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Published on January 18, 2002

Profitability mantra cuts both ways

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Opinion

After listening to several speeches at Continental Tire North America Inc.'s recent dealer gathering in Hawaii, a dealer from the West Coast made an interesting observation.


“Conti keeps talking about how 'we want to make you profitable.' But what they don't realize is that tire makers don't make their dealers profitable,” he told a Tire Business editor.


What this individual didn't say but clearly implied, is that it's up to tire dealers to find ways to make their own businesses profitable. And yes, often this is accomplished with the help of their tire suppliers.


Conti's new management team might want to keep that thought in mind as it goes about revamping the company in an attempt to return it to profitability. Instead of focusing on how to make its dealers more money, Conti should concentrate on what it does best as a company so it can make itself more money. Then let its dealers do the rest.


Newly named President Ulrich Wellen already seems to understand this and what needs to be done to make that happen.


In a speech to dealers, he promised to resolve the company's continuing struggle with low fill rates, calling it one of his personal projects. “If we can't fill our customers' orders, we lose big and we can't let that happen,” he said. How true.


He also addressed Conti's profitability, or lack thereof, noting the North American unit has “been a permanent loss maker for the past three years.” This too must change—and fast.


Discussing his turnaround strategy, he said the company will focus on brands and positioning, image and awareness, an expanded, revitalized product portfolio and streamlined operations.


Backing up that pledge, the tire maker announced plans during the meeting to revitalize the General brand, which it acknowledged has been slipping, and to introduce five new performance tires and six private brand lines over the next five months.


Just as significant, company executives stressed their aim to introduce and make available these tires to dealers on schedule, rather than months late, a problem Conti admitted it has had in the past.


With longtime CEO Bernd Frangenberg retiring in a few months and new leader Mr. Wellen already on board, Conti has a fresh opportunity to regain the momentum of years past.


But it can't lose sight of what's most important: First, it needs to get its own house in order.


If Conti can successfully address the issues it outlined at the meeting, it will go a long way toward achieving its turnaround.


In the process it will become

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