ORLANDO, Fla.—Michelin Americas Small Tires executives left little doubt about the importance of the independent tire dealer to the company's long-term success during the tire maker's recent dealer meeting in Orlando. ``Your growth will be the basis of our future,'' Ken Kruithof, vice president of dealer sales, told the 360 dealers attending the company's 1997 dealer sales meeting, Jan. 7-11 in Orlando.
The Greenville, S.C.-based tire maker is banking on an improved relationship with its independent tire dealers, combined with new and updated tire lines and a ``massive'' marketing effort in 1997 to ``grow the equity of our brands with consumers in North America,'' the company's executives said.
This desire for a partnership with the independent tire dealer symbolizes ``a change in our culture,'' they told dealers. Michelin is listening more and learning more about dealers' needs in order to become a better partner, they added.
Much of its effort with dealers is focused on the Alliance dealer program, which Michelin launched in 1995.
Alliance is a multi-brand retail program aimed at improving the profitability of a select group of independent Michelin tire dealers and distributors. Dealers commit to buying 50 percent of their tires from MAST and sharing more information about their businesses. In turn, MAST commits to improving the competitive position of the dealer in the marketplace.
Michelin is looking to add about 75 dealers to the Alliance program in the coming year, according to Mr. Kruithof. Currently the program boasts 272 dealers, and involves some 1,800 points of sale.
Sales through Alliance dealers were strong in 1996, Mr. Kruithof said. Through November, most Alliance dealers had outpaced the overall growth of the industry, with MAST sales to this group increasing 25 percent vs. 1995, he said.
As part of its plan to help dealers grow and sell more tires, MAST will work to strengthen the positioning of its flag brands in the marketplace, executives said.
Plans include a significant increase in national advertising for the three flag lines—Michelin, BFGoodrich and Uniroyal—along with the introduction of a slew of new tire lines.
The company also will take steps to shore up its private and associate brand lines with new tires, better fill rates and improvements in service levels, according to Dave Cionek, vice president, marketing and sales of MAST's Private Brand Division.
In the Michelin brand, the tire maker is looking to become a major player in the ultra high performance arena with its new Pilot line of tires, Tom Chubb, Michelin brand manager, told dealers.
While Pilot tires have come on vehicles as original equipment for 18 months now, replacement versions are just becoming available.
Beginning this month, Michelin is offering two aftermarket Pilot lines—the Pilot XGT V4, a V-rated all-weather radial, and the Pilot XGT Z4, a Z-rated version—both built in North America.
The Pilot XGT V4 features a silica-rich, advanced technology tread compound, Mr. Chubb said, that provides wet and dry road performance ``previously unattainable from a V-speed rated tire.''
Extreme high performance is attained without the typical penalties of noise, vibration and harshness, he added.
The Z-rated Pilot XGT Z4 is the ultimate all-weather, ultra HP tire, Mr. Chubb said. The tire features a directional tread pattern, a specialized compound ``that's at home on dry, wet or snow-covered pavement,'' and ``Torque-Lock Sipe Construction,'' where the sipes interlock during hard cornering, braking and acceleration.
``The process requires hand-building parts of each tire mold, but pays off in tires with the sipe density to work in slop without sacrificing dry performance,'' Mr. Chubb said.
Michelin will support the Pilot line with the strongest advertising and promotion campaign in the history of Michelin high performance tires. The campaign's theme: ``Pilot tires—Engineered to Extremes.''
Michelin also is looking ``to create a favorable set of conditions for the independent tire dealer to grow with the BFGoodrich brand in 1997,'' said John Winterburn, BFGoodrich brand manager.
``1996 was a big year for the BFGoodrich brand,'' he said, which set an all-time sales record.
This is a turnaround from 1993, when the brand was on the decline. At that time, sales had dropped for the third year in a row. Distribution was heavily dependent on brokerage wholesale and one large retailer—Super Shops. The company also was reducing its investments in advertising and product development, Mr. Winterburn said.
Michelin decided it had to turn the brand around quickly and did so by expanding distribution with wholesale clubs, national retailers and mass merchandisers, adding more than 5,000 points of sale.
``Now that our distribution expansion is almost complete, the challenge. . . is to do what we can to create a favorable set of conditions for the independent tire dealer to grow with the BFGoodrich brand,'' Mr. Winterburn said.
Through the Alliance program, the tire maker added more than 80 new BFGoodrich T/A dealers last year. And in May, the company began the process of adjusting key BFG lines to make them more competitive in the marketplace.
Dealers at the meeting seemed pleased but cautious about the actions the company is taking with the BFGoodrich brand.
When the company expanded distribution to include mass merchandisers, many say it destroyed dealers' profit margins.
As Townie Townsend of Townsend Tire Service in Decatur, Ind., put it: ``I could make more money off of 3- to 5-percent CDs in the bank while sitting at home in my rocking chair, than I could selling BFG in the past.''
But, he added, the company recognized it has to go back to the independent tire dealer, and he liked what he heard at the meeting.
To help with brand recognition, the company will boost its BFG ad budget by 20 percent in 1997.
The brand also will get several new tires and sizes, including a redesigned Euro T/A in 14 new sizes aimed at the Lowrider market. Other additions include: five Comp T/A ZR sizes, 10 Comp T/A HR4 sizes, eight Radial T/As and seven Radial All-Terrain T/A sizes.
Sales of BFGoodrich brand tires to the OE market also are expected to grow in 1997, to 4.6 million units from 4 million in 1996.
Michelin also plans to continue the rejuvenation of the Uniroyal line, which experienced a turnaround in 1996, according to Alison Heiser, Uniroyal brand manager.
Sales of Uniroyal tires through the national dealer group grew 17 percent in 1996 vs. 1995, she said, despite the loss of sales through Kmart Corp. early in the year after the mass merchandiser sold its tire centers to the Penske Group.
``But what began as a loss turned into a major opportunity to redefine just what the Uniroyal brand stands for. . . and to rebuild the brand into a major asset,'' she said.
The Alliance program has been a key to the line's resurgence, and is responsible for adding 80 new Uniroyal customers in 1996, she said. ``Alliance has shifted the business from primarily distributor-based to a mix of key retailers and distributors,'' she added.
For 1997, the goal is to maintain the brand's momentum, with distribution continuing to evolve toward the independent dealer, she said.
The Uniroyal line will get three new tires in 1997, Ms. Heiser said. In early summer, Michelin will introduce the Tiger Paw Touring TR, Uniroyal's first touring tire. It will carry a 70,000-mile treadwear warranty, have a UTQG rating of 480 to 540 and come in 18 sizes.
Later in the year, the company will begin a staggered introduction of the Tiger Paw GTH4 and GTV4, with 11 sizes initially and another nine planned for 1998.