6 Tires, No Plan : The Impossible Journey of the Most Inspirational Leader That (Almost) Nobody Knows (9781608322589)

by Rosenbaum, Michael

  As Van Brunt and his comrades tried to convince the security guard that they had simply misplaced their invitations, they attracted the attention of Bill Sweatt, then a vice president at Goodyear. Sweatt looked the men over and invited them in for a drink. Sweatt was impressed with both the spirit and the presentation of the nattily-attired tire jockeys. “They looked sharp, physically and mentally,” he says simply.

  In 1980, Goodyear would send Sweatt to restore profitability to its Lee Tire subsidiary, which was in danger of shutting its plants. Lee Tire was selling a disproportionate share of its products to wholesalers, missing the opportunity for higher margins available through direct sale to retailers. When he took over as president, Sweatt directed his team to shift the balance more to retailers. Tom Greenwood, vice president in charge of Lee’s Monarch brand, was already a supplier to Discount Tire. He thought the upstart retailer had growth potential and suggested a meeting.

  “I said, ‘Why don’t you bring them in?’” Sweatt remembers. “When they came over, there was Bruce and Ted and Gary and Al. And when Gary and Al walked in, I realized I had already met them the year before in the hospitality suite. I asked Bruce what their plans were and he said they had started in Ann Arbor, expanded to Arizona and wanted to continue doing expansion as they could afford it.”

  Halle impressed Sweatt as “a guy who appeared to be going where he wanted and had the ability to probably do what he thought he could do.”

  Like the Isaacson brothers, Harry Regetz and Sister Marie Ellen before him, Sweatt would prove to be a key mentor and friend to Halle. Sensitive to the changes in the tire industry and the rising importance of independent dealers, he was anxious to identify the strongest partners for the coming years.

  Several years prior to his move to Lee Tire, Sweatt had been in charge of Goodyear’s retail stores on the West Coast. There, he had been accustomed to a service mix that included oil changes, brakes and other maintenance. When he visited Arizona to check out Discount Tire, he was both surprised and impressed by the high-volume operation that focused solely on tires. High turnover more than compensated for the lower gross margin—a lesson learned nearly fifteen years earlier at Dave Fairbanks’s store—and customer satisfaction rose with the reduced wait times.

  “I was a stickler on cleanliness of stores and I was also impressed with the overall housekeeping,” Sweatt continues. “There wasn’t paper all over the darn place. The store manager knew exactly where the heck everything was.”

  Sweatt and Halle would build a strong bond as Lee and Discount Tire expanded their relationship. Sweatt saw in Halle the kind of entrepreneur-ship and relationships with employees that would stand the test of time. Halle saw Sweatt as “a quality, ethical guy” and one of the polished gentlemen who always had impressed him.

  Halle noticed that Sweatt was consistent in thanking others for making him a success and refrained from speaking ill of others—two traits that Halle admired and worked to emulate over the years.

  Eventually, Sweatt would create a major opening for Halle’s team as he returned to the corporate office at Goodyear and convinced his colleagues to begin meeting with fast-growing retailers who had been kept at a distance until then.

  “I went to see the chairman and president of Goodyear and I suggested—I strongly suggested—I said, ‘You know, you gentlemen aren’t aware of some of the people in the tire business in the United States,’” Sweatt says. The chairman at the time, Charles J. Pilliod Jr., had been international head of the business and was exposed to more of the distribution network while in Europe, so he was open to the idea. “It was really wonderful exposure to Goodyear, for them to meet Bruce and the Discount folks, as well as for Bruce and his people to meet them.”

  Goodyear wouldn’t begin selling tires directly to Discount Tire until 1994. As of the first day of that relationship, Discount Tire became Goodyear’s largest dealer. Despite the delay between the party-crashing incident and the direct sales agreement, Halle believes Sweatt’s aegis was a strong motivator for him and the company.

  “The recognition that Bill gave us by introducing us to a lot of other people, just gave us the confidence that we were something,” Halle says. “Nothing drastic changed overnight, but it was just a support system, just somebody that could walk into Goodyear headquarters and say, ‘Discount Tire Company is okay.’”

  Even if Goodyear executives in Akron didn’t recognize the fact in 1979, Halle and Von Voigtlander knew they were building a quality operation. Corporate jets notwithstanding, the company’s cost structure was relatively lean at the store level. Interest rates were high, but credit was readily available.

  Why not bet it all on an audacious expansion program?

  At the end of their second decade in business, Halle and Von Voigtlander announced a plan to open twenty-five stores per year over each of the following four years. They’d finance their growth by borrowing as much as 90 percent of the opening cost of each new outlet and then, as inflation increased the value of the underlying property, they would refinance to get the capital to open additional sites.

  It was the kind of risk Halle had taken in buying a house while still in college and in borrowing $5,000 to invest in Bill DiDonato’s distribution business. It was also the kind of risk Halle would never accept today, but he was more fearless, possibly reckless, in those years. He thought the company’s momentum was strong and sustainable, which made it less risky than it appeared.

  It wasn’t. In fact, Halle and Von Voigtlander were literally betting the store. On a balance sheet, real estate is always listed at its purchase price, not at its appreciated value. By obtaining loans based on rising property values, Discount Tire ended up with a balance sheet that made the company appear bankrupt—with far more debts than the assets to cover them. While bankers recognized and lent money against the market value of the properties, the company was vulnerable to any decline in those values. If property prices fell or credit markets dried up, as would happen in 2008–2009, or if new stores failed to generate the cash flow of their established peers, the entire business could be gone within as little as a year’s time.

  Confident that they had found the magic formula for successful expansion, Halle and Von Voigtlander announced that Dave Fairbanks would be moving to Denver in 1980 to open the company’s third region. His transfer and the ambitious expansion plan were a shock to the system, according to Al Olsen, who was assisting Fairbanks in overseeing the Michigan stores at that time.

