CHARLOTTE, N.C. (April 30, 2002)—He was doing his best impression of Sinatra, sans the “Rat Pack.”
Regrets? Well, you may recall that “The Chairman of the Board” crooned that he “had a few.” But when Bernd Frangenberg packed his bags and boarded an April 4 flight back to Europe after retiring March 31 as president and CEO of Continental Tire North America Inc., he could honestly say that, for the most part, like Sinatra, he did things “My Way.”
During the tire maker's annual dealer meeting, held earlier this year in Hawaii, the CTNA executive had hoisted a champagne glass for a toast not to the company's struggling past, but to what he felt was a brighter future. Then, in his softish German accent, he quietly said he was donning dark sunglasses “only to hide my tears.” One could sense he wasn't kidding.
In running the company for eight-plus years, he had done things he felt would elevate the Charlotte-based company into the echelons of profitability. His record on that account: some successes, some failures. Talking with Tire Business one last time, he acknowledged that record, but professed “no regrets. None at all.
“Sure, you always could do better, no question. But no regrets. We could have been faster with new products, faster with our manufacturing flexibilities. But no, no regrets.”
Alluding to that oft-spoken line that it took more than a day to build Rome, Mr. Frangenberg admitted “there's always room for improvement…. You always build on what you've done before and always get better—but not overnight.”
Buffeted by rivers of red ink, CTNA has “had some very, very tough years,” Mr. Frangenberg said, quick to note, “but we have corrected a lot of issues.
“I'm really grateful to the dealers that they've stuck with us during these tough times and have shown a loyalty by continuing to buy from us, which was really beyond belief.
“If there's one strength we've had and that we must continue, it's fostering our strong, strong dealer relationships.” That's something, he added, that's been “very solid and very deep.”
Still, the 61-year-old Continental A.G. executive—who came to the U.S. in late 1993 to assume the helm of its struggling General Tire unit—hasn't been immune to complaints from those valued dealer customers. He noted some of the more recognizable, ongoing gripes: poor fill rates; new product introductions that have been too slow; and mass merchandisers and their at-times cut-throat pricing.
“We had a lot of complaints when we entered that market,” he said of the so-called “price clubs.” “But we found answers by delivering different products to these channels, so that issue has really gone away.”
Several years ago, CTNA lost its lucrative business with Sam's Club—which Mr. Frangenberg believes helped throw the company into a tailspin from which it's still trying to recover.
According to its just-released results, last year CTNA fell $291 million into the red on an operating basis after taking one-time charges to cover the closing of a tire plant in Guadalajara, Mexico—one of five plants Continental A.G. closed worldwide—and writing down fixed assets.
Conti's sales in North America dropped 4.4 percent to $1.56 billion, as its tire production on the continent slumped markedly.
Mr. Frangenberg said one of the last legacies he wanted to leave with the company was setting the wheels in motion to get CTNA back into Sam's Club. “That's one reason we haven't gained market share. We had a tough time replacing the 6 million tires we lost through Sam's.”
Though Conti did bridge that gap with sales through other channels, he said, had it not been for that loss, “we would have seen some growth”—and possibly better financial results.
The recent plant closings point toward a deeper industry-wide problem of overcapacity worldwide, he explained. But Conti is “not short on plant capacity…. The game is: The fittest will survive.”
The Mexico plant would have been CTNA's low-cost provider, were it not for the trouble the company ran into there with what Mr. Frangenberg called “special unions” unique to that country. The factory had the same equipment, products and machinery as other Conti facilities, “but lost more in terms of inefficiencies.” In the end, union officials “never made any concessions, so we had to take the hard way: irrevocable closure. They still didn't believe it, (and thought) we were playing,…but they were wrong. There's no chance of reopening the plant.”
Gaining ground again
As the industry grappled with replacing millions of Firestone tires pulled from the market—and the jockeying that went on among tire manufacturers—Mr. Frangenberg said CTNA “picked up tremendous business at Ford (Motor Co.) in the OE arena. We have 100-percent fitment again (on Ford's) Taurus, gained some SUV business, and are being approached by a lot of very big customers.
“I'm very confident our growth pattern will take off again in 2002 and afterward, and some of that business will come (at the expense of) Firestone.”
Conti also has reaffirmed its position as a private label player, he said. “We are committed to private branding. We haven't done too good a job providing the right products in the past, but we've selected TBC Corp. as a major strategic partner. And we have great plans to grow the private brand business, which is essential to grow if you're going to be a successful player in this country.”
