Mergers, acquisitions reshuffle commercial tire/retread industry picture

AKRON — In a year influenced heavily by mergers and acquisitions, one could arguably say the biggest influence on the commercial tire sector last year was a company that technically doesn't exist any more.

For the first time in years, there was a noticeable shift among the top dealerships tracked by Tire Business for its annual rankings of North America's largest commercial dealerships and retreaders, thanks in large part to Michelin North America Inc.'s decision to phase out its TCi Tire Centers commercial business and divest nearly all of its holdings.

In a series of actions throughout the year, Michelin sold 51 TCi commercial sales/service locations, leaving it with just a handful of locations in California now operating under the Michelin Americas Truck Tires business.

Michelin's deals included:

Selling three TCi commercial service locations and an MRT retread plant in Colorado to Quality Tire Co. of Salt Lake City;

Selling 27 locations — including four retread plants — in Alabama, Florida, Louisiana, Mississippi, Tennessee and Virginia, in July to Snider Fleet Solutions.

Selling 16 locations — including two retread plants — in Kansas, Louisiana, Missouri and Texas, in September to T&W Tire;

Selling four locations in Ohio — including one retread plant — in December to Shrader Tire & Oil and one location in Michigan, to Meekhof Tire Sales & Service Inc.

Michelin started paring down its TCi holdings in 2010, selling 16 outlets with one retread plant to Service Tire Truck Centers Inc. At that time, TCi operated 60 outlets and 10 retread plants in 15 states.

Even with these deals completed partway through 2017, the acquisitions helped both Snider Fleet and T&W Tire climb up the Tire Business rankings — Snider to fourth from seventh and T&W to 14th from 34th, based on 2017 sales of $400 million and $118.8 million, respectively.

Overall, Southern Tire Mart continued its reign atop the leading dealerships' table, surpassing the billion-dollar mark in revenue for the first time after chalking up 19 percent growth during the year over 2016.

As such, STM's sales volume is roughly a third more than that of No. 2 Best One Tire Service's $425 million. Kal Tire, with North American-related commercial sales of $422.7 million,  Pomp's Tire ($408 million) and Snider Fleet Solutions ($400 million) round out the Top 5.

Southern Tire also moved to the top of the leading retreaders' rankings, pulling even with Goodyear Commercial Tire Systems L.L.C.

Considering Snider's revenue includes just six months of sales from its TCi acquisition, it is likely Snider will push ahead in the rankings next year, perhaps as high as No. 2.

On the move

Other acquisitions of note that affect the commercial tire sector include:

Love's Travel Stops & Country Stores acquired Bridgestone Americas Inc.'s Speedco Inc. quick lube and inspection service center network. It has broadened the tire selection at most of the 52 Speedco stores to include Aeolus-, Goodyear- and Yokohama-brand new tires in addition to the Bridgestone and Firestone brands already offered. Love's also is switching the retreads available at these locations to products made at its own retread shops.

McCarthy Tire & Service took over six GCR Tires & Service stores in Maryland, New York and Pennsylvania from Bridgestone Americas, including one retread plant, in Horseheads, N.Y. Bridgestone, noting its "strong relationship" with McCarthy, said the transaction was tied to its market strategy of "effectively meeting the needs of our customers."

GCR pared down further early in 2018, closing 17 stores and three retread plants in Canada in January part of an ongoing evaluation of its "operating model."

The locations closed were nearly all in Quebec, Bridgestone said. The company since has sold three stores — in Baie-Comeau, La Malbaie and Roberval, Quebec — and a retread plant in Farnham, Quebec.

In a statement, Bridgestone said it is "is continually evaluating its operating model to ensure it is aligned with the needs of customers across North America. Throughout the process of the closures, we have kept the best interest of our teammates at the forefront of every decision we have made."

As for the U.S. market itself, aftermarket shipments of medium and heavy-duty truck tires grew 4.8 percent last year, to 19.5 million units, with both U.S. production and imports growing as well — the former up 2.2 percent to 14 million units and the latter up 5.1 percent to 14.6 million units, according to U.S. Tire Manufacturers Association and U.S. Commerce Department data.

China was the No. 1 source of imported truck tires again last year, despite a 15-percent drop in shipments to 6.46 million units. Thailand solidified its status as the No. 2 source of imported truck tires, boosting exports to the U.S. by 17.1 percent, to 2.13 million units.

The next largest nations on the import list are Canada (1.62 million units), Japan (1.48 million) and South Korea (735,060 units). Worth noting: Vietnam and Indonesia are now among the top 10 nations exporting truck tires to the U.S., at No. 8 and 10, respectively.

