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September 25, 2000 02:00 AM

Goodyear, Treadco join forces

Bruce Davis
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    AKRON—Goodyear and Treadco Inc. are combining their commercial tire distribution and retreading assets into a joint-venture company that they believe will be the world's largest truck tire service network.

    Goodyear will own 60 percent of the new company, Wingfoot Commercial Tire Systems L.L.C., which will operate 194 commercial tire centers and 77 retread plants throughout the U.S., with annual sales of about $650 million. Goodyear has an option three years hence to purchase the minority share from Treadco's parent, Arkansas Best Corp.

    The individual Goodyear and Treadco networks will retain their respective names in in the marketplace—Goodyear Commercial Tire Centers, Brad Ragan and Treadco—but will be linked by the common use of Goodyear's Truckwise commercial tire sales and service program and banner, according to Michael R. Thomann, currently marketing director, commercial tires at Goodyear, who will be president and chief operating officer of the new venture.

    John R. Meyers, currently president and CEO of Treadco, will be chairman and CEO of Wingfoot Commercial Tire, whose headquarters will be in Fort Smith, Ark.—"in order to keep the entrepreneurial spirit that surrounds Treadco in place," Mr. Thomann said. Wingfoot will have to establish some support functions of its own in Fort Smith that currently are carried out by either Goodyear or Arkansas Best, Mr. Thomann said.

    The new company will start operations Oct. 31, pending final approval by the Federal Trade Commission.

    Mr. Meyers said the merger is an inevitable reflection of the wave of consolidation that has swept over the industry in the past several years, and is an acknowledgement that being allied with a cradle-to-grave supplier—providing both new tires and retreading—offers better services for customers.

    The two executives called the planned merger a "complementary fit with very few overlaps," combining Treadco's strengths across the southern U.S. with Goodyear's presence along the Eastern Seaboard, the Midwest and the Pacific Northwest. The network does still have a few holes, though, both exectives said.

    There are, however, several overlaps with independent Goodyear dealers, and these will be addressed on a case-by-case basis, Mr. Thomann said.

    Wingfoot Commercial Tire Services' 194 outlets will be the backbone of Goodyear's Truckwise network of commercial tire dealerships, Mr. Thomann said. There are 500 Truckwise outlets now across the U.S., and the company is just rolling out the program in Canada.

    Goodyear and Treadco officials have discussed a merger for more than a year, starting with a meeting in March 1999 in Fort Smith involving Goodyear Chairman and CEO Samir Gibara, Mr. Thomann and other top executives of Goodyear's North American Tire unit.

    Prior to the merger announcement, the only direct contact between the companies was through the Dunlop brand; Treadco is the largest distributor of Dunlop truck tires in North America.

    The creation of Wingfoot Commercial Tire Services is a straight pooling of assets, both companies said; i.e., there is no capital outlay, other than legal costs and costs associated with setting up a headquarters in Fort Smith.

    Goodyear has an option to buy Treadco's 40-percent share anytime after April 30, 2003, and before Oct. 31, 2004, at a "call price" of $77.5 million. Likewise, Treadco may choose to sell its share at a "put price" of $72.5 million at any time after April 23, 2003, and before April 30, 2004. Both prices are subject to adjustments based on the closing balance sheet.

    The new company plans to convert Treadco's 21 retreading plants to the Goodyear Next-Tred system from their current Oliver Rubber Co. configurations as soon as possible, a spokesman said.

    The conversion should be easier and less costly than Treadco's conversion to Oliver from Bandag Inc. five years ago, Mr. Meyers said, because Treadco owns all its own equipment now and should be able to integrate a portion of it into the new system.

    Spokesmen for Oliver Rubber did not return calls for comment in time for this issue. Treadco is Oliver's single largest customer, with more than 15 million pounds of tread rubber consumed each of the past several years. Based on industry pricing data, Treadco represents approximately 20-25 percent of Oliver's annual tread rubber sales.

    Mr. Meyers said Treadco was not dissatisfied with Oliver, but management felt being allied with a single new-tire and retread systems supplier offered greater returns in the long run.

    Representatives of Bridgestone/ Firestone Inc. and Michelin North America Inc. said it was too early to comment on whether they would continue to supply tires to the new venture.

    Treadco has been one of the companies' largest commercial tire dealers for several years.

    Goodyear's Mr. Thomann said that, other than adding Goodyear to the product mix at the Treadco outlets, the new venture is planning no changes to products offered and would even consider adding a brand or two to the existing Goodyear outlets.

    One independent Goodyear dealer bound to be affected by the merger is Darrell Theissen, owner of T&W Tire in Oklahoma City.

    "I don't particularly like it," Mr. Theissen said, "but we're comfortable with it. Goodyear's been fair to us in the past, and we've brought them a lot of distribution in this part of the country. I guess we expect them to take this into consideration, whatever they decide to do here."

    T&W Tire operates five commercial tire outlets in Oklahoma and Texas, including two Next-Tred retread plants. Treadco operates outlets in three markets—Oklahoma City and Tulsa, Okla., and San Antonio, Texas—that compete directly with T&W.

    "At this point," he said, "we're prepared to let the chips fall where they may."

    Treadco's merger into Wingfoot Commercial Tire Systems will leave Les Schwab Tire Centers in Prineville, Ore., as North America's largest independent commercial tire dealership, as well as the largest independent truck tire retreader, according to Tire Business' annual rankings.

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