LAS VEGAS-The Band-Aid over its Gold affiliated dealer program logo said it all.
At its first-ever Conti Gold dealer meeting in April in Las Vegas, Continental Tire North America Inc. enumerated its shortcomings in recent years during a presentation to more than 150 dealers that featured the bandaged logo. At the same time, the company vowed to become a "consistent" supplier to dealers in terms of pricing, support and supply.
"We can´t conquer everything tomorrow morning, but we will do it step by step," said Andreas Gerstenberger, vice president of sales and marketing for Conti´s passenger and light truck business unit.
Besides being intended to boost the Gold program, launched in 2001, the fixes also are aimed at expanding "significantly" Conti´s U.S. passenger/light truck tire replacement market share-now in the neighborhood of 5 percent-while keeping its original equipment share fairly stable at about 20 percent.
A major challenge for the Gold program is pricing, said Carl Casalbore, director of passenger and light truck dealer sales for the U.S. and Canada.
"That pricing standpoint for our company in the last several years has been-I´ll leave it at this point-a little erratic. And shame on us," he said. "But at least we realize the problem and we´re addressing it, and we have addressed it in the last eight months."
Casalbore said Conti has switched to quarterly pricing models instead of monthly, and original equipment overruns will be offered to some dealers as a profit center. Most importantly, he said, Conti has been weaning itself off the "deal of the day" mindset.
Ron Brady, vice president and general manager of wholesale operations for Free Service Wholesale Tire Center in Johnson City, Tenn., said irregular pricing has been a big headache in recent years.
"We think we got a super deal on something and somebody would be in the market cheaper than what we just bought it for," he said. Free Service, which also operates a retail component, could probably do more with the Gold program, he said, if the pricing situation was resolved.
Paul Fitzgerald, program administrator for Reliable Tire Co. in Blackwood, N.J., said he has noticed some improvement in the pricing structure. "I´ve seen it clean up personally, so it´s working."
Supply also has been a major issue, company officials and dealers said. Tom McMillin, general manager of Cassidy Tire & Service in Chicago, said supply-especially of light truck tires-has been "very poor" for the last year or so, making the dealership turn more to Toyo tires.
"We don´t switch unless we´re given a reason to," McMillin said. "And we try to be loyal; it´s good for our customers and for us."
Casalbore told dealers the pricing fluctuations also hurt supply availability by creating sales peaks and valleys that don´t represent actual demand. Without having an accurate picture of demand, he said, a reliable production forecast is hard to create.
The supply issue also highlights some of Conti´s overall problems in North America. Gerstenberger said Conti is bracing for the potential of more supply disruptions as it seeks to lower its cost structure in North America-a move he said needs to be made to reach profitability.
Specifically, the tire maker is making plans for the possible loss of production at its plant in Charlotte, N.C., where Conti already has laid off workers. It said it will suspend production indefinitely in September if the union doesn´t agree to a new contract that will guarantee $32 million in annual cost cuts.
"We prepared many, many months ago contingency plans in order to overcome a potential situation in Charlotte," he said. "We still hope that we come to a conclusion with the union."
Closing its Mayfield, Ky., factory in late 2004 whittled down supply, and Conti also is trying to sell its Bryan, Ohio, off-the-road tire plant. Its only other U.S. plants are the non-union factory in Mount Vernon, Ill., and the GTY Tire Co. joint venture, also in Mount Vernon.
Asked if the Mount Vernon facility would be next in line for cuts if the highest-cost Charlotte plant were out of the picture, Gerstenberger said the company is working on some give-and-take plans with those workers. He pointed to Conti´s pledge to invest $60 million to $70 million in the coming years in exchange for concessions from its non-union workers there.