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CEO Knapp Answered All Our Questions About Bridgestone

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CEO Knapp Answered All Our Questions About Bridgestone

Modern Tire Dealer had the opportunity to sit down with Gordon Knapp, CEO and president of Bridgestone Americas Inc., at the company’s recently held consumer tire business meeting in Los Angeles.  Knapp took over this position in September when Gary Garfield retired.

Knapp began the interview by providing some background about what he and Bridgestone have been doing and establishing the last few years. It all centers around the consumer.

Knapp: I've been lucky because I've worked side by side with Gary (Garfield) for three years. It wouldn't be correct for me to say we should go off in a different direction, or why did we do that. I've had a chance to sit and participate and, in many cases, influence a lot of this stuff.

I think you'll see Bridgestone continue down the same path, and do the most important strategic initiatives that we've been doing the last couple of years. We’ll continue to focus on boss-centric. We call the consumer the boss -- it's the center of everything. We want to make it the center of everything we do.

We've spent time with our dealer network. That doesn't mean we're doing it to have the best advertising. We think our advertising is good, but that's not what we're chasing here. We're chasing better products, just because we know the consumer better. We're chasing better services. We're chasing better product innovation.

We think the more insights we have about the consumer, the more likely it is we can take those insights and harness them, and actually provide something of value. So you're going to continue to see this. That's been a real focus. We think we're building that muscle over time, and it's going to be something we're going to stay the course on, going forward.

The next thing is specific to the consumer, whether you want to call it high-value added (HVA) or high-rim diameter tires -- we're very focused on winning there. The market is going to move there. There's no question it's going to move there, based on the OEM platforms that have been sold in the last five-to-seven years.

We have a disproportionate share there now, so we think the market's come to that area. We're making substantial investments from a manufacturing perspective and are very clear on an OE perspective. We want to take more than our fair share of those platforms, and you're going to see a lot of our new product work is going to be focused on particularly our sub-brands, and catering to that area. You can expect to see a lot of new product news in those particular areas. That's how we expect to reinforce that going forward.

We talked a lot today about e-commerce and digital. We absolutely believe that. I think you'd be missing the boat if you didn't say that was a trend. We could have a grand debate about how fast that trend continues and how deep and all that, but it's here. We believe it's here to stay.

Part of our strategy is to ensure we enable and prepare our dealers to take advantage of that -- position them so they can succeed and be able to have the presence when the consumer goes online. That they're there, their presence is there, and that they can compete openly and aggressively for that business.

You saw some of the tools we've developed in that area. That's another area where we've invested aggressively. It's an area where we believe it's something we need to continue. We know some of our competitors see this as well, and have invested aggressively behind that, but we think long term there may be something that differentiates some of the smaller players from the larger players.

The last three or four years we have invested more and more around the people agenda. I've said to people openly, coming into this leadership role, I'm a huge believer that at the end of the day what differentiates you is your people.

The days where you could have a technological advantage or something of that nature and exploit it for any period of time, I think those days are over. People catch up too quickly. The problem is they don't just catch up. They eclipse you in their rearview mirror. So for us, that's a huge area of focus.

It's manifesting itself in a number of ways. We've put together a number of very focused intern programs for specific skill sets or functional areas for parts of our business. We've gotten a lot better at just being very focused on a select number of colleges, and going out every year and recruiting interns, and then selecting through those interns and bringing them on full time. So we've gotten much more methodical and thoughtful and holistic in that approach.

I think we're doing a much better job around succession planning but much deeper into the organization. Like a lot of companies, we have a bit of a retirement cliff coming on in the next five-to-10 years, and we're trying to position ourselves so that we're not caught by surprise on that.

We're really working hard to build more diversity into our ranks. We think at the end of the day we should look more like our customers. We think if we do, we're going to have better insights and make better business decisions and understand how they're thinking about the business and coming at it. That's another area we're really focused on and will be moving the needle on in the next three-to-five years.

MTD: Overall, it's really been a mixed year for independents. A lot of them have said they're struggling just to break even this year. Some are operating at a loss. From your perspective, what do you see in the horizon for the tire industry in the next year and a half to two years?

