The first half of the year ended just as it began — with another industry disruption involving tire distribution.
Five months after Michelin North America Inc. and Sumitomo Corp. of Americas Inc. announced they were forming a tire distribution joint venture — called National Tire Wholesale (NTW) — Bridgestone Americas Inc. notified American Tire Distributors Inc. (ATD) it plans to discontinue distributing its passenger and light truck tires in the U.S. through ATD.
The move means that most Bridgestone tires now will be distributed exclusively through TireHub L.L.C., another tire distribution JV formed in mid-April by Bridgestone and Goodyear.
Two months before that, Goodyear announced it was terminating its distribution agreement with ATD, North America's largest aftermarket tire distributor. TireHub became operational on July 1.
So what does this mean for the tire dealers?
ATD President and CEO Stuart Schuette said Bridgestone's decision not only "limits ATD's product line, but it also limits how customers can purchase and obtain products."
There's no question about that. Tire dealers now have fewer options to fulfill customers' requests. And fewer options could mean product delays that affect customers — and independent tire dealers' bottom line.
And what about ATD?
Industry insiders began speculating about its viability months ago, soon after Moody's Investors Service downgraded its ratings for ATD, based largely on an anticipated "material loss of business" resulting from Goodyear's decision to stop distributing through ATD. Mr. Schuette subsequently told Tire Business that Goodyear accounted for 5 million units of more than 40 million units sold by ATD in fiscal 2017, a little more than 12 percent of ATD's unit sales.
Goodyear is conspicuously absent from the list of dealer programs listed on ATD's website.
The loss of the majority of the Bridgestone business certainly changes things for the worse.
Mr. Schuette, though, said ATD remains fiscally strong. In his statement on June 27, he said ATD "continues to generate substantial cash flows and as of May 31, 2018, had approximately $300 million of liquidity."
He remains steadfast in his belief that the Huntersville, N.C.-based business is "well-positioned and will remain the leader in the industry."
The new world order likely means that ATD will need to rely on distributing more products from Tier 2 and Tier 3 manufacturers — as well as other parts of its business — to fill the void created by the loss of Goodyear's and Bridgestone's business.
How will it all shake out? Can ATD not only persevere, but emerge stronger?
Stay tuned. The second half of the year might offer some answers.