YEAR IN REVIEW: Changes abound for tire wholesalers in 2018

AKRON — The last 12 months seemed like an alphabet soup full of changes in the wholesale tire business.

NTW. TBC. TCi. ATD.

From January, when Michelin North America Inc. (MNA) and Sumitomo Corp. of Americas (SCOA) announced the formation of National Tire Wholesale (NTW) — a 50-50 joint venture that combines Michelin's TCi wholesale business with the Carroll Tire wholesale assets of TBC Corp. (an SCOA company) — 2018 was off and running.

In the deal, valued at $1.52 billion, Michelin acquired a 50-percent stake in TBC with a $630 million cash payment along with its TCi assets. NTW now ranks as the second-largest player in the U.S. wholesale tire market, combining Michelin's 85 TCi and TBC's 59 Carroll Tire wholesale distribution locations. Don Byrd, president and COO of TCi since 2014, was named president and COO of NTW.

The wholesale news didn't stop until the days right before Christmas. First, American Tire Distributors Inc.'s voting stakeholders "overwhelmingly" approved of the company's reorganization plan. Then, two days later, the U.S. Bankruptcy Court for the District of Delaware approved its plan, paving the way for ATD to emerge from Chapter 11 bankruptcy protection.

It's been that kind of year. Those changes, and numerous others in the wholesale business, rank collectively as Tire Business' Top Story of the Year.

Within that, the story of ATD dominated. Soon after Michelin and Sumitomo launched NTW, two other Tier 1 tire makers and competitors, Bridgestone Americans Inc. and Goodyear, announced the formation of their own 50/50 JV, TireHub L.L.C., to distribute Bridgestone, Goodyear and their respective associate brand tires through 80-plus distribution centers nationwide.

TireHub, a $600 million stand-alone company based in Atlanta, began operations on July 3. CEO Peter Gibbons, a veteran business and supply chain executive, was named to lead the new JV.

"It's critical for U.S. tire dealers and retailers to be able to get the right tires on time to meet the needs and expectations of their customers," said TJ Higgins, president, integrated consumer tire group, U.S. and Canada, Bridgestone Americas.

"With the ability to deliver the full portfolio of Goodyear products and a dedicated focus on driving logistics and customer service excellence, TireHub creates a winning proposition for us, our customers, Goodyear's company-owned retail outlets and consumers ... ," Goodyear Americas President Steve McClellan said.

It wasn't long afterward when Bridgestone and Goodyear said they would be ending supply ties with ATD, eliminating two of the wholesaler's largest suppliers. Goodyear accounted for 12 percent of ATD sales, according to ATD CEO Stuart Schuette.

The moves jolted the Huntersville, N.C.-based tire distributor, which had estimated sales of $5.2 billion in 2017. In a matter of weeks, Moody's Investor Services delivered another blow to ATD, downgrading the company's ratings and telling investors "the magnitude of the associated earnings and cash flow decline will compound an already levered financial risk profile, rendering a pre-emptive debt restructuring increasingly likely."

With the year just beyond its halfway point, ATD announced a major reorganization plan. About 100 positions were eliminated, 40 others were added, and a renewed emphasis was made on increasing the number of franchises that are part of ATD's Tire Pros program. ATD said the moves would save $20 million annually.

Less than two months later, ATD reached an agreement in principle with holders of 75 percent of its bonds on terms of a recapitalization transaction, which would reduce the company's debt by up to $1.1 billion.

The low point, however, came in early October when ATD filed for Chapter 11 bankruptcy protection, a court-supervised process that was the next logical step toward reducing debt. ATD said it had secured a commitment for $250 million in new financing to fund the process.

Through it all, Mr. Schuette maintained it was "business as usual," for ATD, its employees and customers.

"ATD is — and will continue to be — the leader in the replacement tire business because of our commitment to focusing on innovation to deliver the very best experience for our customers," Mr. Schuette said.

"We know we can achieve that through the continued dedication of our associates. We can't wait for tomorrow."

ATD, he maintained, is stronger today than it was a year ago.

"And we'll be stronger a year from now than we are today," he said. "ATD embarked on a journey of transformation 20 months ago. We're leading change in the industry and will continue to do so. I have no reason to be anything but optimistic as we continue on this journey."

Some of the other changes in the wholesale market — many of which would have been big news items themselves in any other year — include:

• Max Finkelstein Inc. and Treadmaxx Tire Distributors Inc. formed a wholesale buying group, Tire Distributors of the Americas L.L.C. Finkelstein and Treadmaxx said the new company is structured as a "strategic membership group," which provides opportunities for additional members to join. The partners will continue to operate independently in the marketplace.

Atlanta-based Treadmaxx formerly traded under the Kauffman Tire Inc. banner, before Millwood, N.Y.-based Mavis Discount Tire acquired Kauffman's retail assets in January.

Tire and auto parts wholesaler U.S. AutoForce, a division of U.S. Venture Inc., bought Tire's Warehouse Inc. (TWI) in June, expanding westward into Arizona, California and Nevada. The deal includes TWI's eight warehouses in California and Nevada. U.S. AutoForce operates 24 warehouse distribution centers in 10 states.

K&M Tire Inc. opened its 27th distribution center in June, a 21,000-sq.-ft. structure in Milwaukee. The company also broke ground in July on a 15,000-sq.-ft. distribution center in Beresford, S.D.

Atlantic Tire Distributors added D/Cs in High Point, N.C., and Lynchburg, Va., with combined capacity of 105,000 square feet, expanding the Colony Tire subsidiary's network to six warehouses.

Wholesale Tire Distributors opened a D/C in Grand Prairie, Texas.

Community Wholesale Tire opened a D/C in Peoria, Ill., its fourth warehouse.

Monro Inc. expanded its wholesale business in May with the acquisition of Johnson City, Tenn.-based Free Service Tire, whose holdings included four wholesale distribution centers, 12 retail stores and one retread plant. It operates as part of Monro's Tires Now business unit.

Tire Distributors of Georgia added a D/C in Statesboro, Ga., its third warehouse.

ATD opened a 1-million-sq.-ft. mixing warehouse in Blakesle, Pa., designed to supply other ATD warehouses in the northeast and mid-Atlantic U.S. as well as eastern Canada.

Meanwhile, the Canadian wholesale market was disrupted in November when Montreal-based Groupe Touchette Inc. acquired Atlas Tire Wholesale Inc. The acquisition gives Groupe Touchette, Canada's largest tire distributor, extended reach, particularly in Ontario, where Atlas operates three distribution centers and has a fourth under construction.

With both companies privately owned, financial details were not released. Groupe Touchette only said it acquired "the totality" of Atlas shares. The deal will boost Groupe Touchette's sales revenue to between $420 million and $500 million annually.