Discount Tire Company Inc.

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Discount Tire Company Inc.

20225 North Scottsdale Road
Scottsdale, Arizona 85255
U.S.A.
Telephone: (480) 606-6000
Fax: (480) 606-4401
Web site: http://www.tires.com

Private Company
Founded: 1960
Employees: 10,000
Sales: $1.54 billion (2005 est.)
NAIC: 441210 Automotive Parts and Accessories Stores

Discount Tire Company Inc. is a privately owned, Scottsdale, Arizona-based retailer of automobile tires and wheels, offering major brands—including Dunlop, Goodyear, Michelin, and Bridgestone for tires and Enkei, Konig, and Weld Racing for wheels—as well as exclusive brands, such as Arizonian and Roadhugger for tires and MB Wheels, Victory Wheels, and Hot Wheels for automobile wheels. The company serves more than 40 million customers a year through a chain of some 650 stores in 19 states, located primarily in the West, Southwest, and Midwest. Due to a trademark conflict, stores in parts of California, Oregon, and Washington use the America's Tire Co. name. To service its stores, the company maintains four distribution centers. Discount Tire also operates a mail-order division, Discount Tire Direct, and a Mobile Unit that provides tire-changing services to southern California used car dealerships. The company is owned by the family of its founder, Bruce Halle, who remains chairman of the board.

FOUNDER'S BIRTH IN MASSACHUSETTS IN 1930

Bruce Halle was born in Springfield, Massachusetts, in 1930, the son of an insurance agent and one of seven children. His family moved to New Hampshire and then in 1943 relocated to Detroit, Michigan, when the elder Halle took a job with Ford Motor Company. Bruce Halle excelled as an athlete in Michigan, prompting him to enroll at Eastern Michigan University in 1948 as a physical education major, with a goal of becoming a coach. He struggled academically, however, and in 1950, with the war in Korea under way, left school to join the Marines. Following his stint in the service, Halle returned to Eastern Michigan University, as a business major. To support his family he also found work at an area Ford plant and later did well at selling cars. After graduation in 1956 he tried his hand at selling insurance, like his father before him, but less than three years later was ready to try another line of work. In 1958 he bought into a business owned by a high school friend, Bill DiDonato, who ran a struggling tire and accessory store. Despite his business degree, Halle was unable to bail out DiDonato and the store went out of business by the end of 1959.

The 30-year-old Halle found himself broke, jobless, and owing $12,000 to Uniroyal, which gave him a year to repay the money at $1,000 a month. Rather than taking a sales job, however, Halle decided to stick with the tire business. He borrowed $400 and in 1960 opened a tire store in a former plumbing store in Ann Arbor, Michigan, called Discount Tire Co. It was very much a shoestring affair. His inventory included two new tires, four recaps, and assorted auto supplies left over from the venture with DiDonato. His plan was to sell five or six tires a day. If he met that target he calculated that he could make ends meet.

Halle slowly built up sales and after a few months was able to spend $400 on a used air compressor, replacing a portable air tank that could inflate but one tire, forcing him to make frequent treks to a nearby gas station. Halle sold the tires and changed them, but as the business grew he could not handle both roles and took on a salesman, 70-year-old Fred Lirette, a retired Ford executive who brought with him the added benefit of being well known in town, thus lending credibility to the new store. In addition to drumming up customers, Halle faced the challenge of maintaining an adequate supply of tires. Because he lacked both cash and credit he could not buy directly from the tire manufacturers. Halle had to make nightly rounds to other small dealers to buy the tires he needed for the next day. That would all change when the owners of a Toledo, Ohio-based distributor, Tire World Corporation, brothers Maury and Jay Isaacson, visited Halle's store. They were so impressed with his character that they provided him with a credit line, the start of a relationship that would last for many years to the benefit of both parties. Halle could now stock his store and not worry about paying his distributor until he had sold all of the tires.

