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2006: The year in photos

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AKRON (Dec. 18, 2006) — The stagnating broadline tire market—or, more precisely, the dearth of profit potential there—lent a strong hand to many of the year's top news events, ranging from plant closings to financial trip-ups and union battles.

Perhaps the most visible and still continuing episode is the strike by the United Steelworkers (USW) against 16 of Goodyear's North American plants. Some issues in the strike harken back to past years, such as the union's insistence that it made concessions in 2003 and it's the company's turn this time.

But a major point keeping about 15,000 union members on the picket lines since Oct. 5 has been Goodyear's decision to close its Tyler, Texas, tire plant. The firm said that decision is not up for negotiation.

“The global nature of our competition is such that we must change to survive and prosper,” Jon Rich, president of Goodyear's North American Tire unit, told employees in an Oct. 20 letter. “That's why I assure you that we will not agree to a deal that puts Goodyear at a cost or competitive disadvantage.”

The 44-year-old Tyler plant produces small-diameter passenger tires, a segment the company said is under pressure by low-cost imports. Goodyear expects the closing to eliminate 1,100 jobs and save the company $50 million a year after taxes.

The Tyler closing also is part of Goodyear's larger decision this summer to cut its production of private label tires by about a third, representing about 8 million units in up to 10 private brands. That plan also is intended to allow Goodyear to focus on more profitable segments.

Lower unit volume from the private label reduction and other factors led Goodyear to post a 90-percent decrease in net income for the nine months ended Sept. 30 to $28 million. Goodyear posted a net loss of $48 million in the third quarter after starting out the year on a high note, announcing in February that in 2005 it posted its largest annual profit since 1998.

Despite the high-profile strike, Goodyear has not been the only tire maker to hit choppy waters this year because of the faltering broadline segment.

Cooper Tire & Rubber Co.'s chairman and CEO Thomas Dattilo resigned unexpectedly in August as the firm posted deepening quarterly losses. The firm already had been removed from the S&P 500 index and idled some plants temporarily to reduce inventory.

Interim CEO Byron Pond outlined a “soft restructuring” plan in early September to cut costs and get Cooper on the right track, but some dealers see the tire maker at a difficult point: Its tradition and strength is in the broadline market, but that is shrinking rapidly and affecting profits for companies with high cost structures.

For the nine months ended Sept. 30, Cooper posted a net loss of $50.9 million.

Bridgestone/Firestone also felt the broadline blues when it announced in May it would close its 37-year-old Oklahoma City plant by year-end. The plant, which employs more than 1,420, produces radial passenger and light truck tires at the low end of those segments.

“In general, the tire industry in the United States is facing a number of serious economic issues,” said Steve Brooks, vice president of manufacturing operations for BFS. “Significant among them is fierce competition from low-cost producing countries, which has made it very difficult for U.S.-based production facilities to manufacture tires at a profit.”

Michelin North America Inc. made two moves to address the broadline issue, closing its Kitchener, Ontario, plant and reducing output at its Opelika, Ala., factory by 30 to 40 percent.

The Kitchener closing affected 1,100 employees and took about 6 million units of annual capacity out of circulation, while the Opelika decision will cut annual output there by about 3 million units. The move will affect 400 to 500 of the plant's 1,300 employees.

At the same time, Michelin disclosed plans to invest $80 million through mid-2007 in its Waterville, Nova Scotia, plant to expand capacity for its X One wide-based single truck tire.

Still, in August Michelin's BFGoodrich manufacturing unit sealed a contract with the USW after being declared the union's target in tire industry negotiations.

At the time, Michelin said the new pact allows it to get its labor costs in line with market rates while limiting its long-term liabilities, according to a statement from Chairman and President Jim Micali.

“We're committed to our manufacturing base in North America,” Mr. Micali said. “But significant change has to occur to assure the competitiveness of our plants.”

The USW moved on to talks with Goodyear, which resulted in the strike. Bridgestone/Firestone's talks with the union have been on hold pending an outcome with Goodyear.

Continental Tire North America Inc. also faced its share of plant closings and union discord.

The tire maker, which has been struggling with high costs and plenty of red ink in North America for several years, announced in March that it would suspend tire production at its Charlotte, N.C., plant indefinitely.

