COMBINED LOCKS, Wis. (Nov. 5, 2001)—Looking to solidify its position as a leading Midwestern distributor, U.S. Tire & Ex-haust (USTE) has purchased some assets from a Team Tires Plus Ltd. distribution center in Burnsville, Minn., and will supply Tires Plus stores on a limited basis.
The acquisition, terms of which were undisclosed, includes about 10,000 leftover units, Tires Plus' customer list and the lease on the 45,000-sq.-ft. warehouse, according to Randy Groh, USTE's marketing director.
In a prepared statement, Pat Hietpas, vice president of operations, said USTE is focused on acquisitions and partnerships that complement the markets and customers that the company has targeted.
“With the addition of the Team Tires Plus Ltd. distribution center, we can enhance our service level and delivery capabilities while maintaining our costs,” Mr. Hietpas said.
But the Combined Locks-based company doesn't plan to use its newly purchased assets. It will clear the inventory—much of which is obsolete—and sublease the space because it already has facilities in Minneapolis and Appleton, Wis., that are sufficient to supply the immediate area, Mr. Groh told Tire Business.
USTE's main reason to buy the distribution center was to become Tires Plus' first choice for a tire supplier when the dealership can't receive the product it needs through normal channels in Minnesota, Wisconsin, northern Illinois, and parts of Iowa and Indiana, Mr. Groh said.
“From a dollar standpoint, what made the deal work for us is simply being first call for fill in with Tires Plus on tires for one year covers more than we paid for this thing,” he explained.
Tires Plus used to be a Michelin Americas Small Tires dealership prior to its purchase in 2000 by Morgan Tire & Auto Inc., and much of the inventory sold to USTE is MAST product, Mr. Groh said. Morgan Tire primarily has offered Bridgestone and Firestone brands, and Bridgestone/Firestone Inc. bought a majority stake in Morgan Tire last August.
For USTE, a division of U.S. Oil Co. Inc., the deal is a bit unusual because it puts the wholesaler in the position of being a low-cost provider to some of Tires Plus' former customers, some of which are small independent tire dealerships, Mr. Groh said. Typically, the company likes to build tire dealerships into a chain of stores, he said, rather than a few or single locations—much like it does as a member of the American Car Care Centers program.
Mr. Groh said the firm signs tire dealerships to a five-year supply partnership and demands that a dealer invests in his business and perhaps even reconfigure the look of his store. USTE's business philosophy, he explained, is “to be an added value provider and do that efficiently enough so that our differential in price over someone like a Heafner (Tire Group) isn't so dramatic that we can't get the business.”
A wholesaler's role today, he added, “goes beyond supplying product at a price. I really think that it's assisting the independent dealer with the marketing resources that we can bring, the industry connections that we can bring and any training or educational resources that we can bring to the table” so that independent dealers can survive in the aftermarket.
USTE itself doesn't retail or own retail stores, nor does it claim to know how to run a tire store, he said, but the company feels it can help dealerships compete in the marketplace.
Calling USTE the “fastest growing” wholesaler in ACCC's group, Mr. Groh noted that the firm had signed 30 tire dealerships at the end of 2000 and is now up to 60. The company is now negotiating with ACCC to expand its distribution territory.
Sixty percent of USTE's business is tire wholesaling, he said. The remaining portion is wholesaling auto parts such as exhaust systems, suspensions and brakes. The company has approximately 5,800 customers and carries 80,000 units in tire inventory.
Besides MAST brands, USTE also distributes Cooper, TBC Corp.'s Multi-Mile private label, and some Continental General tires. USTE posts $75 million in annual sales while its parent, U.S. Oil, posts $1 billion in annual sales.