anything away. We mark up our prices.''
With a growing local economy, Mr. Horning is optimistic about business in 1997, as are many dealers in the Mountain states.
``Utah's economy should remain favorable through the 2002 Winter Olympics in Salt Lake City,'' said Michael Zufelt, president of the Utah Tire Dealers & Retreaders Association.
But the state's thriving economy and population growth has stimulated the expansion of mass merchandisers and warehouse clubs in the state, creating stiff competition for the independent dealers, Mr. Zufelt said. Prosperity in the state also has led to a labor shortage for all retail businesses, he added.
For tire dealer John Kurosky, an economic upswing in Washington state has been a mixed blessing—boosting business but attracting competition.
Les Schwab Tire Centers, one of the country's largest independent tire dealerships, opened an outlet next door to Mr. Kurosky's Eagle Tire & Automotive store in Federal Way, Wash., last year, and he has been embroiled in a promotional battle ever since.
The small, family-owned business launched what Mr. Kurosky called an aggressive promotional campaign, including: an extensive direct mail campaign that includes sending birthday cards to customers and ``welcome'' mailers to new residents; follow-up phone calls to service customers and thank-you notes to tire customers; and radio and newspaper advertising.
He admits his marketing efforts are eclipsed by Les Schwab's, but Mr. Kurosky said Eagle Tire has the advantage of having built a strong local reputation since opening in 1987 and has been very active in civic organizations.
The dealership managed to increase its sales and profits last year, despite its new neighbor, and Mr. Kurosky faces the new year with ``guarded'' optimism.
Likewise, other respondents in California and the Pacific Northwest came off a year that either was an improvement over, or on par with, 1995, and most are optimistic that 1997 will be a year of improved sales and profits.
California's economy was considered ``fair'' by most survey respondents, and dealers' major concern going into 1997 was state government regulation. ``The House and Senate are in control of Democrats—(they are) not pro-business,'' noted Ed Cohn, executive director of the Southern California Tire, Automotive & Retread Services Association.