Consolidation movements in the tire industry

Emilio Gomez, B2B Tyres CEO, Panama, 1 December 2018

December is usually a month to make a balance of the issues occurred during the year. This 2018 has been particularly challenging for B2B Tyres, a medium size company of this so much competitive industry.

Consolidation as an answer

When no much innovation is sought, when nobody wants to recognize that disruption can be made for the smallest company, consolidation is usually the answer. This has been the case, once again in 2018. Big manufacturers have tried to merge to increase market share and margin, particularly in the USA market, which is of so much interest to B2B Tyres.

North American market

Just in January, we had Michelin North America Inc. and Sumitomo Corporation of Americas (SCOA) announcing plans to combine their respective North American replacement tire distribution and related service operations in a 50-50 joint venture. This has created the second-largest tire distributor in America (Behind ATD).

No too much later, Kauffman Tire sold stores in the US to Mavis Tire Supply. Icahn Automotive Group acquired some tire dealers in 2017 and has continued with its appetite, making the most of about one-third of independent tire and service operations in the USA being aged owners who are actively looking, are considering, or are open to selling their businesses as they approach -or have arrived at- retirement.

Goodyear Tire & Rubber Co. and Bridgestone Americas also teamed up in a tire distribution joint venture they call TireHub. TireHub will be headquartered in Atlanta. It will have more than 80 distribution centers and warehouse locations nationwide.

In March, Clearlake Capital announced its acquisition of Wheel Pros Holdings, LLC, a Colorado-based designer, marketer, and distributor of branded automotive aftermarket wheels, performance tires, and accessories. The company has a portfolio of proprietary brands sporting over 300 customer wheel styles.

Global markets

Moreover, globably, Continental and Hankook are following strategies of consolidation in countries such as South Africa, Italy or India.

Yokohama Rubber bought in 2017 Alliance Tire Group, an OTR tire maker for 1.1 billion. Through this acquisition, Yokohama Rubber took control of two tire factories in Israel and India.

Cooper Tire & Rubber Co. acquired 65 per cent stake in China based Qingdao Ge Rui Da Rubber Co. Ltd. The deal was estimated at USD 93 million.  Qingdao Ge Rui Da manufactures radial truck and bus tires and its supply chain is spread across the world. The company has a million sq ft plant in Pindu, Qindao Province in China.

Michelin put its eye in Brazil with the acquisition of Levorin Pneus e Camaras. This is a Brazilian manufacturer of bicycle and motorcycle tires. Michelin imitated other big names already present in the country.

In March 2018, Solideal On-Site Service, the service division of Camso, acquired U.K.-based tire manufacturer Forklift Tyre Specialists Hull Ltd. (FTS).

Retailer tire industry

But this is in the tire maker, what about the clients and retailers? A similar trend. Just in 2017, there were approximately 50 announced mergers among freight carriers. Estimates are that there is in excess of $10 billion (a 33% increase over 2017) in private-equity funds targeted for further mergers in 2018.

We could continue to number the different movements in the tire markets these last months. Nevertheless, the opportunities still remain for the brave, big or small, willing to growth, not with capital and debt, but with innovation: new services, new materials, more quality and data.

See you in 2019.

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