Halle offered lower prices than the competition and superior customer service, and as an experienced salesman with an outgoing personality he was able to remember names and cultivate a customer base. By the time the competition took notice of Discount Tire, Halle had established himself in the marketplace and it was too late to drive him out of business. Area dealers spread rumors about the stores, claiming that Halle's cheap wares were inferior, but such tactics only served to advertise Discount Tire's prices and brought in even more business. Halle was also more innovative than his rivals. For example, customers of snow tires could have them removed in the spring and remounted the following winter free of charge, something that other dealers had turned into a lucrative business. What Halle realized was that once he had the customers in the shop he was likely to have many of them buy new tires for the spring and summer months.

OPENING THE SECOND STORE IN 1964

In 1963 Halle took on a partner, Ted Von Voigtlander, a man well versed in the tire business and someone who was especially good in negotiating prices with tire manufacturers. With business thriving in Ann Arbor, Halle was ready to open a second store. In 1964 he took out a lease on a former gas station in Ypsilanti, Michigan, and opened what he called Tire Wonderland. With that location established, Halle then opened a store in Flint, Michigan, in 1966. A fourth unit then followed in Ann Arbor in a converted Lincoln-Mercury dealership under the Huron Valley Tire Company name. Before the 1960s came to a close a fifth Michigan store opened, but by this time Halle and Von Voigtlander were looking to expand beyond the state, and given the brutal winter of 1968–69 it was no wonder they looked to growing markets with warmer climates, including Miami, Dallas, Los Angeles, and Phoenix.

Halle and Von Voigtlander paid a visit to Phoenix in April 1969 and were immediately impressed with the potential of the Valley of the Sun. After spending two days scouting every tire store in the area, they bought a former nightclub to house their first Discount Tire store in the state. Neither had conferred with their wives, but agreed that if Halle's wife objected to moving away from Michigan where her family and friends lived, Von Voigtlander would run the new Arizona store and Halle would remain in Michigan. It proved to be an unnecessary provision. When Halle's wife came for a visit two months later, she was so enamored with the Phoenix area that they promptly bought a house.

COMPANY PERSPECTIVES

Discount Tire Company has a vision that not only lives, but thrives, in the hearts of its employees, each and every day. From part-time to full-time employees at the store, regional or corporate level, our employees work to be the best in the business.

The first Phoenix Discount Tire store opened in January 1970. Relying on shoe leather rather than marketing data, the partners did well in the selection of the first site. Business was so strong that only a few months later a second store opened in Glendale, and it prospered as well. By the end of the year the company operated 11 stores, nine located in Michigan, generating combined sales of $2.6 million. Although the Arizona stores did not sell snow tires because of the weather, the expanding population of the region more than compensated. In addition, the Michigan and Phoenix stores complemented one another. While Michigan sales peaked during the winter months and dipped during the summer, the Arizona business was steady throughout the year, providing the company with more steady, predictable cash flow.

The growth of Discount Tire caught the attention of Goodyear Tire and Rubber Company, which agreed to become a direct supplier. Other manufacturers soon followed, including Continental, General, Michelin, Pirelli, and Yokohama. As a result of direct buying, Discount Tire could save money and it severed its ties with the wholesalers, except for World Tire. Forever grateful to the Isaacson brothers, Halle continued to do business with World Tire until they sold the business. The decade of the 1970s also saw the chain accelerate its growth through television advertising. Long a user of newspaper ads, Discount Tire in 1976 launched a series of television spots that featured a "Little Old Lady" heaving a tire through a plate glass window, accompanied by a voiceover: "If ever you are not satisfied with one of our tires, please feel free to bring it back." The marketing effort worked well, leading to further expansion of the Discount Tire chain. In 1979 the first store in Indiana opened, and a year later Discount Tire entered the Colorado market by acquiring E.J. Reynolds Tire Company and adding eight service centers.

By the end of 1980 the chain included 44 stores, but it was just the start of a period of exceptional growth. Over the next five years, Discount Tire added another 105 stores and entered several new markets, including San Diego, Nevada, Oregon, Houston, Dallas, New Mexico, and Utah. By the end of 1985 Discount Tire emerged as the country's largest independent tire dealer. During this period the company also introduced the Arizonian tire, produced by Goodyear. It was a mutually beneficial arrangement: Goodyear was able to run its factories at a greater level of production, lowering their per unit costs, and some of those savings were passed on to Discount Tire and its customers. This was the first private brand Goodyear produced for an independent dealer. The alliance proved so successful that it would lead to other Discount Tire house brands: the Arizonian Rocky Mountain, the Arizonian Silver Edition (to commemorate the company's 25th anniversary in 1985), and the Arizonian Limited Edition.

