CLEARWATER, Fla.—As one of its largest independent dealer customers, Larry Morgan is the apple of Bridgestone/Firestone Inc.'s eye. The same can't be said for his standing with Michelin North America (MNA).
Tire Business has learned that Michelin no longer will sell direct to Mr. Morgan's company, Morgan Tire and Auto Inc., because the dealership would not commit to buying at least 51 percent of its tires from MNA.
The cutoff, effective Feb. 1, opens the door a bit wider for Morgan Tire's principal supplier, BFS, and its No. 2 supplier, Continental General Tire, to expand their presence within the dealership's 287 outlets, which do business under several names, the largest of which is Olson Tire Total Car Care.
``It comes down to the fact that we weren't willing to give (Michelin) the in-house share they wanted,'' Mr. Morgan explained. ``I don't know if we ever got to the nitty-gritty on that. But it's fair to say they wanted over 50 percent, and we've just been going in other directions.''
He estimated Michelin's loss in the ``hundreds of thousands—probably closer to a million units than to zero.'' However, Morgan Tire's customers won't be left in the lurch: ``We'll continue to handle the Michelin brand for anyone who wants those products. We'll just get them through various other providers,'' Mr. Morgan said.
Michelin's unhappiness began last year when Mr. Morgan, in a flurry of acquisitions, bought Oklahoma's Hibdon Tire Centers—a big Michelin customer—then began switching its product mix toward BFS brands. Along the way, he added Cincinnati-based Michel Tire Co., which sold a small share of Michelins.
But it apparently was his year-end purchases of Avellino's Tire & Auto Service Centers in Pennsylvania and Wheel Works in California—both members of Michelin's ``Alliance'' dealer program—that brought matters to a head.
Michelin stipulates Alliance dealers maintain 51 percent of their sales in Michelin, BFGoodrich, Uniroyal and other Michelin-made brands.
The decision to drop Morgan Tire, relayed to the Clearwater-based dealership early in December, was ``difficult and painful,'' said Kenneth W. Kruithof, vice president of national dealer sales for Michelin Americas Small Tires (MAST).
``Essentially, it's a decision (about) where we can best put our resources for mutual growth for our independent dealers and for our brands,'' he said.
At its recent MAST annual meeting, which drew some 350 dealers to Phoenix, the tire maker pledged to solve its festering fill-rate problem and be a more reliable supplier. To that end, the company ``has taken some tough decisions over the last couple years,'' Mr. Kruithof said, adding that dropping Morgan Tire is consistent with those objectives.
In the past 18 months, Michelin has ``exited some national retailers, some auto-parts chains and several dozen key independent tire dealers where we were not able to...get mutual brand-building,'' he said. The surgery is now complete.
``What we intend to do is focus our resources on the Alliance-type relationship,'' he said, ``then put our resources...where we feel we can be most successful.''
``We just don't feel if we spread ourselves everywhere, we can build that fill-rate objective and market-share growth up,'' Mr. Kruithoff said.
Morgan Tire closed 1998 with total sales in the $355 million range and expects to reach nearly $500 million this year.
Asked whether having at least a small portion of that pie would be better than none, Mr. Kruithoff quietly answered: ``Perhaps. That's part of the quandary we find ourselves in today.''