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Published on January 19, 2009

Letters: Goodyear´s credit rating, ATD´s purchase of Am-Pac

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Opinion

Lies and figures


I read in November that Standard & Poor's Ratings Services (S&P) decided to place Goodyear's credit rating on CreditWatch with negative implications.


Don't worry, Goodyear. You should take the rating as a big plus—call it a contrarian positive. These are the guys who were rating Freddy Mac, Fanny Mae, AIG, etc. They were “El Primo” right up until they went into their Gucci crapper for a big triple “A” dump.


From what I see, Goodyear has done everything right over the past decade, and it continues to do so during this brutal economic downturn. It has positioned itself solidly as one of the top three international producers, its technology people are first-rate, forward leaning at 90 degrees and all in for technological superiority and commitment.


So what do the S&P people want them to do—light their hair on fire? There's a horrific worldwide slowdown and downturn going on. Unless you believe that people will stop using tires—and the industry disappears—Goodyear will emerge eventually, and probably be in a stronger competitive position than it was going in.


We all know the ditty about lies and figures. Ratings are just worthless numbers, unless they're looked at in context. Using relative strength as the criteria, what could Goodyear be doing any better?


Like Paul Harvey used to say, “You gotta know the rest of the story.”


If S&P's job is to measure risk, based on their past performance, I'd say their crystal ball has sprung a leak.


Paul Feuer


Partner


Feuer Management Co. L.L.C.


Highland, N.Y.


Where's growth potential?


So American Tire Distributors Holdings Inc. (ATD) said it bought Am-Pac Tire Distributors Inc. just to get into the St. Louis and west Texas markets?


How does ATD expect to grow Tire Pros to 1,000 dealers when the organization has been slowly losing dealers for the last several years? And now that they control what may be half of the American Car Care Centers Inc. (ACCC) dealer group, will that organization continue to exist in the future given that ATD has its own ServiceBay dealer program?


And why would ATD allow Tokyo-based Itochu Corp. to pawn off 40 company-owned stores as part of the deal? This is clearly a really bad time to try and sell retail tire stores, so it's probably safe to assume that ATD will be in the retail business with the rest of us for the foreseeable future.


Most importantly, 95 percent of Am-Pac's operations appear to overlap ATD's current footprint. If these companies were both publicly traded, the Federal Trade Commission would likely prevent this acquisition and rule that it is anti-competitive to the marketplace and detrimental to both companies' customers. In many areas, ATD will be the only game in town and that almost always leads to higher prices.


But no one can force Itochu to continue operating a subsidiary that I believe is losing money, so they can sell it to whomever they want—and they did. I'm just concerned—I do a lot of business with both companies—that fewer distributors will mean higher prices in the future.


And how in the world does ATD expect to service their dangerously high level of debt if/when the recession worsens over the next 12 to 18 months?


Could this actually be two drunks propping themselves up for a little while?


Everyone buckle their seatbelts, this should be interesting.


Steve Maddox


CEO


Anaheim Wheel & Tire


Anaheim, Calif.

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