FAIRFIELD, Calif.—Commercial and wholesale tire dealer East Bay Tire Co. is expanding into retreading following its April 1 acquisition of Oahu, Hawaii-based retreader Rainbow Tire.
East Bay, which has renamed the venture EBT Eco., will employ Mich-elin North America Inc.'s Oliver Rubber retreading system at the 7,500-sq.-ft. plant, putting the plant's annual production at about 10,000 units, according to John Hulsey, wholesale general manager for East Bay. He added that the Fairfield-based dealership is hoping to double that output over the next few years.
“We will, at some point, look at additional capacity and expanding the retread shop,” Mr. Hulsey said. He declined to disclose financial terms of the deal.
Mr. Hulsey said East Bay's decision to open a retread plant stems from its 2013 acquisition of Hawaii's R&G Tire Center Inc., which operated a retread shop that was not included in the buyout deal. With the acquisition, R&G shut its retreading business.
“Really, when we took over R&G Tire, they previously were a Bandag retreader and we knew at some point we would have to open up a retread shop to support what they were previously doing with Bandag,” Mr. Hulsey told Tire Business. “...With that, along with the pressure from our existing customers in Oahu to get into retreading, it just made sense.
“We felt we had enough customers behind us to maximize the production at a retread plant.”
So far the company has brought in a new buffer and is installing a monorail and new enveloper, Mr. Hulsey said. In another year, East Bay will be looking to add another chamber.
Coinciding with the buyout, Rainbow Tire celebrated its 30th anniversary in April, according to former co-owner Alan Batty, who joined Rainbow Tire founders Miles Aoki and Rodney Furoyama as the firm's third partner in 2003.
Mr. Batty noted that overhead costs such as rent, insurance and utilities are much higher in Hawaii than on the mainland, and those kinds of things “are all part of the cost of manufacturing a recap.” Eventually those costs became too high.
“The fallacy of the whole thing is, when you do commercial business you feel you have to have the retread business, which you kind of do—but not if it's going to impact your cash flow and your margins,” he said. “That was what we saw over the years. It was taking its toll, so we decided to sell it.”
In addition to Rainbow Tire, Mr. Batty has owned and operated Honolulu-based commercial and retail tire business American Tire Co. since 1992. He said he plans to continue to focus on that business.
“We need to concentrate on what we do best, and we do commercial and fleet repair work the best,” he said. “And we make the best margins at it compared to recapping tires.”
Mr. Batty said Mr. Aoki has retired and Mr. Furoyama will continue to work under East Bay as the manager for EBT Eco.
While casing shortages have been an ongoing problem for the industry, Mr. Batty said he believes that it's “a little bit less of an issue” in Hawaii.
“I think in Hawaii, for instance, they're a little more cautious of damaging cases,” he said.
“Tires in general are not readily available. You can't just call up 20 different suppliers and have tires over there the next day. It's an island.
“There's a tremendous amount of people who do not retread over there, for one, who allow us to purchase their casings,” he continued. “And with some of our relationships with some of our customers, we kind of just acquire their casings.”
In addition to being East Bay's first foray into retreading, the partnership also marks Oliver Rubber's return to Hawaii after a long absence, which Steve Phillips, director of sales for Oliver, said has been at least 20 years.
“From our standpoint, East Bay is a very important commercial partner for our organization, and we are very pleased to have them representing the Oliver brand in Hawaii,” Mr. Phillips told Tire Business.
To reach this reporter: wschertz@ crain.com; 330-865-6148.