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On Friday, two of the largest tire suppliers in the U.S. announced the joining of forces, eschewing future competition with each other. Arizona-based Discount Tire is in the process of acquiring Indiana-based Tire Rack, and the transaction is expected to close on December 31. With unpredictable rubber supply challenges and price increases in play, this could mean a stronger base for the two suppliers.
Both family-run brands, Discount Tire and Tire Rack have similar histories. Bruce T. Halle rented an old plumbing supply building in Ann Arbor, Michigan with an inventory of six tires, running the whole place himself. Store by store, Halle grew the business, and now 1,100 Discount Tire stores are open across 37 states in the U.S. Meanwhile, Tire Rack was founded in Indiana in 1979 by Dutch immigrant Peter Veldman. Today, Tire Rack runs 2.7 million square feet of distribution center space.
Kelley Blue Book said earlier this year that tire prices have been increasing because the demand for rubber has been growing alongside the size of American vehicles. Back in April, Bloomberg reported that rubber prices hit a four-year high. Along with the rest of the supply chain disruptions in the past two years, that’s no surprise. As reported by Newsweek, the general manager of operations for Pirelli referred to numbers from the U.S. Bureau of Labor Statistics, showing in September that tire prices were up 6.2 percent over the previous year.
As it relates to rubber sustainability practices, Bridgestone has a Biorubber Process Research Center, at which the company is working on a new compound made of guayule, which is a desert shrub. Michelin and Continental are also looking at alternatives to counteract biological issues like rubber tree fungus, which seems to affect the business periodically.
If tire prices increase at Discount Tire or Tire Rack, it’s much more likely to be a result of the threat of a rubber shortage than the acquisition. The new combined management team believes it can make a bigger impact as a team than as competitors. And I truly hope the new team doesn’t axe Tire Rack’s Street Survival program, which teaches teens how to be better drivers.
“This [acquisition] accelerates our omnichannel strategy, provides a broader distribution network and a platform to enhance our B2B and fleet capabilities,” said Dean Muglia, CEO at Discount Tire. “Quite simply, we are better together.”
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