GREENVILLE, S.C.—Almost a year after Michelin North America landed Tire Centers Inc. as a retread franchisee, the tire maker announced March 31 it intends to buy the nation's largest independent commercial tire dealership outright. TCI will continue to operate under its name as a stand-alone business and affiliate of Michelin Retread Technologies Inc. Michelin will not change the company's overall operations, including its retail stores, a Michelin spokeswoman said.
The dealership's tire offerings will change, however.
Bridgestone/Firestone Inc. said April 5 it is cancelling its dealer supply agreement with TCI, effective immediately, because, ``TCI, as a company to be owned by Michelin, is no longer in a position to promote BFS products effectively in the marketplace.''
TCI had been a Bridgestone/Firestone passenger, truck and off-the-road tire dealer for 13 years. BFS' Dayton brand is similarly affected.
TCI owner and CEO James Berlin approached Michelin with the prospect of selling the business less than a year after declaring that TCI's No. 1 goal was to remain an independent dealership.
He did not return phone calls requesting comment on the deal.
``Due to the strategic importance of TCI to our retreading initiative, when TCI approached us about selling their business, we decided to acquire it,'' Jim Micali, president and CEO of Michelin North America, said in a statement.
``Michelin's replacement tire distribution strategy does not change with this acquisition. Our commitment remains in support of the independent tire dealer network.''
An authorized Michelin dealership for 12 years, TCI is North America's No. 1 independent commercial tire dealership with more than $300 million in sales of truck tires and related services, and was the fourth-largest truck tire retreader in 1998, producing an average of 2,440 retread units per day.
On April 1, 1998, TCI parted ways with long-time retread supplier Bandag Inc. to join with MRTI.
TCI posted total sales in 1997 of $470 million; the firm's $90 million in passenger car and light truck tire-related sales puts it among the 10 largest tire retailers in North America as well. The dealership will remain based in Akron.
TCI operates 163 locations in 34 states. Seventeen of those locations are retread shops, the Michelin spokeswoman said.
Terms of Michelin's TCI acquisition, which is subject to regulatory approval, weren't disclosed. An independent analysis of TCI by an outside consultant valued the company at between $100 million and $150 million.
By comparison, Bandag paid $158.5 million in 1997 for the five dealerships it acquired to create Tire Distribution Systems Inc. (TDS), a business with 113 sales outlets and 47 retread shops at that time. Subsequently, in 1998 it paid $20.5 million to buy five more dealerships, with six commercial tire locations and six retread plants.
The acquisition, scheduled to close in the next few months, will give Michelin a solid foothold in truck tire retreading in North America behind Goodyear, Bandag's TDS and Treadco Inc. Michelin has stated in the past it wants to be the No. 2 retread system supplier in North America, after Bandag.
More than 100 of TCI's locations are combination commercial/retail outlets. At least 12 are retail-only stores, and 11 more are listed as wholesale locations for car and light truck tires, according to TCI's Web site. The firm operates as Berlin Tire Centers in California, Minnesota, North Carolina and Utah.
Of TCI's 17 retread facilities, 10 have converted to MRTI processes in the past year, three are expected to be converted within months and the rest will be consolidated. Three TCI plants are ``hybrid'' shops, meaning they use both Michelin's Pre-Mold' precure and Custom-Mold' mold-cure processes.
Because TCI was one of the first MRTI-franchised dealers, and therefore instrumental in the program's launch, Michelin had a ``vested interest'' in TCI and decided to buy it, the spokeswoman said. The deal is a special-case scenario and doesn't signal plans by Michelin to buy other dealerships and form an entity similar to Bandag's TDS, she said.
All of TCI's management will stay in place. Mr. Berlin will serve as a consultant to the business; current TCI General Manager Scott Snyder will become president and CEO.
Counting TCI, there are now a total of 22 retread shops under contract as MRTI franchises. The tire maker entered the North American retread arena in late 1997 when it named McGriff Industries Inc. as its first franchisee.
Since then, Michelin has signed to its franchise program TCI; Consolidated Tires Inc. in Greenville, S.C.; Smetzer's Tire Centers Inc. in Wooster, Ohio; Ziegler Tire & Supply Co. in Canton, Ohio; Allied Oil and Supply in Omaha, Neb.; Jack's Tire & Oil in Salt Lake City; Stringer Tire Co. in Jacksonville, Fla.; and Brahler Truckers Supply Inc. in Jacksonville, Ill.
The TCI buyout marks the first time Michelin has owned retail stores in the U.S. since it bought Riviera Beach, Fla.-based Tire Kingdom Inc. from owner Chuck Curcio in 1988, then sold it back to him in 1992. He no longer is involved in the business.
Mr. Berlin founded TCI in 1986 out of the purchase of former B.F. Goodrich company-owned stores. The firm sells passenger, light truck, commercial truck and earthmover tires and carries Michelin, BFGoodrich, Bridgestone, Firestone, Kelly, General, Yokohama, Kumho and Sumitomo brands.
Bruce Davis, special projects reporter, contributed to this report.