AKRON (Nov. 1, 2000) — Faced with the prospect of regaining lost market share in the U.S. and Canada, Goodyear´s new North American Tire management team is redoubling efforts to improve the company´s presence with more of the continent´s leading independent tire dealers.
Goodyear is banking on its G3 multi-brand strategy to open doors at some dealerships where the company now has only a minor presence, according to John Polhemus, who has been president of Goodyear North American Tire since his appointment in mid-July.
"In order to get back the market share we feel should be ours," Mr. Polhemus said, "we needed to get focused,...get the right people in the right jobs.
"We now feel we´ve identified the right people to lead these functions," he added, pointing out the company has restructured its distribution functions along newly defined criteria, and appointed new managers for those channels.
One of the key appointments, Mr. Polhemus said, is that of Jim Vogel, who takes over as vice president of sales and marketing. Mr. Vogel, 43, previously was vice president of marketing and corporate accounts, and has 17 years´ experience dealing with the North American market.
"We have to manage back to retail," Mr. Vogel said, describing management´s efforts to find a better balance among the company´s diverse channels of distribution—independent retail dealers, wholesalers, mass merchandisers etc.
"Our G3 trade area management process allows us to put into place a portfolio of products at some of these leading retailers," Mr. Vogel said, "and then take advantage of their growth and their presence in the marketplace."
"Kelly has always been prevalent at the large, multi-brand dealers," he added, "and we need to take advantage of that, in introducing Goodyear in areas where it doesn´t compete (with existing dealers)."
The number of dealers joining the G3 program is increasing steadily month to month, Mr. Vogel said, and should continue to grow as the brand mixing takes hold. Goodyear added 40 dealers to the G3 lineup in August and expects to continue expanding the program at this pace for some time, he added.
Among leading independent tire retailers in North America, the Goodyear brand is carried by 42 of the largest 65 chains. However, it is the leading or predominant brand at only 15 of these chains, according to a Tire Business analysis of available data. And it is in that position in only three of the largest 35—Penske Auto Centers, Fountain Tire (which is 49-percent owned by Goodyear Canada) and Purcell Tire & Rubber.
Some of Goodyear´s efforts in these areas will be to offset declining revenues and profits in certain channels of distribution where, according to the company´s financial documents, it experienced "...a shift in mix in the replacement market to lower-priced tires and a shift towards less profitable channels of distribution."
Goodyear declined to identify which distribution channels were underperforming—other than to say they were both commercial and retail sales areas. But it appears, in part, the company was a victim of its own success.
Earnings from certain channels were off, a spokesman explained, because raw materials costs have risen, but long-term contracts restrict price increases, leaving the company no option to recover the difference. Meanwhile, market demand for lower-priced tires increased, compounding the problem.
That situation may be resolving itself, however, due to circumstances beyond Goodyear´s control—namely, consumer reaction to Firestone´s safety-related recall of 6.5 million P-metric light truck tires.
Goodyear Chairman Sam Gibara noted that consumers are making a "flight to quality," turning their attention more and more to well-known brand names. This enhanced consumer awareness should manifest itself in greater first-line brand name sales, Mr. Gibara told stock analysts, and should allow the industry to solidify its pricing.
Goodyear is gaining market share in North America in both the replacement and original equipment markets because consumers are turning away from the Firestone brand, he said.
"We´ll gain, and we´ll retain what we gain," Mr. Gibara said. "Consumers don´t want vehicles with Firestone tires. Firestone now has a bad name recognition, and Bridgestone has no name recognition in the North American replacement market."
The Dunlop factor
Although it´s been a year since Goodyear´s takeover of Dunlop Tire Corp. in North America and Europe, the Dunlop brand is only just now becoming available on a widespread basis through the G3 program, Mr. Polhemus said.
"We delayed on purpose pushing Dunlop into the G3 mix in order to make sure it was done right," he said. "Now though, we have integrated some key Dunlop people into the management team, and this should help speed up the process."
"From a dealer perspective, the initial reaction was, `This is too slow,´ " Mr. Vogel added. "We were going through a very methodical approach to making decisions,.|.|.so as not to create a conflict between the benefits of the Kelly `profit´ brands and the Dunlop `demand´ brands."
Since launching its Gemini Automotive Care program in July 1999, Goodyear has converted more than 600 of its company stores to the Gemini format and has seen 500 of its dealers convert nearly 1,450 of their stores nationwide. This presence is just about what Goodyear expected at this point in time, Mr. Vogel said, although earlier other company executives had said they were targeting up to 3,000 locations for conversion to Gemini.
Among the larger dealerships that have become Gemini dealers are: Mountain View Group (21 stores in California and two in Colorado); Kramer Tire Co. in Virginia (18 stores); Martino Tire Co. in Florida (15 stores); Colony Tire Corp. in North Carolina (11 stores); Frasier Tire Co. in South Carolina (10 stores); Jennings Tire Group/American Tire in Tennessee (10 stores); and Lamb´s Tire & Auto in Texas (10 stores).
After stagnating for a couple of years, the number of company outlets has edged up lately, as zoning approvals for new stores have started coming through, Goodyear said. At last count, Goodyear operated 846 company stores in the U.S.—633 Goodyear Auto Centers/Gemini, 79 Just Tires, 89 Brad Ragan/Carolina Tire and 45 Allied Tire—along with 31 wholesale tire centers.
While the company has a strategic goal to increase the number of company stores, Mr. Polhemus emphasized that the company takes into consideration the local independent situation with each new opening or renovation. Especially when a store lease comes up for renewal, he said, the tire maker often seeks an independent alternative to renovating or rebuilding the company store.
Overtures to customers
Related to the company´s attempts to improve its relations with customers, Goodyear has reorganized its Goodyear, Dunlop and Kelly dealer sales and corporate accounts sales divisions into seven "channel business" teams.
By organizing its consumer, commercial and farm products business units into defined customer channels, Goodyear hopes to improve its market forecasting, source and supply chain functions. It blamed part of its fill-rate problems of 1999 on inaccurate market forecasting.
"Ultimately, we must deliver products and valued services to targeted markets with increased speed," Mr. Polhemus said.
From Goodyear´s point of view, tire distribution in North America is divided into seven channels: independent dealers/G3 dealers; Gemini/affiliated dealers; mass retailers; emerging business; wholesale; government sales; and national accounts. But it´s the G3 and Gemini channels that are of most significant interest to independent dealers.
The G3 channel includes all G3 consumer and commercial, Kelly/associate brand and Dunlop dealers, and will take on increasing significance as the G3 program expands its portfolio of brands, Goodyear said. It is headed by Rich Gibbons, formerly general business manager, western region.
The Gemini channel is headed by Steve True, formerly general manager for the Penske Auto Centers account, who will oversee the company´s efforts to improve market share through dealer expansions and conversions to the Gemini program.
Of the other channels: Mass retailer—large regional independents as well as the mass merchandisers—is headed by Tom Gravalos, formerly manager of wholesale tire centers; emerging business—auto dealers, export sales, e-commerce, etc.—is headed by Eric Brown, formerly director of export sales; wholesale is headed by Neal Valentine, formerly general manager of corporate accounts; government sales continues to be under the control of Dave Beasley; and national accounts continues under the direction of Bob O´Donnell.