LAS VEGAS—For years Midas Inc. has mined a golden aftermarket niche, first presenting itself as your friendly, neighborhood muffler shop, then evolving to offer a menu of other services such as batteries, brakes, steering and suspension work. And, if you really need `em, Midas also can get you tires.
Beginning Jan. 1, the company will experience yet another growth spurt with the introduction of climate control products into its 2,150 franchised installation shops throughout North America.
A new multi-year agreement calls for Visteon Automotive Systems to be the exclusive supplier to Midas of a full line of air conditioning and heat-transfer products—radiators, condensers, etc.—for domestic and import cars and light trucks.
The pact was unveiled Nov. 2 during a press conference at the Automotive Aftermarket Industry Week shows in Las Vegas.
Coinciding with those new offerings, Midas also said it plans to begin dressing up its stores, changing their color scheme as well as introducing a new logo and an expanded array of services.
When a company enters a new market segment, noted Visteon's president, Craig Muhlhauser, "it is absolutely essential that a business rely upon its supplier to provide outstanding innovation, quality, delivery and service. Visteon's absolute commitment to its customers' success spoke volumes in securing this agreement" with Midas.
Visteon has more than doubled the size of its climate control division in the past two years, according to David F. Peace, vice president of Visteon Global Aftermarket Operations. "We are building an extremely competitive aftermarket climate control business and securing a customer such as Midas is a major step forward in this process."
"When you think of Midas," said Wendel H. Province, Midas chairman and CEO, "you think of mufflers, and that's OK with me.
"...But in January 2000, we're going to become a multi-service provider with a broad range of products and a new look...."
Midas, he continued, is committed to becoming the dominant automotive repair facility in America. "To accomplish this, it's extremely critical to form strategic partnerships with innovative companies, such as Visteon."
Climate control is a multi-billion dollar retail business, "yet no single company has a significant market share," Mr. Province said. "With more than 2,100 locations throughout North America and a climate control partner offering us quality products, innovative thinking and leadership, Midas is now positioned to develop a commanding position in a category no one currently dominates."
Visteon pursued this opportunity, Mr. Peace said, because of the extremely strong consumer brand name Midas has built within the auto service industry. In addition to its North American operation, Chicago-based Midas also has more than 600 franchised and licensed locations worldwide.
Because a key to Midas' successful launch of climate control products will be training, Mr. Peace said Visteon plans to work with Midas' staff of professional trainers to ensure a smooth transition.
Following the press conference, Mr. Province, 51, told Tire Business the climate control business "is there for somebody to capitalize on—so it might as well be us."
Formerly executive vice president and COO of Pep Boys—Manny, Moe & Jack, Mr. Province joined Midas Jan. 1, 1998.
Air-conditioning and related services will be a challenge Midas won't be able to pull off without qualified people, he said. Though the firm urges franchisees to hire certified auto service technicians and seek ASE certification for its mechanics, he said only 25 percent of Midas' shops are certified to do A/C work. Only a few now offer some climate control products.
Most Midas franchisees support the company's new direction, but "some don't and will fight it to the death," Mr. Province admitted. However, he believes in the long run "it will be good for them."
A nationwide, market-by-market rollout of the company's expanded services, updated logo and new colors is expected to be wrapped up by mid-2000. It will be tied to national marketing and local advertising campaigns, said Bob Troyer, Midas' director of corporate affairs and investor relations.
For most of this year, a program—known by the internal code words "New Midas"—has been under way for Midas dealers to update their locations. Eventually, the stores will lose their familiar yellow and black color scheme, to be replaced with a "modern gray" with accent stripes, he explained.
As it ventures into new segments, Midas is looking for a strong upcoming year, Mr. Province said. "We think we can grow our overall business by double digits by 2001, assuming the exhaust market stabilizes."
The company expected its muffler sales would drop by "the high single digits" in 1999, he said, but in reality they've been down by double digits.
For the third quarter ended Sept. 25, Midas reported sales were $92.4 million, a decrease of 33.3 percent from $138.6 million last year. Net income for the quarter was $12.2 million, down 6.9 percent from the $13.1 million reported in 1998.
Midas hopes adding repairs including drive train work and a broader range of maintenance and inspection services will help offset any downturns.
Another boost could come from oil changes and lubes. Between 60 and 70 percent of Midas shops now provide those services, but Mr. Province said "virtually 100 percent" will soon.
Hardly considered a major source for tires, that also could change.
Mr. Province said some 400 Midas shops have "a legitimate tire program," furnishing them mostly as a customer service upon request.
"That's an opportunity that exists for us in the future," he acknowledged. "We know we'll be there—we just don't know when."