Managing People, Cash and Tire Supply: Commercial Dealers Face Challenges Head-On
2020 Calls for Strategy Among Top Commercial Tire Dealers
The challenges of 2020 have been immense, and commercial tire dealers are doing their best to weather the storm. As Bob Berlin, president of Orange, Mass.-based Pete’s Tire Barns Inc., put it, “We’re pretty much flat for the year — and we’re happy.”
That’s not to be mistaken for complacency. Despite the shutdowns and uncertain economic climate, Pete’s Tire Barns and other independent commercial tire dealers are hungry for growth.
Berlin says his company is breaking ground on its third retread shop. It will be located adjacent to an existing truck service location in South Windsor, Conn., and the future Bandag plant will have the capacity to build 220 medium truck tire retreads a day. The plant is expected to open during the first quarter of 2021.
Additionally, Berlin says the current climate “does present some opportunities” on the acquisition front. Pete’s Tire Barns has plans to acquire another business in New England before the end of the calendar year, but it was too early for Berlin to divulge any other details.
It was another acquisition that pulled one of the perennial members of MTD’s list of top independent commercial tire dealers from this year’s rankings. Raben Tire Co. Inc. no longer qualifies for the list since it was acquired by Goodyear Tire & Rubber Co. in December 2019. A year ago, Raben was ranked as the 17th largest independent commercial dealer in the country. It had held a spot on the list for eight of the last 10 years.
Technically, the buyout of Raben made room for a new commercial dealer to join the rankings. But Jack’s Tire and Oil Management Co. Inc. of Logan, Utah, would have leapfrogged other dealers onto the list, no matter what.
In early March, Jack’s Tire & Oil merged its 12 locations with the five locations of A&E Tire Inc., based in Denver, Colo. Combined, the new company operates 80 road service trucks, plus six Michelin retread plants, in five western states.
Massillon, Ohio-based Ziegler Tire & Supply Co. opened three new commercial centers in early 2020 — in Bowling Green and Greenville, Ky., and in Evansville, Ind., says John Ziegler, the company’s vice president. Another one will open soon in Louisville, Ky., he says, as the company wants to expand its footprint for regional customers, and also serve the agricultural needs in these markets.
“Despite the difficult times, the new locations have done pretty well, which is mostly attributable to the great teams there,” says Ziegler.
This past August, Bethlehem, Pa.-based Service Tire Truck Centers Inc. (STTC) acquired the commercial assets of Highlands Tire & Service, including three commercial locations, plus a Michelin Retread Technologies plant, in Carlisle, Pa. Walt Dealtrey, CEO and president of STTC, says the acquisition aligns with his company’s growth strategy and will allow the dealership to provide customers with better turnaround time on retreads.
While STTC is adding to its retreading capabilities, five of the 25 largest commercial tire dealers have divested of at least one retread plant in the last year. Les Schwab Tire Centers Inc. has consolidated its retread operations from three locations into a single facility in Prineville, Ore. Scott Robbins, manager of fleet tire systems for the Bend, Ore.-based dealership, says the Les Schwab retread shops in Spokane, Wash. and Rupert, Idaho, have closed.
Facing unique hardships
It’s no secret that people are the backbone of the nation’s commercial tire dealerships. And in the first half of 2020, the COVID-19 pandemic created a huge people problem. On one hand, it was customers who were affected, but tire dealers also had to manage their own people in a new way.
The balancing act was the greatest challenge for Ziegler Tire, says John Ziegler. “We kept all of our commercial service people throughout the slow times as they are the backbone of our commercial business.”
Bob Majewski, CEO and chief technical officer at Sumerel Tire Service Inc., says it’s been difficult to keep track of customers who were closed while trying to call on them, and also keeping employees safe. “We can’t make cold calls in many places due to restrictions.”
For Wilkes-Barre, Pa.-based McCarthy Tire Service Co. Inc., the decline in business has been just one part of this year’s story. The pandemic’s lingering effects on the company’s employees have been just as severe.
John McCarthy Jr., president, says the “safety and well-being of our teammates has been our primary concern,” and “the ongoing uncertainty of the situation” has proven to be their greatest challenge. “This has been exacerbated by hot weather, staffing issues and the demands of our busy season. We have provided ongoing counseling and support, both informally by our management team and through our health care benefits provider. Our human resources team has been actively reaching out to teammates who are struggling to offer support and assistance.”
