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Published on April 25, 2005

Don't dismiss car dealers' challenge

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Opinion

AKRON (April 25, 2005) — It should be clear to tire dealers that automobile dealerships are going to become more formidable competitors.

And not just from the automotive service side of the business but from tire sales as well.

If they're smart, tire dealers should take steps now to not get caught flat-footed as the car dealerships in their area ratchet up their service and tire sales operations.

This push by auto dealers is ongoing and relentless, and it's coming not just from the local car dealerships but directly from the car manufacturers.

The auto makers want to boost the amount of revenue their dealerships earn from parts and service and are pursuing that business aggressively.

Car dealers, faced with the loss of service business as cars last longer and have fewer problems, are looking to develop new revenue streams to fill up their service bays.

Since almost every community of any major size in North America has several car dealerships, the impact of this trend on independent tire dealers may well be significant.

If car dealerships succeed in attracting even 5 percent more service and tire customers, it will have a definite impact on the tire dealerships in those communities.

General Motors Corp., for example, is looking to increase the number of new GM vehicle buyers who return to a GM dealership for service—after the initial warranty expires—to four of 10 this year from the current three of 10. That's a whopping 33-percent increase.

The world's largest auto maker also is training staff members at GM dealerships on how to conduct free vehicle inspections and is working with its dealers to increase tire sales.

Chrysler Group, Ford Motor Co. and Toyota Motor Sales U.S.A. Inc. are pursuing similar tire and service agendas.

Tire dealers have seen this type of aggressive push before and have overcome the efforts of automobile dealers and other distribution channels to take away chunks of their sales. But this time, the effort seems to be more widespread by more car dealerships and by more car companies.

Huge wholesaler American Tire Distributors Inc., for example, has recognized this and is looking to supply tires to the 3,700 GM dealers in the areas in which it distributes. It also has been involved in Ford Motor Co.'s "Around the Wheel" tire program for its dealers.

Bridgestone/Firestone, as it prepares to revamp its Firestone retail tire stores, said it views new-car dealerships as its No. 1 challenger because of their "captive customer base" established through the first three years of vehicle ownership as well as extended warranties that further tie the customer to the dealership.

Tire dealers, don't overlook this ongoing threat from new-car dealers. Move aggressively to keep and expand your own customer bases—before you see them parked at the car dealership down the street.

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