Did you know that John Polhemus checks his tire pressure regularly? Yep. In his garage with an old-style bar gauge that he keeps in his wife's car. He also visits Goodyear dealers regularly. For example, he hosts "town hall" meetings twice a year in each of nine regions. "We even utilized one of our dealer incentive trips as an opportunity to have an open forum with our dealers... so they could address top members of our executive team with their concerns," he says.
Over the last two years, those concerns have included the integration of Dunlop Tire Corp. ("too slow"), the dismantling of the Kelly-Springfield Tire Co. subsidiary ("where did the brand go?") and fill-rate problems ("a 70% or less fill-rate is not good enough"). A new pricing program has drawn the ire of some of Goodyear's large wholesalers as well.
MTD: How many points of sale do you have in the U.S.?
Polhemus: 10,000 or more, mainly for the Goodyear brand.
MTD: Given the many concerns they have had with the changes that have taken place at Goodyear in the last two years, how would you describe Goodyear's relationship with its dealers?
Polhemus: We're working hard on the relationship side of our business with all of our dealers. That has been a focal point of our organization and a priority. Our dealers have to remember that we have the largest dealer base of any tire company, and it takes time and commitment both to communicate and execute decisions that will have a positive effect for our customers and for the company.
If any negative feelings have surfaced recently, it probably is due to changes in programs, and the time necessary to fully communicate, execute and totally understand how everything works together. Our G3 Xpress distribution program is a change for our dealers, and so is the change in pricing programs -- what we have called "pricing parity."
However, while some negative comments from a few dealers may have generated some headlines, most dealers are happy with the changes and are quite vocal in letting us know they support these decisions. They are encouraged by this new model, what it means for them, and what it means for Goodyear.
Overall, we have been reaching out to our dealers in many ways. We have been on the road a lot, visiting dealers all over the country. We have made personal visits to their dealerships. We have hosted regional "town hall" meetings. We continue to have National Advisory Board meetings with representative dealers to tell them about potential new programs, and to listen to their concerns. Those advisory board meetings have been open and honest exchanges with us on a number of issues. And they will continue.
MTD: Is your "priority pricing" policy working? Have you made adjustments in it?
Polhemus: Sure, we have made adjustments during the first quarter and we announced a few more adjustments at the start of the second quarter. And we will continue to do that as long as we need to until we get it right.
The important thing is that when you make an adjustment, you don't make it at just one level.
MTD: How would you describe the impact on consumers of your "On the Wings of Goodyear" national advertising campaign?
Polhemus: I think the "Wings" program has been successful for us from an image standpoint. The numbers have documented that. We knew it was something that was going to take time to build equity in. As far as we are concerned, there is no intent to change it. We are going to continue it.
MTD: Last year, you admitted the integration of Dunlop Tire Corp. and the rebirth of the Kelly brand were going more slowly than anticipated. Have you picked up the pace?
Polhemus: Any business integration -- of people, products, programs, services, etc. -- can be bumpy. It simply takes time to complete the steps necessary to integrate separate operating processes together. The way we are approaching these integration efforts is to not just take Kelly or Dunlop and make a Goodyear out of them. We look at them independently, look at what works well, and attempt to integrate the best practices of the various entities to assure that we come out of the process with what works best for everyone.
We have mostly completed the integration of Kelly and Dunlop operations. Behind the scenes business management systems have been integrated, which means our G3 dealers can get all products on one order, and have all brands shipped on one truck. But a few integration items remain.
As for Kelly's "rebirth," we definitely are committed to Kelly as a strong dealer brand. That is where the heritage of this brand exists. We have made efforts to maintain and even rebuild Kelly's identity, and recently held a separate Kelly-only event when we introduced the new Safari Signature SUV tire, recreating the "Kelly Experience" with a small group of dealers and trade media. It's more about re-establishing relationships as a focal point of doing business, assuming you have the rest of the business model in place to make everyone a successful proposition.
MTD: At last year's Goodyear Dealer Meeting in Las Vegas, you said fill rates were in the 70% range, and blamed part of the problem on helping Ford Motor Co. replace millions of Firestone tires on its vehicles. Have your fill rates improved?