Knapp: I guess I would speak somewhat from an industry side and from Bridgestone. I think probably in fairness 2015 was an easier year than 2016. The replacement market was more buoyant and more positive by two or three percent.

There are a number of factors going on right now. One of the things we're charting and looking at is the U.S. replacement market, which should benefit from the extra miles being driven. But there are a couple of headwinds. One of the headwinds we're dealing with now is the OEM market and number of new vehicles that have been sold into the U.S. market over the last two or three years. It is very clear to us the average age of the U.S. fleet has gotten a little younger.

When we talk about this market, it's a very large market, but a few percentages can often really differentiate a good year from a bad year. It is very clear to us that's one of the headwinds going on right now. This will work its way through in the next couple of years. I don't think this is one of those things that is going to haunt us for a long period of time.

My folks are trying to work through and understand the impact of offering tires with longer tire warranties. Again, I don't think it's a huge driver, but there are a number of things going on that may slow the replacement cycle.

My last comment would be, and we see this in our business: There are pockets in the U.S. that are more disadvantaged or hurting more economically right now. (Knapp referred to coal-dependent economies and states with oil/gas fracking activities.) Economically there are clearly pockets in the country where fortunes have taken a bit of a reversal in the last two or three years. We see it accentuated there.

I think we're optimistic that we're going to see a rebound and back to modest but sustainable growth going forward.

MTD:  Is Bridgestone looking to sell online directly to consumers?

Knapp: Right now, it's not in the plans, certainly for the next 12 to 18 months. One of the things you learn as a CEO is never make a promise you know you can't keep. I won't sit here and promise never to do that, but I hope today you saw how I think we distinguish ourselves from some other players. We've tried to come at this and say, "How do we prepare, how do we arm, how do we enable our independent dealer network to succeed at this?" Recognizing their success is ultimately or eventually going to be our success, and believing they're going to have to participate in this, so that's where we've gone.

We made the acquisitions of Tire Connect. We've built up the capabilities of Tire Navigator, side by side, so that is what we're investing in going forward. We want dealers to be prepared and enabled to be a participant in this. We believe the trend is here. We can have a grand debate about how fast and the risks and pros and cons, but to ignore it we think would probably be folly at this point in time. That's how we're trying to distinguish ourselves in that particular area.

MTD: You had the mobile tire-service program test in Nashville that started in June. What were the results?

Knapp: Very small test at this point in time. I think generally we've been pleased with what we've seen. The test is not done. The concept is not entirely new. It's available. There are some successful models in Europe that you may be aware of, and we're well aware of and have had a chance to actually go and meet with folks and learn from them as to what's working and what's not.

I think we've learned a number of key insights that we're still building upon. Maybe at a future date we'll be prepared to share more of that. I would say it's always interesting to me -- we've had people come back and say that model has been tried. It's been tried in the States. It's failed in a lot of places, but I think the difference here is many times people have tried to do it. They're independent entrepreneurs.

This is a tire company trying to do it, and we're less interested in making money on the mounting of the tires. We're much more interested in making money on selling the tires. We see this as an incremental opportunity to bring value to the consumer by making their whole experience easier. We then reap the benefit of selling incremental tires. We think that's the business model. What does that mean to the independent dealer? I think this is a model that could be harnessed and expanded

MTD: You said in time, if it’s successful, you’d roll it out to the affiliated dealers. Too early?

Knapp: It's too early. We've been pleased by what we've seen. We've only been at it less than six months at this point in time. I applaud the team that's working on it because they learn some stuff and adjust the model; they learn some stuff and adjust. We're going through that prototyping stage. It's probably a little early to declare success on it.

Hopefully you saw today, the side by side (counter), the Tire Navigator. We don't bring these things to our dealer network untested or untried. We're very careful to go through a trial period to make sure we're bringing them something that we think we've worked the kinks out of to the greatest extent possible.

MTD: Of the innovations you mentioned to the dealers, which one do you think is most important?

Knapp: Of all the innovations we've talked about, I think in the short term that the Tire Connect is really important. We have a lot of independent dealers who don't have a presence online at this point in time. There's a handful that do a very good job and invested earlier in this, so our opportunity here is to enable these guys to have a presence, to position their business online.

