FINDLAY, Ohio (May 18, 2001)–A declining retread industry has prompted Hercules Tire & Rubber Co. to sell some assets of its retreading operations to its Findlay neighbor, Cooper Tire & Rubber Co.
Cooper intends to purchase those assets–which include Hercules' precure press, all of its molds, its Cedco equipment division, some inventory and intellectual assets–by June 30 at a price not to exceed $8.5 million, the firms announced May 9.
The deal does not include Hercules' physical facilities because Cooper will rely on its existing resources to supply customers formerly served by that company. Hercules said it will retain its plants in Findlay and Guntersville, Ala., and the sale does not affect its custom mix or tire distribution businesses.
The company will cut a total of 80 employees as a result of the sale–leaving 63 in Findlay and about 16 in Guntersville, said Craig Anderson, Hercules president and CEO. The company, a privately owned dealer co-op made up of 40 stockholders, will try to place employees whose jobs have been eliminated with local employers or with Cooper, if the tire maker has any openings, he said.
Paul Rinauro–vice president and general manager of Hercules' manufacturing division, which included retreading–will now head the firm's custom mix operations.
Hercules has decided to sell off its retreading operations because its business has declined at the same rate as the rest of the industry, Mr. Anderson said. Fewer retreaders, shop closings and stiff competition from tire makers offering cradle-to-grave truck tire services all influenced the company to drop retreading and redirect its business, he said.
“It's pretty hard to compete when (a tire maker) comes in and gives (a dealer) the equipment, a national account program and reduces (a dealer's) buying price on truck tires,” Mr. Anderson told Tire Business. Retreading accounts for 12-15 percent of Hercules' annual sales, which exceed $300 million, he said.
Several of Hercules' dealers have closed shop recently or switched to a tire maker's retreading process. Mr. Anderson also noted that among the company's co-op owners, only three currently use tread rubber. That's a far cry from Hercules' founding in 1952, when the company had 21 New England retreaders among its co-op owners.
“It was a matter of looking at the directions our co-op owners want to go, and they're not in retreading,” Mr. Anderson said. “They prefer to redeploy their assets into the tire distribution part of the businessà.”
But, he added, “at the same time, we wanted to protect our current retreaders that have been very loyal to us over the years.” So the company opted to place them with a dealer-oriented firm that had a long-range plan for retreading. Cooper–which acquired Standard Products Co., parent of retreading equipment and tread rubber supplier Oliver Rubber Co., in 1999–fit the bill.
Cooper said the two companies will work together to make the transition for Hercules dealers as smooth as possible.
The purchase is expected to significantly increase sales of the Oliver Retreading Systems and Products unit, which is a part of Cooper's new commercial division.
Cooper also said the Hercules acquisition will provide an even larger retreading support system for its present Oliver and Long Mile customers.
In late 2000, Cooper announced a restructuring plan combining Oliver with Cooper's radial medium truck tire manufacturing operations to form a new commercial division. Oliver's business operations were transferred to Findlay from Athens, Ga., this past April.
Larry Enders, Cooper's commercial products president, said the company had been looking for an opportunity to increase sales in retreading.
“Over the past six months, we have been streamlining retreading assets and maximizing our facility utilization to enhance our customer service capabilities,” Mr. Enders said. “We are now ready to serve an expanded customer base and are looking forward to meeting the needs of our retreading customers.”
Hercules, meanwhile, will refocus its business on a growing custom mix business, which has expanded more than 35 percent per year and now equals about half of Hercules' capacity, Mr. Anderson said.
The company wants to continue to expand those operations, but that will come slowly because of the amount of technical work and plant certifications involved for securing new customers, he explained.
“Custom mix is not bought over a cup of coffee,” he remarked, noting that new accounts sometimes don't come to fruition for six to eight months as customers perform plant inspections and perform trial runs on Hercules' product.
Hercules also plans to expand its private brand and tire distribution business, though Mr. Anderson wouldn't elaborate on those plans.