However, Barry Steinberg, president of Watertown, Mass.-based Direct Tire & Auto Service, called the move a “cash flow killer” for dealers, providing this hypothetical scenario:
“What they want to do is they want to pay me, say, $80 or $90 — it doesn't really matter — to do the service on tires we didn't sell, and then they're going to give us this commission for doing it,” Mr. Steinberg said. “Let's say it's $100. Let's say it's an $800 set of tires — hypothetical numbers, so do the math.
“I buy that tire from Michelin for $125 normally,” he continued. “Let's say I sell it for $175, so the set of tires costs me $500 to buy and I'm making $200 profit plus various mount and balance (fees). Let's say the sale turns out to be $850 with sales tax, recycling and balancing, and maybe I sold them a warranty or whatever — now I would have that $850 to put in my bank, pay my guys, pay my bills, pay Uncle Sam and maybe pay for some advertising.”
An installer fee like what Michelin is proposing can still generate a decent profit, Mr. Steinberg said, but it doesn't leave a business owner much money on hand.
When Direct Tire sells a set of tires, “I've got that $850 in cash flow to work my business with, to run my business,” he said. “What they're giving me is a lousy $100. What's that gonna do for me?... Regardless of how much they pay me, they've taken $850 in one simple transaction out of my cash flow, and they're gonna multiply that by thousands of guys.”
Alpio Barbara, owner of Redwood General Tire Pros in Redwood City, Calif., said he wasn't surprised by Michelin's online sales plans and isn't enthusiastic about it, but is not overly concerned about its impact on the industry, either.
“If you're a good dealer, people are going to come buy from you or they're going to get it mounted (by you),” he said. “I'm not going to fight city hall. (Michelin's) going to do it, and I'm going to get the mounting and the balancing and hopefully an alignment out of it.
“Do I like it? No — it's another competitor out there for me,” he continued. “But I'm not gonna win the battle. It's just like when they started selling to the car dealers. Yeah, you might go there once, but you're not gonna get the service you'd get from an independent tire dealer.... It's just the way it is, the way of the future.”