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April 27, 2018 02:00 AM

OUR VIEW: Fasten your seatbelt for next 8 months

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    The year is barely 110 days old, and changes continue to happen within the tire industry at a breakneck pace.

    First, Michelin North America Inc. and Sumitomo Corp. of America (SCOA) announced their intentions to combine Michelin's wholesale distribution assets with TBC Corp., creating a 50/50 joint venture, National Tire Wholesale (NTW). The business, with 144 locations across North America, will distribute nearly 15 million tires.

    Days later, Continental A.G. revealed it is considering restructuring to position itself for the upcoming disruption in the automotive industry.

    In early March, Mavis Discount Tire and Express Oil Change & Tire Engineers agreed to merge, forming a formidable retail giant with 870 locations in 24 states throughout the East Coast, South and Midwest.

    Later that month, Michelin announced plans to bolster its mining portfolio by striking a deal to acquire British conveyor belt and polymer maker Fenner P.L.C., a transaction valued at $1.8 billion.

    Meanwhile a long fight for control of South Korea's Kumho Tire Co. Inc. ended recently when Kumho's management and union agreed to allow China's Qingdao Doublestar Tire Co. Ltd. purchase a major stake in the tire maker.

    With the dust not yet settled from the establishment of NTW, Goodyear and Bridgestone Americas announced in mid-April that they are combining their respective U.S. wholesale tire distribution assets into a 50/50 joint venture that will operate through as many as 83 distribution centers nationwide.

    TireHub L.L.C., as the JV is called, will combine Goodyear's company-owned distribution portfolio with Bridgestone's Tire Wholesale Warehouse (TWW) subsidiary. The new business, valued at $600 million, will distribute 10 million units annually, which would translate into roughly $1 billion or more in revenue.

    Both companies say the venture complements their existing distribution strategies while expanding the depth and breadth of their passenger and light truck portfolios.

    But the news has sent a shockwave through the markets. Moody's Investors Services announced it placed both American Tire Distributors Inc. (ATD), the leading U.S. wholesaler with $5.2 billion in sales, and Dealer Tire L.L.C., ranked third with more than $1 billion in sales, under review for a credit downgrade.

    Meanwhile, Moody's said TireHub is a "positive credit development but does not currently impact Goodyear's Ba2 Corporate Family Rating, or stable rating outlook."

    "It's all about positioning Goodyear and our customers for growth," said Scott Rogers, president. North America Consumer at Goodyear.

    "We're excited about the prospects of what is going on with the tire industry. TireHub will help our customers win in the marketplace, capitalize on the trends that are shaping up that we believe means increased demand and specifically demand for Goodyear products by consumers."

    TJ Higgins, president, integrated consumer tire group, U.S. and Canada, Bridgestone Americas, said one reason for forming TireHub was to "create stronger, broader coverage by bringing these entities together. And we also thought with our other partners, we could create a broader network that would be more efficient.

    "The end objective of making sure that we have those really valuable products that we work so hard to develop and bring to market, that they're accessible to dealers and consumers when they need them and want them."

    The proliferation of SKUs — various sizes, speed ratings and load-carrying capabilities — make the tire industry even more complex. Couple that with intense global competition, as well as a volatile supply chain and a consumer who increasingly is going online to shop for tires, then wants them installed yesterday, the industry is ripe for more compelling news such as the NTW and TireHub revelations.

    We can hardly wait for the next 250 days to see what else unfolds.

    Letter
    to the
    Editor

    Do you have an opinion about this story? Do you have some thoughts you'd like to share with our readers? Tire Business would love to hear from you. Email your letter to Editor Don Detore at [email protected].

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