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Size matters

Most tire dealers, especially the older ones, recognize that their relations with tire manufacturers have changed dramatically in the last 20-plus years or so. And in interviews with dozens of dealers of all sizes and from all parts of the country, we discovered that many of them don’t think the change has been for the better.

Some no longer buy direct from the manufacturer. Many also find themselves competing against an increasing number of retail outlets.

They are resilient, however. Despite these challenges, independent tire dealers have increased their share of the U.S. retail passenger tire market by 4.5% in the years between 1985 and 2007. Statistics from MTD’s Facts Issues, outlined in an accompanying article (see page 22), detail the changes that have taken place not only in retail sales but in distribution channels.

It was in 1986 that the Big Three tire manufacturers -- Goodyear Tire & Rubber Co., Bridgestone Firestone North American Tire LLC and Michelin North America Inc. -- began making the huge financial commitments that altered their relationships with dealers.

In interviews with MTD, many dealers acknowledged some changes have been necessary. But some complain that loyalty and trust have suffered, and that manufacturers no longer provide them the individual attention they once received.

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Manufacturers contend that spelling out rules qualifying dealers for bonuses, discounts or other benefits actually assures more equal treatment for all. And there are still times when they directly help out promising but struggling dealers.

What do the dealers say? Since none were willing to discuss their thoughts publicly, we promised not to reveal their identities or the names of their dealerships.

Most, called at random, said they do sell either some or all of the Big Three brands. However, some maintained they don’t want to, either for competitive reasons or because they think dealing with second tier brands is less of a hassle.

The president of a large eastern chain rated Goodyear’s service in dealing with problems “a four on a scale of one to 10,” (with one being the worst service and 10 the best). He said he’s had some fill rate issues with the company, but he’s happy with its “good new products” and has found Goodyear executives available when he needs to talk with them. “Everyone has to decide if their quality is worth the price.”

He still gave Bridgestone’s dealer relations the highest rating -- about a six on the one-to-10 scale. “Michelin is better than they used to be,” said the dealer. But in his mind, the company still only rates about a three. He’d also like to see better service from the company’s distributor.

He said Michelin’s new Alliance Associate Dealer (AAD) program “has become a viable option for medium-size dealers.”

An eastern dealer prefers direct contact with the Big Three manufacturers to dealing with less reliable, smaller distributors.

He complained about manufacturers setting percentages or sales quotas because if you’re dealing with multiple companies “you have to cheat to make it work.”

He said he rejected Michelin’s requirement that it has the right to audit his books to verify the sales percentages.

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Bridgestone is the best manufacturer to work with, he said. He’s direct with Goodyear, but finds its service “inconsistent.” Michelin is “better now.”

In jockeying for business, he contended, distributors tend to “break the rules.” He declined to be specific.

Two commercial dealers commented on the battle for retreading customers among the Big Three. One noted that his switch to Bandag since its purchase by Bridgestone has resulted in Goodyear’s pulling out as a tire supplier.

The other said Michelin pulled its tires from his dealership “a few years ago” because he wouldn’t switch from Bandag to its retreading process. The dealer said he didn’t have the close relationship with manufacturers that he did in past years, but that Bridgestone’s people were still the best of all.

He, too, has refused to permit Michelin to audit his books to check on the percentage of its tires he was selling. “We talked about it. I just said ‘No!’”

Further west, another large dealer said that in dealing with manufacturers, “you must learn to defend yourself.”

Bridgestone has good products, he said. Michelin has good products and a great reputation, but he finds the company difficult to deal with at times. As an alternative, he said, “Cooper tires are still good, even though they got rid of a lot of people.

“A good thing,” he said, “is that virtually all tire brands are of good quality, and the average customer is happy with whatever brand we put on their vehicles.

“We keep a good relationship with our district guys, but with voice mail and other modern stuff, it’s harder to deal directly with people from the main offices. That’s just a sign of the times.”

Not everyone is unhappy with the manufacturers. A relatively small Goodyear dealer in a northern state said, “Everything is going well. We have no problems with adjustments and we’re happy with their service.

“If our customers are happy, so am I!”

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A Midwestern dealer is pleased with Michelin’s AAD program, handled by a local vendor, but said, “their main brand is expensive and that sometimes makes it harder to sell to some customers.”

He’s also happy with Bridgestone products supplied by a different vendor, but he often leans toward foreign-made tires that “are still a good value and provide a better margin for the dealer.”

A large northern dealer, whose main brand is Michelin, “has no issue” with Michelin’s auditing his books to verify that it has the required percentage of his business.

“Their program of discounts and benefits to loyal dealers gives them the right to do that,” he believed.

He also sells Bridgestone and Firestone consumer tires and some other brands such as Kumho and Hercules. “Of course, there will always be some issues, and with the smaller companies it is easier to get access to the main players faster.”

Back in the Midwest, a large dealer said that on the commercial side, it is easier to do business with Bridgestone than with Michelin and Goodyear, his other major brands. “All manufacturers want you to sell more of their products. With Michelin, they want you to grow their business or they’ll cancel your business or you’ll lose their discounts.”

With the increase of quality products, however, he felt dealers are in a stronger position to resist if profit margins go down.

Trust is an issue with a western state tire dealer. With numerous tire brands, it’s difficult to meet the requirements of Michelin, for example, which wants a lion’s share percentage of your business. “They should take into account that not all customers prefer their products or their prices.”

Another Midwest Goodyear dealer said it’s difficult for a Big Three manufacturer to provide the service to match a major wholesaler in most markets.

Quick deliveries to dealers of all sizes of tires help save the cost of carrying a large inventory.

He said with rising costs of travel, it’s hard to service dealers with a sales volume of less than $100,000 a year. “You have to recognize that the top 750 to 800 Goodyear dealers sell 85% of their tires.”

He liked the Goodyear Business System that makes it possible for dealers to tie in with special events and take advantage of regional or national advertising programs.

Despite their reservations, most dealers agreed there have been some improvements in dealing with the Big Three tire manufacturers in the last several years.

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