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September 27, 1999 02:00 AM

WHAT LIES IN THE ROAD AHEAD?

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    What does the future hold for the industry in general and independent tire dealers in particular? We sought the opinions and predictions of a number of individuals representing various segments of the industry. The following are excerpts taken from their responses.

    William B. ``Bill'' Thomas, a past president of the former American Retreaders Association and one of the co-founders years ago of the Big O Tires organization, foresees a retail market where the conventional tire store of today is all but a thing of the past.

    Mr. Thomas believes the future of the replacement tire market can be glimpsed today in the operations of such leading-edge retailers as Home Depot Inc., Wal-Mart Stores Inc., Dell Computer Corp. and Gateway 2000 that have explored new methods of reducing warehousing and other sales expenses.

    Despite the fact that tire distribution and sales costs have gotten ``way, way out of hand,'' in Mr. Thomas' opinion, the tire industry continues operating as it always has from the beginning, he said.

    The major cost factors once the tire is manufactured are sales and warehousing expenses, he observed. ``And those are the areas where Home Depot has found its niche. They've eliminated most of those costs.''

    Mr. Thomas said he's attempted to bring up the need to develop more efficient distribution and sales methods in discussions with others in the tire industry, but nobody wants to listen. ``They don't want change.''

    Nevertheless, such change is inevitable, he said, whether traditionalists in the industry are ready for it or not. And those tire retailers who are last to change likely will be the first to suffer, he predicted.

    As consumers turn more and more to the Internet and mail order retailers—such as The Tire Rack, which sells tires and wheels—the end result could be fewer but larger retail outlets primarily devoted to servicing rather than selling tires, he predicted.

    Pam Fitzgerald, president of Melbourne, Fla.-based Mike Gatto Tire Inc., foresees run-flat tires becoming standard equipment on all cars and for the Internet to change the way society views and buys tires.

    If tire makers ``can get people to see (run-flats) as a safety feature, like airbags or antilock brakes, then they will be more interested in paying for them,'' she said.

    Ms. Fitzgerald, former president of the Tire Association of North America, thinks the Internet holds possibilities for tire dealers to market tires as high-tech products to young tire buyers, although in the eyes of many tires are viewed as a commodity.

    ``In the strict dictionary definition of commodity, tires don't fit because there's too much technology,'' she said. But in the consumer's mind, they're all the same. The younger people are more technology-savvy as far as computers go. Maybe they would be more receptive to the fact that tires aren't all alike because they understand technology better than my generation does.''

    Maurice Taylor Jr., president and CEO of Titan International, predicted that auto, farm and industrial equipment manufacturers will become increasingly aggressive in supplying end users with tires and other replacement components—perhaps insisting on having their own names on tire sidewalls.

    Mr. Taylor, whose company produces tires mainly for farm, construction and specialty applications, pointed out that manufacturers in those markets have much invested in the nameplates on their vehicles.

    Manufacturers such as Ford Motor Co., Caterpillar Inc. and Deere & Co., he said, will be asking themselves why tires are the only component on their vehicles carrying someone else's brand identification.

    ``I think you're going to see (original equipment) tires branded with the name of the vehicle or equipment they're mounted on,'' he said.

    Should this occur, it will drastically alter the composition of the replacement tire market, affecting tire manufacturers and independent dealers alike, he believes.

    Tom Foord, president and CEO of Kal Tire Inc., Vernon, British Columbia, said the major industry trends he sees are driven by the demands consumers are placing on tire manufacturers and dealers.

    ``You must have the best products and the best service because the consumer requires it,'' he said. ``That's different than it has been in the past.''

    Buyers of all types of tires are much better educated than in the past, he said. ``I think the future...from the independent dealer's point of view is very positive, particularly for those who see the necessity of keeping up with the consumer's requirements.

    Having good employees also will be a factor in determining the dealer's success, he believes. At Kal Tire, Mr. Foord said, ``We have lots of good ideas, all we need is the people to apply them.''

