DURAND, Wis.—Bauer Built Inc. is severing ties with its long-time retread system supplier Bandag Inc. and will convert its seven retread plants to Michelin Retread Technologies Inc. processes over the coming five months. Bauer Built, with 200,000 units of annual production capacity and more than $10 million in retread business, was one of Bandag's eight largest franchisees in North America last year. Bauer Built, the 15th-largest commercial tire retreader and sixth-largest independent commercial tire dealership in North America, is the sixth major Bandag franchisee in the past 18 months to convert to the Michelin processes.
Bauer Built made the switch because the Michelin program was more in line with the firm's growth plans, President Jerry Bauer said. Founded in 1944, Bauer Built has been affiliated with Bandag for nearly 40 years.
Bauer Built will set up one MRTI hybrid plant—both precure and mold-cure capacity—near its Durand headquarters, and six precure shops at or near existing retread plants in Indiana, Iowa, Minnesota and Wisconsin.
By converting, the company also will be expanding capacity at each site, Mr. Bauer said. Existing capacity is 800 units per day. Mr. Bauer declined to comment on the investment budgeted to carry out the conversions. Other companies that have converted have budgeted between $2 million and $4 million to set up an MRTI plant.
The first two conversions will take place in Cedar Rapids and Des Moines, Iowa, by August, Mr. Bauer said, and the remainder will be converted by Oct. 31 at the latest.
Bandag said it will continue to provide service to customers in the territory Bauer Built covered with other Bandag dealers.
Bandag said it had anticipated Bauer Built's move for some time, and obtained verbal commitments from other Bandag Alliance dealers to service the markets covered up to now by Bauer Built.
``In terms of retread plant capacity,'' the company said in a prepared statement, ``we anticipate no problem in meeting customers' needs,...and the Bandag Alliance members clearly see an opportunity to strengthen market positions by bringing full-service coverage and a choice of commercial tire products to these markets.''
Bandag did not indicate whether it anticipates existing or new franchisees to set up retread plants in the territory, or cover the business from their own existing capacity.
Royal Tire Inc. in St. Cloud, Minn., is one Bandag franchisee expecting to garner some new business as Bauer Built switches over.
``We're already stepping up production to take up the slack,'' Royal Tire President Paul Duinink said. ``Bandag's still a strong player in the market, and we hope to improve our position in this area.''
Like Bauer Built, Royal Tire is a Michelin new-tire dealer.
Chicago Bandag Inc.—with locations in Illinois, Indiana, Michigan and Wisconsin—and Premier Bandag Inc.—with plants in Indiana, Kentucky, Missouri and Ohio—are the two largest Bandag franchisees operating in or adjacent to the territory covered by Bauer Built. Both declined to comment on the situation.