PRICE CLUB CONCEPT OPENING IN LOS ANGELES IN 1980

In the second half of the 1980s Discount Tire moved its corporate headquarters to Scottsdale, Arizona. The chain also continued to expand into new markets: San Antonio in 1986, Washington state in 1987, Los Angeles a year later, and Florida to close out the 1980s, when sales topped $360 million. At the same time, 50 stores were closed and another 24 were relocated, but overall between 1987 and 1990 the chain opened 64 new locations. The year 1989 also saw the demolition of the former plumbing store that housed Halle's original business. It was replaced by a new, larger building. Not everything the company tried worked out, however. Discount Tire tried its hand at selling automotive accessories such as batteries and windshield wipers, and some of the Arizona units began to offer alignment services. The company quickly realized, however, that it was better off focusing on tires and wheels, and these offerings were terminated.

The company also tried to develop a price club concept under the Tires Plus Club name. The operation opened in the Los Angeles, California, market in an old supermarket in 1988. In addition to a vast array of tires and wheels and 16 service bays, the store offered a wide range of automotive accessories. A year later Tires Plus Club added a mail-order operation. However, the competition in this category proved too stiff and in 1991 the store was closed. The company was at least able to salvage the mail-order catalog, however, which did well in the specialized performance tire and wheel market. With the advent of the Internet, a companion web site, www.tires.com, was added in 1994. After the Tires Plus Club closed, Discount Tire decided to stay in the Los Angeles area, but an established retailer, Discount Tire Centers, objected to having a similar name operating in the same market. The two companies eventually came to an agreement that called for Discount Tire Co. to use the America's Tire Co. name in the Los Angeles area.

KEY DATES

1960:: Bruce Halle opens the first Discount Tire location.
1964:: A second store opens in Ypsilanti, Michigan.
1970:: Discount Tire expands to Arizona.
1983:: The first Texas stores open.
1988:: The company enters the Los Angeles market.
1994:: The Discount Tire direct web site is launched.
1999:: Annual sales top $1 billion.
2005:: The chain opens its 600th store.

In the 1990s the Discount Tire chain grew through acquisitions as well as by internal means. Seven stores were purchased from the Michelin Tire Company in 1991, giving Discount Tire entrance into Oregon and northern California. In 1993 Discount Tire became a direct Goodyear dealer, a move that paved the way for Discount Tire to acquire a number of struggling Goodyear stores. By the middle of the decade the Discount Tire chain approached 300 stores and annual revenues totaled $650 million from the sale of more than seven million tires each year. By this point Bruce Halle, Jr., who had been working with the company full-time since 1973, had assumed the presidency. Other acquisitions in the 1990s included 13 Parnelli Jones stores in California, Nevada, and Texas, and another five Scher Tire stores and four Good Guys stores in California. In the second half of the decade, Discount Tire also opened stores in Illinois, Ohio, and North Carolina.

When the 1990s came to a close, Discount Tire's annual sales topped the $1 billion threshold, a number that would total $1.3 billion a year later. Operating in 18 states Discount Tire and its 450 stores commanded a 7 percent overall market share. Some of that sales volume was due to the recall of more than ten million Firestone tires in 2000 and early 2001. Because it had never been a Firestone dealer, Discount Tire did not have to contend with customers returning tires. Rather, it attracted a great deal of business from people looking to replace their Firestone tires, attracted to Discount Tire because of its reasonable prices on name brand tires. Consumers were not interested so much in cheap tires as in good tires they could afford, and Discount Tire over the years had devoted a great deal of its resources to carving out this niche in the market. Discount Tire also developed a new business in 2002, establishing the Mobile Service unit to provide new tires and wheels to used car dealerships in southern California.

Discount Tire entered Georgia, Minnesota, and South Carolina in 2001 and the following year opened its 500th store. The 600th store opened in Acworth, Georgia, in August 2005. At year's end sales exceeded $1.5 billion, and there was every reason to expect the company to continue to enjoy steady growth for years to come.

Ed Dinger