    ``Employees today want to feel like they're part of the organization,'' he continued. ``And unless you have a good profit sharing plan to keep their interest up, you'll be taking a second seat.

    ``I see little or no expansion in the industry—and manufacturers and dealers who provide the best service will be the winners.''

    Richard Aronson, president of Century Tire Co. and Auto Service in Portland, Maine, said he sees no end to the proliferation of tire sizes and types dealers must stock to meet customers' needs. ``Every single year our inventory problems become more complex. We're now carrying 600-700 SKUs because we'd like to feel we can handle any vehicle that comes into our stores.''

    However, that's becoming much more difficult, he said. It has forced the dealership to turn from its principal suppliers to others that make some of the more specialized sizes and types of tires.

    ``Customers depend on us more today that ever before,'' he said. That forces the company's service people to remain knowledgeable about present inventories and what tires can be substituted for others in particular sizes.

    ``We, as independent tire dealers, especially some of us who've become a bit staid in our ways, are going to have to get with the program and properly train our people as to proper sizes for the vehicles,'' he said.

    ``And I think the burden lies with the manufacturer to get away from the present status of teaching strictly by video and by e-mail etc. and get back to having more meetings and face-to-face contact with dealers.''

    Martin Carver,Bandag Inc. chairman, thinks the future will bring fewer "look-alike" tread designs, as precure manufacturers discover how to improve on the performance characteristics of new tire designs.

    "I think you'll see a lot more of a trend we started in 1996 (developing new tread designs tailored to specific applications)," he said.

    Fleet managers in the future, Mr. Carver believes, will be looking for superior quality products, an extremely high level of service, and national—and in some cases even global—coverage by their tire supplier. Many fleets will be looking to totally outsource their tire management programs.

    "...While some would say the future is for the large dealership, our position is that it is not about the size of a given dealership, but more about the strength of the whole distribution network and the capabilities and strategic locations necessary to serve the vast North American trucking fleets," he said.

    Terry Westhafer, president of Central Tire Corp., Verona, Va., believes the future of the tire industry in the next few years will be shaped by events of the past decade or so.

    He foresees a concentration of manufacturing capability and technological advancement among three dominant firms—Group Michelin, Goodyear and Bridgestone Corp. Second-tier players will do their their best to follow the lead of the Big Three, but Mr. Westhafer doubts they have the resources to do so.

    He looks for improvements in the tire casing, which he said will be good for the retreader. Fuel efficiency also will be a primary concern in tire develoment, he believes.

    ``The next big investment in the commercial tire business is going to be non-destructive testing equipment,'' he said. ``So I think casing testing and inspection is going to be one area where the cost of doing business is going to go up. And it's going to be a difficult thing to pass on....Customers will demand it, but they won't necessarily want to pay for it.''

    The labor market will continue to be tight, he predicted, with entry-level positions particularly hard to fill. Recruiting and keeping a trained workforce also is going to be difficult.

    Len Lewin, president of Memphis, Tenn.-based American Car Care Centers, expects the consolidation among tire makers, marketers and dealers to continue—until only a few large chains or organizations are left—and he predicted that trend will drive manufacturing costs down.

    In the struggle to remain viable, the survivors will be those manufacturers, marketers and dealers that deliver the product to the buyer at the least cost. Dealers will need to increase their knowledge and sophistication in order to keep up with the demands of knowledgeable consumers,'' he added.

    ``A lot of people now running successful (retail) operations have come up through the ranks so to speak. They began by mounting tires, and then suddenly they (were) selling tires, and before they knew it, they owned the shop.''

    Mr. Lewin said he doubts such rapid progress will be possible in the future. ``Unless you're capable of providing the knowledge customers are seeking, unless you're able to represent the products in an impeccable way, unless your location is impeccable and on the cutting edge, you're not going to see the customers,'' he said.

    Letter
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    Do you have an opinion about this story? Do you have some thoughts you'd like to share with our readers? Tire Business would love to hear from you. Email your letter to Editor Don Detore at [email protected].

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