Still, he believes CTNA doesn't have the “share of that market that we should have.”
Despite its continuing financial problems, he insisted that the tire maker has not received any ultimatums from its parent firm. Rather, he has seen a reaffirmed commitment from Continental to the North American market—“globally the most important one. There is no alternative, we can't get out of this market.”
All has not always been doom and gloom for CTNA. Not that long ago the company “did experience profits in its passenger and light truck divisions,” Mr. Frangenberg said. “But in these crisis years we fell back into the red—and this we have to change.”
The catalyst for that change? “New products are the key to success,” he stated, “and more flexible, market-oriented factories to provide the products when needed.”
Supporting that contention, the company unveiled a flurry of tires at its recent dealer meeting and vowed that new products would be in dealers' hands on time for a change.
Despite its problems, Mr. Frangenberg said he believes he has left the company in better shape than he found it—when its General brand's future was a question mark and its flagship Conti brand enjoyed virtually little of the recognition it holds in Europe. A big part of CTNA's success has been in widening its customer base in all areas of the tire business, including independent dealers, private branders and wholesalers.
A return to profitability, he told Tire Business, will come on the heels of the company's growth “to our big customers. We're delivering Sears, TBC, Wal-Mart, Discount Tire, American Car Care Centers, and I'm sure we'll get back into Sam's. We're in all the major accounts, with the potential to grow.”
And life goes on
Though he has, for the time being, returned to Europe and must again become re-acclimated to the cultural changes of his German homeland, Mr. Frangenberg doesn't plan to be a stranger to America. One of his sons is marrying in the U.S. and will live in the States. So the executive plans to make regular trips back and forth.
Asked to sum up his tenure at the North American unit of the world's fourth-largest tire maker, he paused, furrowed his brow, then answered: “It was a period of turn around of a dying company. But now the growing and sustainable profitability has to follow, for which the plans are in place.
“I feel very confident that with our customer base, we have a very bright future ahead of us, and that profitability will follow.”
The environment has changed, he continued. “Price hikes have been sticking, and the cutting of capacities and increasing prices…will lead to a healing process of the total industry.”
At the Hawaii dealer gathering, Conti Executive Board Chairman Manfred Wennemer, who previously headed Continental's ContiTech non-tire group, noted that “the time is over for promises. We are here to deliver—you can count on it.”
He echoed Mr. Frangenberg in praising dealers for their continued support and loyalty, then called the retiring executive “a good corporate soldier” and a gentleman with a nice personality with whom it was easy to do business.
“He was instrumental in our improvements in OE and replacement gains in market share,” Mr. Wennemer said, “and was responsible for two to three years of profitability.”
Yet, he noted that while Mr. Frangenberg dedicated himself to righting a listing corporate ship, “he didn't have time for his hobbies—and I understand his wife has a better (golf) handicap.”
Then, to accompanying laughter and applause, he presented the executive with a certificate to a golf school.
One official with an independent dealer group that has done business with Mr. Frangenberg over the years agreed with Mr. Wennemer's assessment, calling Mr. Frangenberg “very personable, and a consummate salesman who would do anything to get the sale.”
He refrained from commenting on Mr. Frangenberg's golf game.
From his start at CTNA, the retiring executive said, he worked hard to hear words of encouragement from Conti's independent dealer base—and in turn, usually wasn't disappointed. Now, he added, “we're not just talking about things to come, not just making promises anymore. We're launching programs, advertising campaigns, building on facts.”
And from the company's larger customers, he said he has seen a “real keen desire to do more business with us, and build an alternative supply source. They see us as that alternative, as opposed to the Big Three. They see all the ingredients they need: brands, products, strategic plans in place, price positioning and a good management team in place. So I'm very confident.”
Mr. Frangenberg denied any insinuation that he was asked to leave Conti, noting he was retiring of his own choice because his five-year contract had expired. And, frankly, it was time for someone younger—a new generation to take over, he said. His replacement is 43-year-old Ulrich Wellen.
As is often the tradition, an outgoing executive is asked to offer some sage words of wisdom to those who will carry on the torch in his stead. But Mr. Frangenberg was plainly uncomfortable making any “elderly statements or giving advice.”
If anything, he admitted he had “mixed feelings” about his departure. “I'd like to see the success and be a part of it because (the company) has not been reinvented overnight. A lot of the ground-breaking work has been laid before.
“But on the other hand, it's a natural age process in corporate life: You have to leave, and it's time for me now.”