Polhemus: We have accomplished a great deal in this area, especially on the Goodyear side, after a tremendous amount of effort and focus. Today it's not a hot topic of discussion, especially with Goodyear. On the Goodyear side, our fill rates are consistently in the high 80s; we target numbers in the mid- to high-90s.
Our fill rates are measured by having tires available for shipping to the customer when they order them and where they want them shipped. We track them by product, by region and by customer, so we have visibility to any issue that might arise.
The real challenge right now is on the Dunlop side of the business, where we are experiencing growing pains with the distribution. We have moved from three distribution points to 12 to have greater regional coverage and access. We had some forecast issues that didn't accurately project the necessary mold needs, so we are in the process of procuring additional molds that will better help meet those needs.
MTD: How much of a priority are original equipment contracts to you?
Polhemus: There is a lot of debate over the impact of OE placements on the replacement business and the priority placed on going after that business at OE.
First, OE and the pull-through that it provides in the replacement market is important to our dealers. We continually track first replacement data at OE and that data clearly shows that 40% of first replacements of Goodyear branded tires are with other Goodyear brand tires. That is an impressive statistic, and one that every tire dealer should focus on when looking at sales opportunities. Goodyear's percentage of first replacements is the highest of any tire company.
At the same time, we are working on our business model at OE so that the business becomes more profitable, and is in concert with our replacement market objectives. Our OE and replacement organizations are working closer together than ever to leverage this position and manage the necessary investments to benefit both Goodyear and our retailers. That means making informed decisions on the OE platforms that we go after, to assure we are putting the right tires on the right vehicles that translate into the best sales opportunities in the replacement market.
MTD: The National Highway Traffic Safety Administration (NHTSA) recently adopted a regulation that will implement the early warning reporting provisions of the TREAD (Tire Recall Efficiency, Accountability and Documentation) Act. Under the regulation, tire manufacturers have to follow "relatively extensive quarterly reporting requirements" that will cost them a significant amount of time and money. How will this affect Goodyear?
Polhemus: I think we feel very fortunate because we do have a global system in place that will allow us to be compliant. In fact, it may be a system that we would want to market.
Obviously it will require more work and extra people and things like that. But we feel we are set up to be compliant when this kicks off. At the same time, we are also working within the Rubber Manufacturers Association to make sure that it is the right system.
MTD: What are you doing to help independent tire dealers?
Polhemus: We provide so much more in terms of value-added benefits that it can go unnoticed. For one, Goodyear's OE pull-through is unmatched in the industry. We have the largest share by far, and that automatically benefits our dealers. Goodyear training assistance and marketing for the dealer also are benefits that can't be beaten by anyone else. If we have let our dealers down at all in this area, it is in communicating to them the entire package of what is delivered by the company if you are a Goodyear dealer.
We offer XPLOR, the best dealer extranet system in the industry, which offers our dealers real-time, 24/7 insight into our business, allowing them to check product inventory on-line, then place orders and track orders on-line as well. Not to mention all of the instant product and marketing information that our dealers can access any time they'd like.
And if you're talking about another version of e-commerce -- selling tires on-line -- we're involving dealers there, too. Making tire purchases on-line has been something that was possible, but we didn't want to do it and have the process bypass our dealers. So we're currently managing a pilot project (in Atlanta, Ga.) that allows consumers to make tire purchases on-line -- but the sale and the installation have to go through one of our retail locations, including independent tire dealers.
Also, our new G3 Xpress distribution program is a great help to our independent tire dealers. With G3 Xpress, we are able to improve delivery service to dealers, especially our smaller-volume dealers who now can receive deliveries from approved WDs more than just once weekly. Our pricing parity model also has provided more consistent pricing.
We also are putting the final touches on a new program to assist Goodyear dealers in expanding their businesses. Our Blue Ribbon expansion program is being modified into a new program called Wings Up that will assist those dealers who want to grow their Goodyear business share.
MTD: Thank you, John.
