Yellow Roadway Corp. is expanding its relationship with Michelin North America Inc. to the point the tire maker will be supplying ``well over half'' of the trucking company's supply of tires and retreads by the end of the summer.
Although the value of the deal was not disclosed, Yellow Roadway has revenues of nearly $6 billion. Yellow Roadway was formed last year when Yellow Corp. bought Roadway Corp. in a deal valued at nearly $1 billion.
Yellow Roadway decided recently not to not renew an outsourcing agreement with Bandag Inc. that the retread systems company has had with Roadway since 1999. That agreement had put Bandag in control of all tire functions, from inventory to maintenance.
Bandag said the contract had delivered about $27.5 million in sales, including revenue from sales of retread materials to dealers. More than 100 Bandag dealers participated in the national program.
The work with Michelin and other tire suppliers, including Goodyear, likely will be more limited than Bandag's outsourcing contract, said Don Barger, chief financial officer of Yellow Roadway.
``Most of what Yellow Roadway does is in-house, so the predominant piece of the new relationship will be a traditional purchasing relationship,'' he told Tire Business. ``But obviously there are some service aspects of it as well,'' such as emergency road service.
Also, although Michelin will be the majority supplier effective Aug. 1, it will not be the only one. ``We expect to have more than one vendor,'' Mr. Barger said, though he would not say if there would be others in addition to Goodyear.
Prior to this contract, Michelin had a ``minor'' relationship with Yellow, a Michelin spokeswoman said. ``This is a significant expansion of that relationship,'' she said.
A Goodyear spokesman was not sure if that dealt a corresponding reduction in its relationship or whether Michelin is gaining from business that Bandag lost with Roadway. Goodyear also had supplied Yellow before the merger. Mr. Barger would not say if the Akron-based tire maker's role was reduced although he said Yellow Roadway still expects to have a ``very important'' relationship with Goodyear.
Mr. Barger said the decision to change tire vendors was a consideration of Yellow Roadway's customers and its own bottom line.
``Bandag is a fine company, they did a fine job,'' he said. ``It's just when we looked at everything, we felt it was more appropriate to make a change.''
Though the Michelin spokeswoman said the company is ``extremely pleased'' about the deal, officials could not be contacted to comment further, including how the program will be offered to dealers.
Dan Rice, president of Michelin retreader Piedmont Truck Tires Inc. in Greensboro, N.C., said he has not heard any details from Michelin about the program, though after hearing Bandag's contract wouldn't be renewed he was confident Michelin would try for the business. Mr. Rice told Tire Business he'd like to service Yellow and Roadway fleets in his area if possible, but it's too early to know what impact it will have on his business.
``I would love to (participate) if I could,'' he said.