It goes back to one of the insights we've shared very openly. We know that over 60% of all consumers pick where they want their tires mounted, pick the retailer before they pick the tires. If you're not even available to come up when they put that into Google or whatever search engine they use, and you don't come up, that's a problem coming out of the gate.

To me, I'm telling you it's most important because that's an enabler of everything else. If you're not there, then some of the other innovations we're offering probably are not going to benefit you nearly to the same degree.

MTD: How do you manage the units between the Bridgestone, Firestone, Fuzion and Primewell brands?

Knapp: It would be naive to say they don't compete with one another, but we're pretty careful how we position that. We believe in the better/best/good fighting, and you hear a lot of that across the industry, or at least vernacular that's very similar to that. We've been pretty consistent that generally Bridgestone occupies mostly the best. There are a few lines that probably touch on what we would call the better segment. Firestone fills most of the segment in the better, and at the top of the good, and then we deliberately use brands like Fuzion and/or Primewell to compete in the lower good and the fighting areas.

MTD: Talk more about your position on the HVA, high-rim diameter tires.

Knapp: Make no mistake, there's a difference between producing HVA tires and the curing of a 15-inch tire versus a 20-inch tire. So you need to make those investments, and you need to be thoughtful about it, and you need to understand how fast the trend is coming on you. You can get pretty good insights on that by doing exactly what you referenced: tracking what's going on in the OE market.

I think what's important after that is what are you as a manufacturer prepared to do around it. Invest in the manufacturing, yes, but what else are you doing to enable yourself to win in that area? We've been very focused on the OE side, not just gaining share, but making sure we have a very smart portfolio approach, and that we're gaining share in that area. We're very focused on taking a disproportionate share of what we would call the high-rim diameter platforms. We know down the road that will bode well in certainly the first and second replacement cycle for us.

Then finally, we're very focused on our R&D work and how we're allocating those resources. When push comes to shove, we're going to invest in those sub brands that probably cater more to the high-rim diameter. Our goal long term, and one of the KPIs we look at very carefully, is what is our share in high-rim diameter. I won't go into the specifics, other than to tell you it's almost 50% higher than what our current share is. If we can maintain that, that bodes well for us. The market will grow into where we want to play and where we think we can be successful.

MTD: Do you still have roughly 2,200 company-owned stores?

Knapp: Yes.

MTD: Do you still have the goal of 3,000?

Knapp: No, I would tell you right now we don't have a specific goal around company-owned stores. Let me take a step back. Our strategy is to have access to the consumer. And all it really means by that is to ability to give Bridgestone and Firestone a fair shot in front of the consumer.

There's many ways of accomplishing that. One of the ways is making sure we continue and enable our independent dealer network so they can do the best job they can. Another is through e-commerce, making sure they're prepared and enabled to compete on e-commerce. That's access to the consumer.

I would tell you we don't have a specific number as a goal by any means. Some are strategy. Admittedly it wasn't on Pep Boys, driven so much by defense, but we have a large network of dealers. From time to time, some choose to retire or some choose to sell. Sometimes there's an heir in the family, a daughter or son or relative that wants to take on the business and sometimes not.

We will participate and make acquisitions on those, but some of that for us is just defensive. We have a large share of that and don't want to see that dealership or chain go to a competitor. So we'll do that deliberately in that case. Frankly, a lot of the 2,200 stores, a good portion were amassed in that manner over time. Some of them were defensive.

Again, as CEO, I'll never sit here and make you a promise or tell you something I can't keep. We'll always have our eyes open if there is an opportunity that's brought forward to us. I will absolutely guarantee you one of the first considerations is what does this mean for our independent dealer network? Are we somehow disadvantaging them? Is there a proximity issue?

There is no magic number. We're not out there chasing a number. It's driven more by a strategy of wanting to make sure we have access to the consumer. The opportunities we looked at, at least since I've been here the last three or four years, have been much more defensive in nature. There's a dealership that's changing ownership or someone's retiring, and we don't want to see that market share in that particular market lost to someone else.

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