GREENVILLE, S.C. (March 23, 2001) — Michelin Americas Small Tires (MAST) chief operating officer, Pete Selleck, and Nancy Banks, director of public relations, agreed to discuss with Tire Business Michelin´s statement in regard to DeKalb Tire and, where possible, address some issues in the lawsuit.
Questions posed by TB and their responses follow:
TB: On which points does MAST disagree with DeKalb?
Mr. Selleck: "The reason that (MAST´s) direct relationship with DeKalb ended in 1996 was a conscious choice DeKalb made about not participating in a forward-thinking program we call Alliance, which has been extremely successful.
"At that point, DeKalb´s relationship with Michelin became an indirect one—they became an associate dealer of a distributor."
TB: Was it a question of the volume DeKalb was purchasing? Could the dealership have continued as a direct dealer if it met a certain quota?
Mr. Selleck: "Fundamentally, we presented a program (Alliance) to them which involved a number of benefits and obligations, and they decided not to enter into that agreement."
TB: Did they give a reason why, and could DeKalb have continued as a direct dealer without joining Alliance?
Mr. Selleck: "I don´t know...at that particular time what the reason was. I was not there, so I do not know."
TB: Can you explain how Michelin´s "Minimum Advertised Pricing" policy—which is referred to in the DeKalb lawsuit—works?
Mr. Selleck: "I don´t want to get into that."
TB: MAST´s statement says it has never controlled prices. But what about the "Maximum Value Policy (MVP)" program the company established in 1999 which set a minimum price for the BFGoodrich Radial All-Terrain T/A KO and All-Terrain T/A?
Mr. Selleck: "That is a contract that a customer enters into in order to receive the product."
TB: But isn´t that, in effect, controlling the price on that product?
Mr. Selleck: "I don´t want to get into a lot of legal issues, but in fact (MVP) is a procedure we put into place that we think dealers have actually been very pleased with."
TB: How do you respond to DeKalb and other dealers who contend that they can buy Michelin products cheaper at discounters such as Sam´s Club than either direct from MAST or through a distributor?
Mr. Selleck: "We don´t control or we don´t manage the prices of our customers. A customer is free to sell at any price—even below the acquisition price we sell to them.... (But that scenario) certainly could happen in some cases."
TB: Mr. Bennett claims there was a difference in pricing he was charged vs. what Michelin charged other bigger retailers and that, for the period covered by the lawsuit, there were retailers in the Atlanta area selling tires for less than DeKalb could purchase them direct. Did that in fact occur?
Mr. Selleck: "That´s part of the litigation and I don´t want to discuss any ongoing litigation."
TB: What about the charges in the suit that large-volume purchasers got different promotional services, including co-op benefits 3 to 5 percent higher than what smaller independent dealers received?
Mr. Selleck: "I go back to our statement that our `pricing is fair and legally defensible....´
"How retail pricing is set on every product in the marketplace is something we cannot control and do not control."
TB: Has Michelin taken steps to "level the playing field" for independent dealers vs. competitors such as mass merchandisers and price clubs?
Mr. Selleck: "We believe Alliance has been a very effective program for dealers. The feedback we get from a majority of our dealers is that it is adding tremendous value for them."
TB: How many Alliance dealers does the company currently have?
Mr. Selleck: "About 300 direct retail or distributor Alliance dealers."
TB: Why did Michelin attempt to settle the case with DeKalb? And is there a chance it still could be settled before trial?
Mr. Selleck: "I don´t want to discuss our strategy in this ongoing legal matter."
TB: Does Michelin fear that other dealers may make charges similar to Mr. Bennett´s and enjoin MAST in similar lawsuits?
Mr. Selleck: "We´re looking at this lawsuit...and I think we have a sound position, and we´ll see how this lawsuit is resolved."
TB: Have any similar suits been filed against Michelin or are there any pending?
Mr. Selleck: "No."
TB: While no one would probably argue with your point that independent dealers are still the leading channel of tire distribution, wholesale and retail, many have told us they derive the bulk of their profits from auto service and things other than tire sales. Is this not the case with Alliance dealers?
Mr. Selleck: "It varies depending on each dealer´s business model. We have some dealers who are 100 percent tires, some who sell a very small percentage of tires."
TB: What percentage of Michelin-made tires do Alliance dealers have to sell?
Mr. Selleck: "There are actually different levels within the program. But the entering position is that, for a number of commitments on our part, the commitment dealers must make is that at least a majority of their unit sales are our brands and tires—that equals 51 percent."
TB: Would Michelin be willing to ask the court to unseal certain documents it asked the judge to seal due to their proprietary nature so that Tire Business can examine them?
Mr. Selleck: "No. (They contain) pricing information that is highly sensitive. We delivered to the court the information it asked for. But we do not consider that public information—we consider that to be proprietary information."
Ms. Banks: "And it´s proprietary information between us and other customers. We´re not going to put customer information that is proprietary out there."
TB: If the case goes to trial, won´t that information come out in court?
Ms. Banks: "It may. That´s a decision for the court to make. But while it´s our decision, we would prefer to have it sealed."