The economic downturn has affected all sectors of the U.S. economy, and commercial tire dealerships are no exception.
Surveys completed for Tire Business by commercial dealers across the nation indicate business is flat at best, down sharply at worst. While the drop in fuel prices has generally helped them and their customers, many say they've had to lay off personnel—or at least not replace those who leave—park some of their service trucks and consolidate certain operations.
As for their business practices, they are doing what they always do, only more so: keeping current customers as close as possible, while staying on the lookout for new ones.
“Our commercial business has been just about flat,” said George Pehanick, president of East Bay Tire Co. in Fairfield, Calif. “Our fleet orders have all been slow to one degree or another, although our business in garbage and milk trucks has been less affected. People are still eating and dumping their garbage. But the construction side is down.”
California's central valley is a large agricultural area, which has softened the blow somewhat for East Bay Tire, Mr. Pehanick said. Nevertheless, the company has had to lay off “three or four” workers at two of its six locations, leaving about 60 employees overall.
“What I've told our salespeople is just to stay as close to our customers as possible,” he said. “You need to hold all the customers you have and pick up some new ones, or your business is not going to survive.”
Action Tire Co. of Forest Park, Ga., reported its sales and service revenue was off 40 percent last year. Morale within the company is low, according to Action Tire President Rick Stewart, and outside the company “consumer confidence is as low as I have seen it.
“We had a very, very flat December and January,” Mr. Stewart told Tire Business. “We had a little spurt in February—not much, but in the last three to five weeks it's seemed like things are up just a little. I don't know if it's just the break in the weather, but let's hope that things have hit bottom and are starting to look up.”
The company actually started laying off people in early 2008, as the building market began to soften, Mr. Stewart said. So far the company has laid off about 40 employees—15 in January alone—and has about 90 workers remaining.
Usually Action Tire buys about 10 trucks a year for its fleet, but has put that off for this year. The company recently sold eight vehicles, leaving it with 75, he said.
Action Tire has been emphasizing fleet inspections and other fleet services, “although we try to do a good job with that anyway,” Mr. Stewart said. “We want to keep our accounts, and you're so vulnerable when you're down—people come in and try to slash prices. Our competitors are like vultures.
“You've got to be careful, pay more attention to fleets and communicate more with your customers,” he said.
Allen Park, Mich.-based Belle Tire Distributors Inc. is seeing its sales slightly down today from the same period a year ago, according to Vice President Tom Bowman.
In response, the dealership consolidated two locations that were only five miles apart, trimming its commercial stores to eight. “It was more efficient to combine the two,” Mr. Bowman said. “What we've done in the last 90 days is to get a little leaner.”
Belle Tire, which operates 77 retail and commercial outlets, has cut back by close to 60 people in its commercial and retreading operations, leaving the company with about 290 commercial employees, he said.
About 73 percent of the dealership's business is in retail, with 23 percent in commercial and the remainder in wholesale, according to Tire Business and company data.
“We're doing more with less,” Mr. Bowman said. “Our guys are working harder, stepping up to the plate and trying to get through the hard times.”
Stepping up fleet surveys, particularly on weekends, is one technique Belle Tire is using to stay close to its customers, according to Mr. Bowman. The auto glass business Belle Tire began last year also is proving helpful.
“We're picking up a lot of fleet business from glass—Ryder, Penske, trash haulers,” he said.
Sales at Bauer Built Inc. of Durand, Wis., were off about 15 percent in dollar amounts in January and February compared with the same months in 2008, according to President Jerry Bauer.
“We're looking at everything,” Mr. Bauer said, regarding his company's efforts to stay profitable. “If it's an expense, we're looking at it.”
That includes everything from vehicle operations and fuel costs to payroll, benefits and insurance, he said.
Bauer Built has had no layoffs yet, but it is running leaner, according to Mr. Bauer. “The things we learned during the days of high fuel prices are things we're relying on.” The company is doing continuous fleet inspections, but it also did them before the downturn, he added.
Logan, Utah-based Jack's Tire and Oil Inc., which also has operations in Arizona and Idaho, has seen its overall business slump about 8-10 percent recently, though business was better in March, according to Dick Tolotti, company president and CEO.
More than most other parts of the U.S., construction and fleet business in the states that Jack's Tire serves are seasonal, Mr. Tolotti said. “Though we were off in January and February, the sun is starting to come out.”
Fleet business has been flat for Jack's Tire, which means it's been better than other aspects of its operations, according to Mr. Tolotti. “We're trying to stay as close to our customers as we possibly can, and we have a real close eye on the fleets we serve,” he said. “Also, we're trying not to buy anything we absolutely don't have to have.”
The farm business is also a bright spot for Jack's Tire, to the point that Mr. Tolotti said he is “guardedly optimistic” about 2009. “The downturn seems to have flattened out for us, and we think the second quarter will be better for us than the first.”
Winter, always a tough season in the northeast, has been rough for Terry-Haggerty Tire Co. Inc. in Albany, N.Y., according to President Thomas Terry.
“Winter's starting to break, and spring is our selling season,” he said. “The third and fourth quarters are where you hope to break even, and we hope we will do that.”
To date Terry-Haggerty has laid off seven workers and idled three vehicles—one boom truck and two service trucks—leaving it with 38 employees and 13 trucks, Mr. Terry said. “We're doing everything we can to add value to our customers, including inspections,” he added.
Central Tire Corp., based in Verona, Va., with another location in Richmond, held its own in sales until November, when things began to soften, President Terry Westhafer told Tire Business.
“I would say percentage wise that November, December and January were down about 15 percent, and February was worse,” he said. “In March it was up some, but I don't know whether it's real improvement or the usual jump due to the change in the weather.”
So far the dealership has not laid off anyone, but it has limited hours—including a four-day production week at its retread shop in Verona—and it hasn't replaced three workers who left of their own accord, Mr. Westhafer said.
The company's fleet business is down a little more than its retail business, which Mr. Westhafer described as “palatable.”
“I wouldn't say there's been a noticeable increase in inspections over normal conditions,” he said.
“We do it when the customer needs us or wants us. We're also willing to take national account business, where we earn less but where we know the business will last.”
Generally speaking, none of the dealers contacted reported any problems with obtaining credit, and all of them said they had been helped tremendously by the drop in fuel prices since last summer.
“We're a 63-year-old company this year, and we have a very strong relationship with our bank,” said East Bay Tire's Mr. Pehanick. Mr. Stewart said Action Tire had refinanced a few properties, taking advantage of low interest rates, but hasn't had to borrow money recently.
Mr. Stewart also said his company was helped a great deal when gasoline went to $2 a gallon from $4. “That saves us $50,000 a month, and for someone like us, $50,000 is a lot of money,” he said.
Mr. Westhafer seconded Mr. Stewart's approval of lower fuel prices. “We ate a lot of increases when fuel prices escalated, and now the price reductions we hope to keep for ourselves,” he said.