The emergence of Thailand, Vietnam and Indonesia as truck tire producers/exporters reflects in part moves by some of the major Chinese tire companies to move some production out of China to circumvent the possibility of restrictive import duties levied by the U.S. and/or Europe.

The USTMA has yet to issue a forecast for 2018, but recently Yokohama Tire Corp.'s Dan Funkhouser, vice president, commercial sales, shared some of the company's thoughts regarding market prospects this year.

Among the highlights of his comments:

The manufacturing sector is experiencing unusually robust expansion, with housing starts at a 10-year high. The reduced corporate tax rate will lead to a reinvestment in manufacturing and capacity, YTC said. People are spending money, and consumer confidence has increased.

Shipping capacity remains very tight, Mr. Funkhouser said, which is forcing the transportation industry to respond with new equipment purchases. More shipping demand will lead to more pressure on the issue of driver retention, which could yield a driver shortage.

All freight segments year-over-year are up, dry van freight is up 54 percent, refrigerated freight is up 112 percent, flatbed freight is up 63 percent, and specialty freight is up 45 percent.

The infrastructure bill will add construction and road jobs. The price of gas and oil is expected to keep rising, increasing the need to service the oil and natural gas fields, which in turn means increased demand for mixed service tires and retreading.

Michelin remained the No. 1 brand in this year's ranking, carried by 39 of the 50 dealerships profiled. The next most prevalent are Continental and General (31 each), Yokohama (28), Bridgestone (26), BFGoodrich (25), Firestone (24) and Goodyear (21).

Bandag and Michelin Retread Technologies are the dominant retread system supplier among the Top 50 commercial dealerships, together accounting for 34 of the 50 — 21 Bandag and 13 MRT.

Other retread system suppliers, include Michelin's Oliver system (eight companies); Goodyear (seven); Marangoni (three, including two RingTread System licensees); ContLifeCycle (two); and one is allied with AcuTread.

Six dealers use more than one system, and one — NRI Inc. — employs its own blend of equipment and technologies.

Finding qualified employees at competitive wages was the No. 1 concern of 21 dealers who replied to Tire Business' survey for this ranking. Other major concerns were the negative effects of low-quality imported casings, such as a downward push on prices, substitution for retreads and a shrinking pool of retreadable casings.

Dealers surveyed for this special focus expressed mixed reactions to truck stops' increasing business with tires, retreads and associated services.

Many still consider this to be a niche business that will have little impact on their operations, citing their fleet customers' insistence on full-service. A growing minority, however, see the truck stops — Love's Travel Stops, TravelCenters of America, etc. — as an emerging threat to their business.

Love's Travel Stops boasts more than 400 locations in 41 states, according to the company. It added tire care services to its business in 2008, and the Speedco acquisition gives it more than 320 tire and lube centers altogether.

Love's also ventured into retreading last year, opening four Oliver-system plants around the country to supply its growing store network.

TravelCenters rolled out its dedicated TA Truck Service Commercial Tire Network in late 2016 at its 240-plus TA and Petro Stopping Centers locations in the U.S. and Canada

STM gains ground

On the retread side of the ledger, Southern Tire Mart has pulled even with Goodyear Commercial Tire Systems L.L.C. as the largest truck tire retreader in the North America.

STM actually has a higher per-day production ticket — 4,660 vs. 4,384 — but Goodyear's estimated tread rubber usage is on par with STM's. Goodyear has more plants as well, 27 vs. 18.

Snider Fleet Solutions, by virtue of its acquisition of four MRT plants from TCi, advanced to third on the list ahead of Bridgestone Amercas' GCR Tires & Service unit.

New to the rankings this year are T&W Tire and Love's Travel Stops, at Nos. 10 and 13.

T&W, which added a pair of MRT plants in its mid-year acquisition of 16 TCi centers, previously didn't report its production. Love's position in the ranking is based on estimated production; the company declined to provide data this year because 2017 was its first full year as a retreader.

TCi's appearance in the ranking also is an estimate, based on the firm's previous years' production numbers and restated according to how long its various plants were in operation before being divested throughout 2017.

TCi will drop out completely in next year's ranking, leaving Bridgestone (GCR), Goodyear and Continental Americas (BestDrive L.L.C.) as new tire makers with retread subsidiaries.

Bandag was the predominant system among the top retreaders last year, affiliated with 21 of the 50 firms ranked.

The rest of the companies use MRT (12), Oliver (eight); Goodyear (seven); Marangoni RTS (five); ContiLifeCycle (three); or AcuTread, Bandamatic, Galgo, Ironhead, PQ or Vipal (one each).

Eight companies use more than one retread system, accounting for the apparent discrepancy between number of companies and retreading systems.