Riding the wave: When OTR supply falls, Craft Tire’s sales shoot up
Allen Craft likes it when new OTR tire supply is tight. His company, Uniontown, Pa.-based Craft Tire Inc., is making a mint selling OTR retreads to tire-starved customers.
"We´re looking at a record sales year," he says. Projections are in the $11 million range -- nearly a $4 million increase over the dealership´s 2003 sales. The first two months of Craft Tire´s second quarter were its best months ever. On a monthly basis, the company has boosted its business by 30% since May.
"I´m thrilled to death," says Craft. "Both of our retread plants (one in Uniontown, and the other in Greenville, Ohio) are at full capacity."
Hustling up business
Craft Tire only entered retreading five years ago. But the company has enjoyed a lucrative presence in the OTR tire segment for nearly 30 years. Craft went into business for himself in 1975 following a seven-year stint at Brad Ragan Inc. He started out with $5,000 of his own money and a $15,000 credit line from a local bank.
Craft bought used tires by the truckload and then repaired and sold them. He only dealt in OTR tires. "All they did (at Brad Ragan) was OTR," he says. "That´s all I knew. We bought anything we could get our hands on."
Craft flirted with selling other tires along the way but always returned to OTR. "I just couldn´t get excited about truck tires. I even had a little retail store that sold passenger tires. It lasted about two years. I found myself spending more time selling a $40 car tire when I could´ve been out selling a $2,000 OTR tire!"
Craft logged countless miles building his used tire business. "I´ve traveled to every state in the country looking for tires, going to strip mines that had been shut down and visiting other dealers who were holding close-outs. We spent hours on the phone calling steel mills and iron ranges. We used to get a lot of our tires from mines.
"The key to selling OTR tires is buying them," he says. "It took years and years of combing the country for leads and contacts."
A new route
In the late ´90s, Craft noticed it was becoming harder to find good used OTR tires. "We came to a point where we had to make a decision: ´Do we stay small or get bigger?´ You can´t stay the same in business."
Craft Tire was already selling casings to retreaders. After much thought, Craft decided to go into retreading and opened a plant in Uniontown. Returns weren´t immediate. "The most difficult part was finding equipment," he says. Meanwhile, the dealership began stockpiling casings and training employees. Craft frequently found himself on the shop floor training techs.
Once everything was in place, business took off, he says. Craft Tire´s sales force, including Mark Goodess, another Brad Ragan alumnus, and Glenn Heller, got the word out to customers. "They did a lot of the marketing."
The dealership´s retread business experienced some growing pains, according to Craft. "We went through a period of higher adjustments. Our rate was three times higher than the normal retreader." Adjustments eventually fell as techs honed their skills.
Craft also observed a shift in how other dealerships looked at him. "When we only sold used tires, everyone was our friend. When we went into retreading, other retreaders became our competitors."
Grow or wither
"Once we committed to retreading, we felt we had to get larger," says Craft. Enter Shrader´s Inc., a large OTR retreader headquartered in Greenville, Ohio. Shrader´s Inc.´s president, John Shimer, had put the operation up for sale, and Craft liked what he saw. Craft Tire bought the company´s assets in April 2003 following eight months of negotiations.
Craft opted for an asset buy-out rather than a full-scale acquisition. "It makes things simpler. As the buyer, you don´t want to assume any liabilities. We wanted their equipment, their employees and their customer list."
The purchase brought Craft Tire a number of long-time Shrader´s Inc. employees, including retread plant manager Terry Kerg, who started with the company in 1972, and Dwaine Holsapple, who began his career with the dealership as a gas pumper in 1955.
Some employees were worried that they would lose their jobs. "There was a lot of concern. The first meeting I held, I said, ´This is a new company. The first thing we´re going to do is fill that shop with tires. Your job is to cap them for us.´ I also told them, ´The more money this company makes, the more money you´ll make.´"
Meanwhile, Craft assembled a sales team and called on customers aggressively. "It took us a year to get (Greenville) turned around. During that time, you could see these people start to feel more secure.
"We felt if we had enough casings, we could make the thing go," says Craft. "And it has worked perfectly."
Craft Tire enjoys a unique niche. It only produces and wholesales OTR retreads. Many are sold to fellow commercial tire dealerships like McCarthy Tire Service Inc., the Zurcher Group, Antioch Tire and others. The company does not service the retreads it sells.
"This is a very specialized segment. It isn´t a glamorous business. Salespeople are out in mines and stone quarries, inspecting old and dirty tires. That´s why it´s difficult to get good salespeople. It takes many years to train a good OTR person."
He says Craft Tire can´t train employees fast enough. "We´re within 30 days of getting enough people hired and trained to go 24 hours a day, seven days a week" -- a first for the company.
Craft Tire has put together an attractive benefits package to recruit new hires and retain old ones. The company offers medical insurance, a 401(k) program, an annual bonus, various incentive programs and up to five weeks of vacation each year based on seniority. "Eighty-percent of our (existing) employees have been here at least 15 years."
The company approaches its retread business in a systematic fashion. It keeps 20 different sizes in stock at both plants at all times, ranging from 16.00x25 to 33.00x51, both bias and radial. The company retreads 30 OTR tires a day between both of its plants.
Craft says the biggest part of the OTR business is now radial. "Growing up in a bias-ply market, we didn´t understand radials. We thought they´d put us out of business. But I spent a lot of time with a Michelin radial specialist and found out they´re the way to go."
Customer acceptance of radials was gradual, he says. "Radials were so much more expensive than bias tires. But then radial prices started to drop." Radials comprise more than 80% of Craft Tire´s total inventory.
Craft´s extensive industry contacts ensure a steady supply of used casings. "This is a very unorthodox business. My accountant gets on my case all the time about turning our stock five or six times a year. Well, you can throw that out the window."
You never know when a great deal is going to pop up, he says. "And you have to make the decision right then and there. Do you want them or not? I´ve always been the type of guy to buy them."
Most sellers are eager to unload their stock. "It has more value to us than them." But on occasion, Craft has had to wait for a good buy. "I´ve had situations where it´s taken me a year to buy a bunch of tires. The seller will call me and ask, ´Do you still want those tires?´ and I say, ´You still have those tires?’" he says with a laugh.
Bad buys are inevitable. "But sometimes, if you buy them cheap enough, you can afford to sit on them." Craft handled most of the dealership´s tire buying for years but is gradually doing less of it. "I have a guy, Jay Campbell. All he does is go out in the field and buy tires."
Seizing the day
Craft has every intention of continuing his company´s growth. He´d like to buy another retread plant as soon as possible, hopefully in the southeastern United States. If business stays strong, he may have to make an addition to the 50,000-square-foot Greenville plant. (Craft Tire´s Uniontown plant is smaller at 37,000 square feet.)
Meanwhile, he plans to make hay while new OTR tire supply is down. "Even after this (boom) is over, our retread business will still be good. We´re now getting tires from people who have never retreaded before." The company charges $2,000 per unit on average.
"We have to prove to our customers that it´s cost-effective to retread. We have a product that helps them save their customers money."