Following a decision earlier this year to end its parts distribution business, Midas Inc. has turned to AutoZone Inc. to distribute automotive parts and accessories to Midas' 1,670 automotive service shops in the U.S.
Nine Midas distribution centers currently distribute parts to those franchised and company-owned shops through two wholesale distribution channels that handle weekly stocking orders to replenish exhaust, brake, suspension and other parts. Shops also obtain just-in-time deliveries of parts through a network of Midas-owned Parts Warehouse Inc. (PWI) quick-delivery sites and other local parts suppliers.
In January Midas said it planned to sell or close its 77 PWI sites.
As a result of its deal with Memphis, Tenn.-based AutoZone, Midas will close its U. S. distribution centers and will exit the distribution business. Afterwards, Midas shops will receive their weekly stocking orders from AutoZone's U.S. distribution centers. Dealers will be able to purchase parts for their just-in-time deliveries from AutoZone's retail stores nationwide, Midas said in a prepared statement.
Alan D. Feldman, Midas' president and CEO, said the company's dealers ``will benefit from improved service from AutoZone's nationwide presence, access to an expanded line of quality products and preservation of Midas lifetime consumer warranties on mufflers, brake friction and shocks and struts.''
Midas will continue to manufacture exhaust products at its plant in Hartford, Wis., and will control product specifications and quality of Midas-brand private label brake and suspension parts. The company said it will close eight U. S. distribution centers and all remaining PWI sites, but one warehouse will remain open to support exhaust manufacturing and Midas' IPC-brand exhaust wholesale business.
``The outsourcing of distribution will provide financial benefits to Midas, given that the wholesale distribution business is not profitable and consumes a significant amount of capital,'' Mr. Feldman said.
``The agreement with AutoZone as-sures the Midas system of a continuing supply of quality products and enables the company to focus on retailing and its primary objective of growing our profitable franchising and real estate businesses.''
In making the decision, the company sought support from the leaders of its International Midas Dealers Association (IMDA). Mr. Feldman said the group gave Midas its ``unanimous endorsement to proceed and has committed to work with us to make this a successful transition.''
The transition of distribution from Midas to AutoZone will occur in phases throughout the year, beginning during the second quarter-and is expected to be wrapped up by year-end. AutoZone will contact local Midas shops to establish working vendor relationships for just-in-time parts deliveries.
Then, as each Midas distribution center closes, the company said responsibility for supplying Midas shops' weekly stocking orders will be moved to the AutoZone distribution center serving that area.
The move will help Midas shops reduce their inventory in-shop levels, ``which will help to improve their profitability,'' according to Mr. Feldman.
AutoZone will assist Midas in the disposal of its U. S. inventories and will provide support to Midas for its lifetime warranty program.
Midas also signed a letter of intent with Uni-Select of Boucherville, Quebec, Canada, for a similar distribution alliance for the 230 Midas shops in Canada.
Midas said it will take special charges throughout 2003 to cover the closing of its distribution centers, the write-down of inventories and resulting employment reductions. The amount of the charges has not yet been determined.
The company is one of the world's largest providers of automotive work, including exhaust, brake, steering and suspension services, as well as batteries, tires, climate control and maintenance services at 2,700 franchised, licensed and company-owned Midas shops in 19 countries.
It has 2,000 outlets in the U.S. and Canada.