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'If it isn't broken, don't fix it'
Some of the dust created by Bridgestone Americas Holding Inc.'s acquisition of Bandag Inc. has settled, but the integration of the two companies remains a work in progress.
The point man in that process will continue to be Saul Solomon, chairman, CEO and president of Bridgestone Bandag LLC. Before his appointment to Bridgestone Bandag, a new entity created by the buy-out in June 2007, Solomon served as vice president and general counsel of Bridgestone Americas Holding Inc. (BSAH).
Commercial Tire Dealer recently traveled to BSAH headquarters in Nashville, Tenn., to speak with Solomon about Bridgestone's plans for Bandag and its franchise dealers.
In this exclusive interview, Solomon discusses the future of Bandag's franchise agreements, its Tire Distribution Systems Inc. (TDS) and Speedco operations, Bridgestone's position on Bandag retreaders who sell new truck tires made by other manufacturers, and other topics.
"Holding onto the core of what Bandag was is one of our biggest challenges," he says.
CTD: How has the integration of Bandag into Bridgestone gone?
Solomon: The approach we took was you can go fast or you can go slow. I think in general you can say we went slow, and the primary reason we did that was the first order of business was to build trust between the two organizations.
Right now I think we're at a good jumping point to go further. On the back side, we've done a lot of accounting, financial and human resource integration. On the more customer-facing side, the sales guys have been working in marketing teams and have identified opportunities for both companies.
CTD: Bandag has 43.5% of the market in the United States, according to Modern Tire Dealer research. Is that where you want to be or do you want more market share?
Solomon: You always want to do the right thing for your business; if that's more market share, then it's more market share. But whatever is right for the end user customers and our dealers is the most important thing. I don't think we're focused on any magic market share number.
CTD: Do you plan to grow through production increases within your existing franchise network or through the addition of new franchises?
Solomon: In the past, Bandag has traditionally grown through what we would call "adding dots." There's such a maturity in the market right now that the important thing is to grow the team together. We'll look at where it makes sense to add distribution, but I don't think that's the primary way we're going to see growth.
We have enough capacity in our tread rubber plant, so capacity is not an issue.
CTD: Do you have any plans to alter dealer franchise agreements?
Solomon: No plans... we think the agreement works for both sides. From a business perspective, if it isn't broken, don't fix it.
CTD: What about new signees? If you bring on new franchises, will they be subject to the same agreement as existing franchises?
Solomon: As of now, the answer to that is yes. We plan on sticking with (the existing agreement structure).
CTD: Can you update us on what's happening with TDS?
Solomon: TDS is an amazing success story. It lost $11 million five years ago. It had an unbelievably successful 2006, followed by a very successful 2007. TDS has helped us in places where we don't have distribution.
CTD: Are there concerns that TDS will compete directly with independent Bridgestone Firestone new truck tire dealerships?
Solomon: That's never been TDS' model. If TDS goes to a fleet customer and finds out, for example, that another Bandag dealer is already supplying that fleet, they basically will bow out gracefully. You don't hear a squeak about TDS from dealers; at least I haven't.
CTD: Do you see any untapped potential in TDS?
Solomon: There's always a balance between company-owned distribution and independent dealers. We have great faith in what the independent dealer does. But you do need a balance because there are places where you don't have independents, and you have to make sure your fleets are covered. But you want the majority of your business to go through independents; that's my personal philosophy.
CTD: What's Bridgestone Bandag's position on Bandag retreaders who sell new truck tires made by other manufacturers?
Solomon: In the Bridgestone family, we have dealers who only sell our ag tires, we have dealers who sell our ag and truck tires but don't sell our passenger tires, then we have some dealers who sell the full family. We're used to having customers who might buy one product line or 10 product lines from us, so this isn't anything new for Bridgestone. If you're representing our brand well in the marketplace, I think your place with us is secure.
CTD: What's Bandag's overall financial position?
Solomon: Bandag underwent a pretty severe restructuring in 2006. I think Bandag is very right-sized now. One thing we were concerned about when we first looked at Bandag was, "Did they (cut) too far?"
CTD: Will efforts be made to keep Bandag personnel in their current positions at Bandag headquarters in Muscatine?
Solomon: This wasn't really a synergy-type deal because (BSAH and Bandag have) different product lines. For Bridgestone, it was more of a revenue-enhancement, product portfolio-enhancement transaction. There wasn't a lot of pressure to take out a lot of cost.
CTD: What are your plans for Speedco? Where does Speedco fit in the overall picture?
Solomon: It provides another way of bringing revenue to the business. I'm a big believer in diversification if you do it intelligently. It also is not foreign to Bridgestone because it's basically a retail operation and we have some core expertise in that.
CTD: The retread market is always consolidating. There are around 760 retread shops in the U.S., down from 1,000 in 2003. Have you seen a rise in aggressiveness on the part of your competitors?
Solomon: When Michelin entered the retreading market, it was a new chapter for retreading in North America. There's no secret that Bandag lost some market share to Michelin. But we think that's pretty much stabilized right now.
We have fewer retread shops but the shops tend to be bigger. The retread-to-new ratio is probably our biggest challenge. The retread-to-new ratio is a little bit less than one-to-one.
There are actually more tires sold at replacement than retreads, and in years past that wasn't the case.
"We're continually working on ways to improve," Solomon says. "We'll continue to make adjustments as the market requires."
Chinese connection -- Bandag chairman sees potential for
retreading in Asia
Bridgestone Americas Holding Inc.'s decision to purchase Bandag Inc. "was driven by North America," says Saul Solomon, chairman, CEO and president of Bridgestone Bandag LLC.
Solomon also is responsible for Bandag operations throughout the world, including Asia, which he calls "an untapped jewel. Bridgestone feels very confident it can make retreading much bigger in some Asian markets, such as Japan. It's a great 'green' message, and it's the right thing to do for fleets because it helps with their operating costs."
Solomon sees potential in China as well. There aren't many quality casings in China, he says, "but that's going to change. They're going to start building more superhighways. As China's economy becomes more sophisticated, there will be a bigger role for retreads."
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