MTD January 2016
Industry analysis
MTD: What's the biggest story of the year in the commercial
tire side?
Mitchell: Te biggest story on this front has to be the
fact that Pirelli & Cie SpA was acquired by China National
Chemical Corp. (ChemChina). Te deal creates the fourth
largest commercial tire business in the world with roughly
12 million units of capacity. Integration is the hardest part of
any merger, and this seems like it will be a tricky one to pull
of without a hiccup in light of the fact it requires bringing
together two very diferent cultures.
MTD: How much are tire dealers depending on feet work
to maintain, or grow their businesses?
Mitchell: Fleet work is a very important segment of the
market. It is typically a lower margin business but the size
and predictability of the volume trends make it atractive. It
should continue to be an area of focus going forward.
MTD: With so many tire plants under construction in the
U.S., in addition to extra production and faster fll rates, what
are the other benefts?
The billion-dollar battle for Pep Boys
The 2015 award for best drama in the
tire industry goes to Icahn Enterprises
LP, the victor in a month-long, back-and-
forth bidding war for Pep Boys – Manny,
Moe & Jack against Bridgestone Retail
Operations LLC. Tire industry analyst
and Modern Tire Dealer columnist
Nick Mitchell liked the initial terms
from the vantage point of Pep Boys
shareholders, "as this has been an
undervalued asset and poorly man-
aged business for quite some time."
Mitchell says Bridgestone's loss
likely is a win for the tire industry.
"Personally, I do not think manu-
facturers should own and operate
retail assets unless captive distribu-
tion points are the only venues that
their product is carried in. Historically,
manufacturers have not been good at
running stores for a variety of differ-
ent reasons, and their desire to do
so only creates channel conficts,"
Mitchell says.
"I expect Bridgestone will step back
from the deal scene for a period of time
due to a dearth of other acquisition
opportunities."
As for billionaire investor Carl Icahn,
chairman of Icahn Enterprises, acquir-
ing Pep Boys and merging it with Auto
Plus, the sixth-largest parts distributor
in the U.S., still won't make him one
of the power players, Mitchell says.
"The combined chain would only
move up one slot, and still rank be-
hind the four major powerhouses, Au-
toZone, Advance Auto Parts, O'Reilly
Auto Parts and NAPA," Mitchell says.
He expects Icahn Enterprises will
divest Pep Boys' service bays and
tire wholesale operations.
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