Web Is Where Rubber Meets Road as Tire Battle Looms

By GREG JOHNSON

May 8, 2000 12 AM PT

TIMES STAFF WRITER

When TireDex.com opened its business-to-business Web site late last year, executives at the company that bills itself as “the tire dealer’s exchange” saw few road hazards ahead. The B2B wheel has continued to spin, however, and the Newport Beach-based company now faces significant competition from established automotive industry players and a cadre of online start-ups.

TireDex and other online companies that hope to change the way tires are manufactured and sold, are reworking business plans on the run. “Decisions are now being made very quickly because things that might take eight years to occur in the real world are happening in the space of one year online,” said TireDex founder and Chief Executive Terence Scheckter.

Two of the biggest tire industry forces surfaced within weeks of each other. Toyota Motor Co. in February weighed in with a planned online marketplace for the $100-billion replacement automotive parts market, which includes tires and wheels. Six major tire manufacturers then announced plans for an online marketplace for the industry that spends $50 billion annually on goods and services.

The two giants are joined by a rush of smaller B2B competitors, including ETirePlace.com, which advertises itself as “the dot-com of the automotive aftermarket,” and such business-to-consumer players as Tirerack.com, the self-proclaimed “online tire and wheel store.”

The battle for online supremacy will be fierce. “The tire business is among the most competitive of all businesses,” said Chris Aked, director of global communications for Goodyear Inc. “And, while we will remain fiercely competitive, it’s clear that increased use of the Internet and its related systems is going to be important for all the companies.”

Some online competitors will end up with tire tracks across their backs. Some smaller players undoubtedly will get rolled over by such proposed players as Toyota’s IStarXchange, and the tire manufacturing industry’s rubbernetwork.com.

Toyota’s joint venture with Dallas-based I2 Technologies Inc., for example, hopes to speed the process of getting auto parts, including tires, out of warehouses and into garages where they’re needed. That’s a welcome development for consumers who have cooled their heels in customer lounges while mechanics track down the right tires for their vehicles.

Toyota’s venture will target industry players who distribute and sell repair parts, but the system also will have a B2C element. That means IStarXchange could compete with such B2C players as GR8RIDE.com, an online start-up that hopes to sell aftermarket parts to car buffs.

“What you see are guys creating independent businesses, some of which will become part of larger-scale operations,” said Chuck Emery, IStarXchange’s vice president of technology. “Maybe one of [the emerging B2C players] would fit in with us, because we plan to have an enthusiasts’ section.”

Some newcomers might also find themselves in combat with rubbernetwork.com, the massive online procurement system proposed by Goodyear and five other tire manufacturers.

The proposed online venture is similar to electronic marketplaces being formed by the automotive, aerospace and retail industries. Well-known companies such as Ford Motor Co., Kroger Co., Johnson & Johnson and Procter & Gamble Co. are forming online exchanges in their respective industries.

What’s uncertain is whether the industry-wide procurement-side systems will extend into the business of distributing products. “Frankly, it’s just too early to discuss that sort of thing,” Goodyear’s Aked said. “But those are good questions to ask. Now that we’ve put this out in the general public, we can sit down and discuss all these implications.”

TireDex and other competitors aren’t sitting still. Scheckter has made preliminary calls to tire manufacturers to determine if there’s a role for TireDex. “We’d like to be their sell-side solution,” Scheckter said.

Further territorial disputes are likely to erupt as manufacturers, distributors and retailers scramble to reach critical mass. “All these guys are trying to figure it out,” said Bruce Davis, special projects editor at Akron-based TireBusiness magazine. “And a lot of what they’re looking at is overlapping and interrelated.”

The tire industry is ripe for change. Manufacturers will ship more than 325 million tires this year, according to the Washington-based Rubber Manufacturers Assn. About 70 million of those tires will be bolted onto new vehicles, but the remainder will move through a complicated and inefficient distribution system.

Companies such as Goodyear are developing proprietary inventory-management systems for their company-owned stores. But 65% of replacement tires are rung up at independent stores and chains--and there’s little doubt that the Internet will help to untangle the industry’s complex tire distribution system.

“There’s no reason a customer can’t go to a computer at home and punch in ‘four Wrangler tires for my pick-up’ and find out which Goodyear store in their neighborhood has them,” said Goodyear’s Aked. “For that matter, there’s no reason you shouldn’t be able to make an appointment to have the tires installed and balanced, maybe at home in your own driveway.”

The tire industry also hopes to use the Internet to help deal with surplus tires and wheels that can quickly fill warehouses.

“The true killer app of the Internet is what it can do for people with excess inventory,” said Ross Kogel, executive vice president of the Reston, Va.-based Tire Assn. of North America. “If [online exchanges] can make the process more cost-effective, and shipping costs don’t make the process prohibitive, you’ll literally see the creation of an EBay for the B2B world.”

Online competitors face plenty of obstacles. Rubbernetwork.com, for example, won’t succeed if its fiercely competitive backers can’t find a way to work together online. TireDex must complete a second round of venture capital funding to augment the $1 million raised in its first round.

ETirePlace, a Framingham, Mass.-based start-up, is betting that a mid-course correction will help it to survive online. The subsidiary of ASA Tire Systems Inc. was a B2B player when its site opened in mid-1999, but it subsequently added a B2C element. “We think that the more consumers who are looking toward our site, the more tire dealers will want to be there,” said David Duchesne, national sales manager for Framingham, Mass.-based ASA Tire Systems, which operates the site.

Tire industry players say more changes are in store: “It’s still such an undefined area that business models have to keep evolving,” Emery said. “If you don’t evolve, you’re doing yourself a disservice.”

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Tires on a Roll

Tire manufacturers anticipate continued overall growth in sales through 2005. Figures in millions.

Passenger cars

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Market 1999 2000 2005 ‘99-’05 growth Original equipment 61.0 60.0 60.1 -0.2% Replacement 191.9 198.0 224.0 2.6

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Light Truck

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Market 1999 2000 2005 ‘99-’05 growth Original equipment 8.4 8.4 9.3 1.7 Replacement 33.8 35.8 45.4 5.1

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Truck