Conti told the union at year-end 2005 that it needed to cut $32 million in costs at the plant. Closing the factory at that time was described as a “remote possibility” by an executive with parent Continental A.G..

But the call for cuts began a year of tumultuous relations with the union.

“Union members are upset because they spent their lives in the plant and the company doesn't give a damn about them,” said Mark Cieslikowski, president of USW Local 850, which represents workers in Charlotte, in March. “This has been going on too long. They (management) have a distinct hatred for this union. This is the same management group that has run the company into the ground. It looks like they want to manufacture tires outside the country.”

The union later filed an unfair labor practices charge against Conti with the National Labor Relations Board and questioned the firm's business plan in a mailing to about 1,700 tire dealers in the U.S.

Many dealers also felt the effects of the closures as supply—which was already constrained because of original equipment demands—became more tenuous.

“People drive in and like (the original equipment tires) they had, but we can't get them, so we turn them over to something else,” said Alpio Barbara, owner of Redwood General Tire in Redwood City, Calif., who in August estimated his fill rate from Conti to be only 50 percent.

In March Conti had reiterated its shortcomings and pledged reform to dealers at its first-ever Gold dealer meeting in Las Vegas.

Outside of the plant closings and labor strife that made up a large part of 2006's news, big buyouts also colored the landscape.

The largest—and most unexpected—was Bridgestone Amer¬icas Holding Co.'s (BAH) pending $1.05 billion purchase of Bandag Inc., announced Dec. 5. In an exclusive interview with Tire Business, Bandag Chairman and CEO Martin Carver said he initially told BAH Chairman and CEO Mark Emkes that Bandag would remain independent.

In the end, BAH made an offer Bandag couldn't refuse.

“We weren't looking for this. There wasn't any catalyst to doing this from our side,” Mr. Carver said.

Other deals secured during the year include:

* American Tire Distributors Inc.'s purchases of Nevada's Silver State Tire Co. and its Golden State Tire Distributors affiliate as well as Samaritan Wholesale Tire Co. of suburban Minneapolis;

* Monro Muffler Brake Inc.'s $14.7 million buyout of ProCare Automotive Service Solutions L.L.C. in Ohio and Pennsylvania. Monro's planned purchase of Strauss Discount Auto fell through when Strauss filed for bankruptcy;

* Titan International Inc.'s purchase of Conti's off-the-road tire plant in Bryan, Ohio, though a proposed buyout of Titan by private investors fell through;

* GPX International Tire Corp.'s acquisition of solid industrial tire and wheel maker Maine Industrial Tires Ltd. for an undisclosed amount;

* Hercules Tire & Rubber Co.'s buyout of wholesaler Tire Distributor Inc. (TDI);

* Remington Tire Distributors Inc.'s purchase of President Tire Canada Inc. after the latter filed for bankruptcy, claiming $38.8 million (Canadian) in liabilities;

* Bridgestone/Firestone's acquisition of White Tire Inc., one of North America's largest commercial dealerships and a Bandag retreader;

* The purchase of Big 10 Tire Stores Inc.—the seventh largest independent retail tire chain in the U.S. with 101 stores—by Sun Capital Partners Inc., a private investment firm; and

* The purchase of Lex Brodie's Tire Co. by a group of investors, including General Manager Scott Williams.

While 2006 was marked by many ups and downs in the business of the tire industry, probably the most wrenching moment for the industry this year was the death of Group Michelin CEO Edouard Michelin on May 26.

Mr. Michelin, 42, died in a boating accident in the Atlantic Ocean off the French Brittany coast. His companion on the boat, the president of a regional fishing committee, was never found.

Mr. Michelin, who had served as CEO since 1999 and was the primary architect of the firm's transformation into a more global company, was laid to rest May 31 in Clermont-Ferrand, France. Michel Rollier was named CEO as part of a succession plan worked out with Mr. Michelin's involvement.

Many officials in the tire and automotive industries, as well as the French government, expressed their sorrow at Mr. Michelin's death.

“He was just so friendly, just an amazingly warm, nice person,” said Jerry Nerheim, president of Waukegan Tire & Supply Co. Inc. in Waukegan, Ill. “I can't imagine a worse loss for his family, friends and company.”

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