AKRON—Their outlook for 1999 is positive. If the strong U.S. economy continues to hold, it should translate into another period of dealership growth, expansion and relative prosperity.
But the six tire dealers interviewed by Tire Business see challenges ahead, particularly in finding and keeping quality personnel.
To get a handle on where the tire industry is headed in the new year, TB asked these dealers for their opinions.
Acknowledging that crystal-ball-gazing comes with inherent risks, they agreed to offer some thoughts on what they expect—and hope—will come. The dealers, whose remarks have been edited due to space constraints, were:
John Donovan, vice president of sales for Sullivan Tire Co. Inc., Norwell, Mass., which has 32 retail and seven commercial stores;
Riley Kirn, manager of dealer programming for S&S Tire Inc., a large Lexington, Ky.-based wholesale distributor with 16 retail stores, one commercial outlet and subsidiaries Premier Bandag and Premier Accessories;
Jim Finlayson, owner of one-outlet Finlayson Tire Service and Sales in Fort Erie, Ontario;
Nick Hodel, CEO of Portland, Ore.-based Northwest Tire Factory, a 105-store, member-owned buying group;
Mark Rhodes, president of Plaza Tire Service Inc., which operates 34 outlets—75 percent of them retail/commercial—from its Cape Girardeau, Mo., home base; and
Larry Morgan, owner of Morgan Tire & Auto Inc. in Clearwater, Fla., which operates more than 285 stores nationwide as Olson Tire Total Car Care.
How are economic conditions in your area? Do you expect them to change?
Mr. Rhodes: ``They've been consistent and good. We have a pretty good manufacturing base, and the area is not totally dependent on agriculture. I expect them to remain fairly consistent. In the counties where we operate, unemployement is less than 4 percent.''
Mr. Finlayson: ``I expect the economic conditions to be very good over the next five years, with a new casino and a new power-generating plant being built, and all the development going on here.''
Mr. Morgan: ``Economic conditions are pretty good, and I don't expect to see any negatives on the horizon. I just hope there won't be any national disturbance that'll goof things up.''
Mr. Donovan: ``The retail tire business in general is flat, although we're shifting more and more into the light truck business. About 20 to 25 percent of our inventory now is light truck or light truck sizes.''
Mr. Kirn: ``Our economy in Kentucky, and especially in Lexington, has been booming. There are way too few workers for the economy. We've had a record year and are looking forward to having another positive year. The growth is there, the market is there and consumer confidence looks really high right now. We foresee improvements in every one of our warehouses, despite increasing competition.
``We've really moved to be a distributor instead of a wholesaler, and I think that's set a good tone for us going into the new year.''
Mr. Hodel: ``Conditions are good and I don't think it'll change this year, at least not in Portland. I rank the condition as an 8 on a scale of 10, though Seattle is getting hit by the Boeing layoffs.''
What challenges do you face?
Mr. Morgan: ``With a much bigger company now and over 3,000 employees, our challenges are keeping our people quality high. That's critical to us. We know big is not better unless big is better, so that's where we're focusing our attention.''
Mr. Rhodes: ``Keeping and retaining good-quality employees is our biggest challenge. That hasn't been a problem, but with the growth our company has seen, it's been a challenge. That means maintaining fair business practices with employees, continuing to offer competitive wages and benefits and treating them as part of the company family. Our base company has so many long-term employees, and that's what we strive for.''
Mr. Finlayson: ``Competition is always a part. But I don't concern myself with the mass marketers and such. My concern is handling my customers on a day-to-day basis. Your service and background as an independent tire dealer is the biggest part of getting the job done. Somebody's always going to have something cheaper. But overall, the consumer's going to be better off with the tire dealer.''
Mr. Kirn: ``With all the mergers going on in the industry—and a lot of distributors not wanting to gouge each other—you've got to figure that service to independent dealers is going to improve. There are going to be a lot of distributors offering very attractive products to dealers, but you've got to be there and be strong.''
Mr. Donovan: ``There's a lot of competition in the Boston area. NTB has about 12 stores now and Penske's here too. But independents are still very strong here.''
Do you expect any of your business segments to fare particularly well in '99? Any likely to suffer?
Mr. Hodel: ``We've had steady growth in the past five years in all segments, and I think it's going to continue. The majority of our business is done in passenger and light truck, though we've seen some growth in undercar service in some stores. But I think that's because a lot of people are diversifying more. I don't seen anything that's going to be on a downtrend. I expect light truck to exceed passenger sales because more people are driving sport-utility vehicles and light trucks.''
Mr. Donovan: ``We're going aggressively after the automotive service business, which is now about half of our annual sales revenues. We don't want to go too far into auto service, though—we still like the tire business.''
Mr. Kirn: ``I think you'll see expanded ranges in light truck products and positive growth in that segment especially.''
Mr. Morgan: ``We've had two straight years of double-digit, same-store sales increases for retail stores that have been open 24 months or longer. We'd like to keep that momentum going because we're committed to running bigger-volume operations.
``Our commercial side had a huge improvement in sales and profits last year, and I think that momentum will continue.''
Mr. Finlayson: ``I expect the light truck market to grow because there's going to be construction-type people coming into our area, which automatically dictates an increase in pickup trucks. I don't keep track of our light truck to passenger, but the number of units has changed over, probably 20 to 30 percent, from passenger to light truck.''
Mr. Rhodes: ``The light truck/ sport-utility vehicle segment is strong in our area and should remain so. Looking at the trends, we also anticipate growth in our custom wheel business.''
Are you planning to expand?
Mr. Hodel: ``We may build a new retail training store, but are planning on adding about 10 to 20 new member stores this year. We're a partnership and only sell to ourselves, so they're like associate stores.''
Mr. Kirn: ``There are some markets where we see some opportunities, where our suppliers want us to focus on. For example, we're going strong into Birmingham and the Alabama area. We're going to have a warehouse and a distribution center there.
Mr. Donovan: ``We added one new store recently, buying Donle's Tire in Rainham, Mass., and we're looking to add up to six new stores. On the commercial side, we've expanded our service truck fleet and continue to expand the range of field services we provide. We've gotten into the skidder tire business and added filling and solid tires to this business.''
Mr. Rhodes: ``In 1998, we added eight new stores, and always continue to add new products. We'll continue to increase our number of retail locations through startups or acquisitions, but only add half as many as last year.''
Mr. Morgan: ``We have a lot of new stores under construction, under contract or in serious negotiations. Between 30 and 50 will be new construction. About 35 are already done deals.''
Would you sell your dealership if the ``right'' offer came along?
Mr. Finlayson: ``That's always a possibility.''
Mr. Kirn: ``If the right opportunity were to present itself—one that fit the way we do business and the way we've been successful doing business—I'm sure the powers that be inside our company would be more than willing to look at that.''
Mr. Hodel: ``Never say never. I don't think any business could ever say that. Consolidation is definitely going to keep happening and that doesn't mean we might not want to partner with somebody. I think you're going to find that, to make it a more viable market for people to stay competitive, they've got to do that.''
Mr. Rhodes: ``Never say never. Who knows what the `right' offer is? But we're a family-run business and plan to remain that way.''
Mr. Morgan: ``I've had some people talk to me about selling my company. I'm not saying never, but right now I really love what I do.''