Dealtrey at STTC says COVID-19 caused a lot of “side effects” for employees, and that resulted in personnel issues that the dealership had to manage as it also adjusted due to sales declines. One bit of good news, Dealtrey says, is that “surprisingly few customers have filed bankruptcy due to COVID-19, which is great for many reasons.”
Even with locations in Nebraska and South Dakota — two states that enacted fewer stay-at-home restrictions than most others — David Mickelson, CEO and president of Graham Tire Co., which is based in Sioux Falls, S.D., says supporting the company’s staff was its primary priority.
“The biggest challenges were helping our employees navigate through all of the uncertainties, and (we) did so by trying to provide regular communications,” he says. “We were fortunate we did not have government shutdowns in the communities that we operate. However, (the pandemic) did certainly impact business. We were also fortunate that our commercial tire business has remained strong during this time.”
With 19 commercial locations in five states, plus four retread shops, Larry Jeffries, CEO of Elk Grove Village, Ill.-based Tredroc Tire Services Inc., says managing the various rules and limitations in every jurisdiction was a behemoth task. It was particularly difficult in Michigan, with “the draconian approach” there.
“We did not furlough or lay anyone off,” says Jeffries. “However, we did manage other variable expenses accordingly.”
Making prudent investments
When it came to balancing the books, many dealers took a similar approach to that of Tredroc. They tapped — or slammed the brakes — on capital investments in the first half of 2020, but have slowly and cautiously eased up more recently.
Brian Chase, regional sales manager of Rice Tire Co., says the Frederick, Md.-based commercial dealership has been “strategic with our investments by investing in trucks and retread equipment to make sure we are able to best service our customers.” The company has 11 commercial locations, plus two retread plants.
“As stressful as the business environment is right now, the last thing our customers need is to have their truck sitting for several hours or a long turn time on retreads because we ran equipment past its useful date.”
Mike Weber, vice president of operations and manufacturing at Durand, Wis.-based Bauer Built Inc. says, “We continue to invest where it makes sense.”
Right now, that amounts to a warehouse addition and shop upgrade at the company’s tire center in Fremont, Neb. The site, northwest of Omaha, has been in operation since August 2001. It is being expanded with a new showroom and more space for tire and mechanical services, plus upgrades to office furniture and tire equipment.
“The new addition is 6,000 square feet, which will allow us to improve our commercial tire services (and) add commercial alignment and mechanical services to the Fremont market,” says Weber.
The project is designed to meet growing customer demand and is expected to be complete this fall.
At Sumerel Tire Service, Majewski says the company has kept its capital expenditures going, and has added six new trucks, two new tread lines and 17 molds for its AcuTread line.
McCarthy Tire Service has been “very cautious” with cash flow and watching expenses on a daily basis. McCarthy says his company followed through with orders it had placed before the pandemic for service vehicles and boom trucks. “Our equipment purchases are decided on a case-by-case basis. If the need is critical, we buy the item. If the request is not urgent, we are deferring the purchase to a later date.”
Managing tire supplies
The shutdown of most commercial truck tire factories in the U.S. didn’t immediately cause problems for tire dealers, but the situation changed for some in July.
Early on, Ziegler Tire reduced its commercial inventory to maintain good cash flow, but John Ziegler says it’s now “a huge issue as most of our major manufacturers are experiencing shortages on many key replacement tires.”
Bauer Built’s Weber describes supply as “very tight across the board,” while Majewski at Sumerel Tire Service says the first shortages have been in steer tires in size 295/75R22.5.
At Tredroc, Jeffries says his company followed what seems to have been a common approach. It scaled back during the early days of uncertainty, then “flexed accordingly” as demand rebounded.
Rice Tire, so far, has avoided serious supply troubles, says Chase. “While there have been shortfalls here and there, we’ve been lucky to work with great partners and stock enough of our major movers that the factory shutdowns did not turn into a large shortfall on our end.”
See MTD's chart of the Top 25 Independent Commercial Tire Dealers in our digital edition, pages 44-45.