AKRON —The announcement in early January that Michelin North America Inc. was taking a 50-percent stake in TBC Corp. and that the companies would be combining their wholesale businesses foreshadows what is likely to be continued structural change in the tire industry.
Not only does the soon-to-be combined wholesale venture, — which will be called National Tire Wholesale (NTW) — create a national competitor for the acknowledged leader in the wholesale sector, American Tire Distributors Inc. (ATD), but it positions Michelin and TBC better to prepare for a future that could be populated by autonomous vehicles. Sumitomo Corp. of America and Michelin each will own 50 percent of the JV.
No one knows how quickly it will take for autonomous vehicles to be accepted by the public, but there is no question the automotive and tech industries are barreling forward in that direction.
So the tire industry, including tire manufacturers, wholesalers and dealers, has little choice but to begin to position itself for that potential, and probably eventual, reality.
The new NTW business will combine Michelin's 85 TCi warehouses with TBC Corp.'s 59 Carroll Tire wholesale distribution outlets. Together they will distribute nearly 15 million tires, valued at $2 billion-plus, annually, placing it No. 2 behind ATD, which distributes 32 million tires and generates estimated sales of $5 billion a year.
Besides becoming a stronger competitor, the Michelin/TBC venture also opens other opportunities.
For one, Michelin gains additional distribution for its full range of tires, not just those for passenger cars and light trucks, which was TCi's focus.
In addition, with more warehouses, service speed should increase, not only for daily delivery to tire dealers and other tire users, but also for the venture's online efforts.
Also, while Michelin has no plans to change its strategy of not owning retail tire stores, having the ability to potentially test new ideas through TBC's extensive retail tire network can provide valuable insight in how to prepare for tomorrow's retail tire business. This could include even more data-based strategic decision-making.
Michelin's and TBC's venture is likely to spawn other such combinations as the industry's tire makers, distributors and dealers look to develop their own strategies for staying successful today but also to prepare their operations for what could be a different competitive environment tomorrow.
Just who might be the next companies to become bedfellows? Stay tuned.