CLEARWATER, Fla. (Aug. 23, 2001)—In Larry Morgan's version of the game of tag, Bridgestone/Firestone Inc. is it.
But the Tire Alliance Groupe (TAG) L.L.C. won't be bidding sayonara anytime soon to Morgan Tire & Auto Inc., one of the dealer retail buying organization's founding members. When BFS purchased a majority share of Mr. Morgan's company earlier this month—52 percent according to analysts covering the tire maker—some wags may have presumed the formerly independent dealership would no longer be welcome in TAG.
That's not the way Daniel L. Beach, the group's president and CEO, sees it.
The buyout doesn't affect TAG because, he said, as far as its 13 other member companies are concerned, Mr. Morgan is still the No. 2 stockholder in Morgan Tire and is continuing as the dealership's chairman, president and CEO. “The only thing that's really changed is the percentage of stock owned by Larry,” Mr. Beach said. “It's still the same company. It's not a part of Firestone, if you will—it's an investment of BFS. The same (Morgan Tire) corporation is sitting there, with the same financial responsibilities, same business plan and same people working there.”
In essence, “a lot has changed but very little has changed,” he added paradoxically.
According to the purchase agreement between Mr. Morgan—who also is chairman of TAG—and BFS, the tire maker will eventually acquire full ownership of the dealership and will run it as a subsidiary, but Mr. Morgan will remain in charge. When the deal was announced Aug. 9, he called it a “strategic alliance” that will further strengthen his 38-year relationship with BFS as both an employee, first, then later as its biggest customer.
BFS actually has been acquiring minority shares of Morgan Tire gradually since 1998. Analysts said the tire maker intends to buy full control of the dealership by 2008.
As it stands, the purchase will make BFS the largest retailer of tires in North America, with almost 2,200 stores and nearly $2.8 billion in estimated tire, wheel and auto service related sales. At last count, Morgan Tire operated 558 stores in 25 states and pulled in estimated sales of between $750 million and $900 million. That will give Nashville, Tenn.-based BFS direct control over approximately one-third of its aftermarket passenger car and light truck tire sales, according to a Tire Business analysis of available data.
Sears, Roebuck and Co. is considered the largest retailer of tires in North America now, with an estimated $2.25 billion in tire, wheel and auto service sales revenue from its nearly 1,100 Sears Auto Centers and National Tire & Battery (NTB) outlets throughout the U.S. The company also operates 67 auto centers in Canada.
A spokeswoman for BFS told Tire Business Firestone company stores will not be changed to Tires Plus outlets, nor will Mr. Morgan's retail sites lose their individual identities.
Morgan Tire ranks as the nation's second-largest retailer of tires, operating under various names around the country—Olson Tire in Florida and the Southeast; Hibdon Tire in Oklahoma; Avellino's in Pennsylvania; Wheel Works in California; Michel Tire throughout the Ohio Valley and in Florida; and Tires Plus in the Great Plains states. The company's plan remains to convert all stores to Tires Plus. Morgan Tire acquired the Tires Plus name in July 2000 when it bought Burnsville, Minn.-based Team Tires Plus Ltd.
Bridgestone/Firestone has not yet commented on its plans for dealing with situations where a Tires Plus store is located in close proximity to a Firestone Tire & Service Center or other BFS-owned retail store—the company also operates stores under the Tire Station, Expert Tire and Mark Morris names.
But “the Firestone stores have a very, very loyal customer base,” the BFS spokeswoman said. And although they've suffered somewhat from the recall of 6.5 million Firestone light truck tires, the stores, “particularly in the service area, are right back on target.” The company-owned Firestone outlets have more of an auto service orientation, she added, while Tires Plus stores focus on tires.
“We want to make sure consumers can continue to distinguish between the two,” she said.
That distinction also is what ensures Morgan Tire's continued membership in TAG. Were the dealership to switch its outlets to Firestone company stores—lock, stock and barrel, with signage to boot—it would no longer be allowed to belong to TAG, Mr. Beach explained.
But he has been assured that with Mr. Morgan as a minority owner the company “intends to pursue its business plan of multiple brands…which is an important part of their strategy.”
Despite the buyout, Mr. Beach doesn't see the direction of the dealership changing. It has always committed a large percentage of its business to BFS and he believes “it would be difficult for Larry to give them much more than he's already giving.
“The balance of his business primarily will come through TAG.”
Including Morgan Tire, the buying group member dealerships operate more than 1,350 retail outlets. To date, tire units purchased by members through TAG from its principal suppliers—Yokohama Tire Corp. and Continental Tire North America Inc.—are up 37 percent over last year's numbers, and are expected to be in excess of 3 million units in 2001, Mr. Beach said.
Although TAG is always open to signing new members, he said it's not looking for small dealers and no wholesalers need apply, either. Rather, the group's profile tilts to multiple-location retail dealerships. And with the number of outlets members currently operate, “there aren't many areas of the country that we don't cover,” save for a few pockets here and there.
The group has continued to add new programs for members, he said, recently signing a supply agreement for Exide batteries. It also is “fine-tuning” a contract with a supplier of shop chemicals.
“Tires Plus is a major part of the Tire Alliance Groupe,” Mr. Beach reiterated, and while the BFS buyout of Morgan Tire “is a major event, it's still business as usual for TAG.”
Reporters Bruce Davis and Miles Moore contributed to this report.