Controlled growth spells success for Bauer: Midwestern dealer prepares to enter Chicago
Pick a word to describe Jerry Bauer: patient, methodical, ambitious, persistent. He's all of the above. And Bauer's systematic application of these qualities has enabled his 27-outlet dealership to develop into the fourth largest independent commercial tire chain in the United States, according to Modern Tire Dealer statistics.
Few years in Bauer Built Inc.'s 58-year history were as busy as 2001. In March, the company acquired U.S. Wholesale Inc., a Fulton, Ill.-based tire distributor with customers in Iowa, Nebraska, Wisconsin and parts of Minnesota. In July, Bauer purchased Lincoln, Neb.-based Great Plains Tire Centers, a four-location truck tire dealership and retreader with a long history in the "Cornhusker State." That same month, the dealership relocated its Davenport, Iowa, operation to a new, larger facility within the city. And in December, it did the same thing with its Sac City, Iowa, complex.
Bauer is now focusing on realigning his management and sales teams to better meet customers' needs. And he's gearing up to strengthen Bauer Built's presence in metropolitan Chicago with new facilities.
Modern Tire Dealer recently spoke with Bauer about his company's activities last year and his plans for 2002.
MTD: You made two acquisitions last year: U.S. Wholesale Inc. in March and then Great Plains Tire Centers four months later. What does each company bring to the table?
Bauer: With U.S. Wholesale, it's a couple of things. First, one of our goals is to expand our wholesale products, especially consumer and farm, and that was the thing they were in. Second, their market area was on top of ours, so we eliminated a competitor. Third, they had exclusive rights to the Michelin/BFGoodrich ag tire program and territories we had operations in. And fourth, they had a number of very talented people.
Great Plains was a different-type deal. They were a commercial truck tire operation with four locations in Nebraska. There were a lot of similarities between their business and ours. And again, with an excellent group of people, they fit well into our plans.
MTD: Did the acquisitions present themselves or were they part of a long-range strategy?
Bauer: U.S. Wholesale came up pretty quickly; we weren't even involved until January 2001. Great Plains was part of a long-term strategy. We'd been talking with them for more than a year.
MTD: What do you look for in potential acquisitions?
Bauer: People are the most important thing. Second, how does (the company) fit into our existing market area? Third is product offering. We try to stay with the family we're in.
MTD: Does Bauer Built have acquisition plans for 2002?
Bauer: No. Historically, our management style has been to acquire and absorb, acquire and absorb. You can only do so much so fast. But we won't close the door on anything.
MTD: You've announced that Bauer Built will target the Chicago market this year. Why there?
Bauer: We've been selling in Chicago for 20 to 30 years. We have a truck that runs into Chicago once a week. We're in Indianapolis, Ind., we're in Milwaukee, Wis., Cedar Rapids, Iowa -- we've got Chicago surrounded.
MTD: What will your strategy be in "The Windy City?"
Bauer: We're going to have a commercial tire center and a wholesale distribution center, and eventually a Michelin Retread Technologies Inc. (MRTI) shop sometime this year. We'll be the only MRTI retreader in the Chicago market. We'll be located in Romeoville, Ill., a southwest suburb, which we feel is strategically located.
MTD: Do you have plans to expand east of Chicago?
Bauer: Our focus is more to increase our dominance in existing areas instead of expanding beyond it. We want to make sure we've got all of our holes filled.
MTD: The commercial truck tire market is significantly depressed. How has Bauer Built managed to grow during hard economic times?
Bauer: Two of the things were the acquisitions we made to keep ourselves growing. We've had to be more aggressive with pricing to fend off competitors. And we've focused on targeting new businesses and customers.
MTD: When the market bounces back, will you get more aggressive when it comes to growth?
Bauer: Our pattern will stay fairly consistent with what it's been historically. We believe in controlled growth. We aren't growing for the sake of being bigger. In 2002, you'll find us making the things we did in 2001 work. When we get the bugs worked out, we'll look to the next opportunity. If something doesn't come along, we'll start targeting new things. We've been talking with people.
MTD: Switching over to retreading, in 2000, Bauer Built had five retread shops; last year you added another one, and a Chicago plant is on the horizon. Are more retread plants in the works?
Bauer: We'll have an eighth retread shop in 2003; I'm not sure where. As our business grows, we may need another to take care of our existing business.
MTD: What were your retread sales like last year?
Bauer: The first half was slow, but it rebounded decently during the second half of the year. When the economy is soft, people look at retreads as economical alternatives. I'm pretty optimistic about 2002.
MTD: In early 2000, Bauer Built introduced an associate consumer tire dealer program called Tire Shop that provides co-op ad support, merchandising plans, rebate programs and other perks to wholesale customers. How did that come about?
Bauer: Our typical customer is really small and didn't necessarily fit the terms and conditions of programs like American Car Care Centers, for example, but still needed some help. We're rolling out a sister program called Farm Tire Shop. It's similar to Tire Shop, but will focus more on the agricultural customer.
MTD: What was your farm tire business like last year?
Bauer: It was up due to our acquisition of U.S. Wholesale. I think 2002 will be a decent year with the advent of Farm Tire Shop. We have a farm tire specialist who came from U.S. Wholesale, Dave Ripley, who'll coordinate our farm tire program. His focus will be getting the program up and running.
MTD: The U.S. Wholesale buy-out brought the Yokohama brand into your fold, joining Michelin, Bridgestone, Firestone, BFGoodrich, Kumho and Hercules, which you added in 1992. How important is brand portfolio?
Bauer: You need the right mix of products; you don't want to be a jack-of-all-trades. Each year, we sit down and develop a merchandise plan and evaluate each product to see what makes the most sense. We decide which products to carry and which ones we'll phase out.
MTD: Are fleets brand-loyal or do they tend to buy the most inexpensive tire available at the moment?
Bauer: It's a mixture. Most fleets have a pretty good grasp of the value of the product they're buying. They're not just buying price -- they're buying service, delivery, the whole package. There are a lot of fleets who buy from us simply because they've been doing business with us. And there are some who will bid and let the lowest price prevail.
MTD: What are Bauer Built's most significant challenges ahead?
Bauer: Control our costs, maintain our margins and keep moving forward. We're in a difficult economy. You need to keep your head above water and get by. There are people who just don't make it during economic downturns. Being there when it's all over is one of the key challenges. It will get better, and we want to come out of this stronger than when we went in.
MTD: What's your advice to other commercial dealers planning to expand their operations?
Bauer: Stay out of the Midwest! (laughs.) You have to manage your business. It won't manage itself. The big three are sales, gross profit and payroll. If you can maintain your sales, grow your gross profit margins and keep payroll in line, you'll be OK.