  Creation of a new region meant much more than the addition of new stores, in Olsen’s mind. It also meant that the Michigan stores would experience a substantial drain of talent as Fairbanks looked to staff the Colorado stores with experienced Discount Tire managers. Part of the company’s strength flowed from the loyal managers who had joined the team and thrived in the stores. Taking them out of their stores and moving them to new locations would break up the teams, and it could be hugely challenging to find more of the right people quickly enough to make the gamble succeed.

  “As Dave is going to Colorado, I have nineteen stores in Michigan and one in Indiana,” Olsen says. “Now I need to fill a pipeline.”

  The company invaded Colorado with the acquisition of E.J. Reynolds Tire Company, which operated eight stores in the state. While it was difficult to convince Arizona store managers or assistant managers to relocate to Colorado, the move was appealing to up-and-comers in the Michigan and Indiana stores. The drain that Olsen feared in his region was beginning in earnest.

  Olsen hired two recruitment agencies and started visiting area colleges to find the bright young guys he’d need to feed the rapid growth plan. He instituted group interviews and role-playing to identify people with the necessary customer focus.

  “Everybody that I was hiring, I advised them that if you have a special someone, partner or wife, she’s gotta know,” Olsen reports. “Don’t say ‘Yes, I accept coming on board’ unless you understand you’re going to leave Michigan in four or five m
onths after you start with us.”

  After Colorado, Discount Tire started opening stores in California, Nevada, Oregon, Texas and New Mexico. The company didn’t succeed in opening twenty-five stores per year, but Discount Tire tripled its footprint from thirty-six units at the end of 1979 to 110 at the end of 1984. Revenue grew at an even faster rate, rising 270 percent to $126 million in 1984 from $34 million just five years earlier.

  By that time, Discount Tire was the third-largest independent tire dealer in the country, behind Big O and Les Schwab. With the addition of thirty more stores in 1985, the company jumped to the top of the heap.

  Although it would be years before Goodyear would fully embrace the company, Discount Tire was courted heavily by other major manufacturers. While the off-brand retailer had been selling private labels made for the Isaacson brothers’ World Tire in the earlier years, Discount Tire began to develop its own private labels directly with manufacturers.

  In return for the generosity shown to him, Halle continued buying from World Tire until the business was sold in the 1980s. As the company grew, however, direct purchasing became both possible and more profitable.

  In 1982, the company began selling its proprietary Arizonian tire, modeled in part after the private-label Californian tire offered by that state’s largest independent dealer, Sam Winston. Ironically, freight costs precluded initial sales of the Arizonian in Arizona, limiting most of its market to Michigan and Indiana, where it was made by BF Goodrich.

  In 1985, Halle established what would become a very close relationship with Francois Michelin, who was seeking strategic partners to expand sales of Michelin radial tires. Radial tires were developed by Michelin in 1948, but it would be decades before they were accepted widely in the United States. Michelin needed to establish a strong retail beachhead in the United States, but the company was not accustomed to dealing with discounters. Meanwhile, the higher price of radials, compared to bias-ply tires, presented its own challenges for the low-price retailer. Still, the market was moving and Halle needed to follow. He and Francois Michelin hit it off, and a long-term partnership was established.

  Halle began to emerge as a leader in the retailing industry. Although he wouldn’t seek a leadership role in any trade groups, his reputation as an ethical and successful entrepreneur won respect from both vendors and competitors. Shel Diller, a tire wholesaler who met Halle shortly after the move from Michigan, invited him to join a buying group that Diller had set up.

  Halle didn’t buy much from Diller’s Empco distribution business, but he joined the buying group Diller formed to negotiate with General Tire and a few other companies. Tires Plus founder Tom Gegax, one of the retailers who joined the buying group, operated in Minnesota and regularly told Halle to stay out of that state. Discount Tire would not open its Minnesota region until 2001, after Gegax had sold his business to Bridgestone/Firestone.

  Diller says Halle’s influence was clear in the buying group’s 1986 meeting with General Tire in New York. Halle, Diller and a number of other retailers joined the breakfast session with Gil Neal, who was president of General Tire at the time.

  “I’m the spokesman, mostly, and we’re trying to talk about the reasons he should drop the price,” Diller remembers. “I was talking until I was blue in the face. Bruce was sitting there rather quietly and I kept talking and talking and I didn’t know if I was getting anywhere and then Bruce said, ‘Gil, I think you need to do this,’ and Gil agreed. That was Bruce’s influence.”

  While Halle’s star was rising, his relationship with Von Voigtlander began to fray. The two had started out working together like a pair of matched oxen, pulling in unison and sharing equally in the labor. As the company grew, however, Halle began to feel that Von Voigtlander was spending too much time on outside ventures and investments and covering too many expenses with the company’s dime. Twice, Halle would pull the second jet out of Michigan, depriving his minority partner of its use. In 1994, Halle would buy back shares from Von Voigtlander to help him cover losses on a failed investment outside the company.

  The rift was still largely invisible to most employees in the early 1980s, but it was clear that Halle was consolidating his leadership role in Arizona, creating a corporate office in 1985 and moving all administrative functions that were still in Michigan out to Scottsdale in 1987.

  As the company’s fortunes grew and the expansion gamble paid off, Halle began to pay forward to more of his managers with higher bonuses and more lavish parties. The impetuous decision to fly Fournier, Holman and Van Brunt to California for dinner in 1979 led to incentive flights awarded when stores first reach $200,000 in sales in one month. The 1981 fishing trip that Bill Sweatt offered as a prize for selling Discount Tire’s private-label RoadHugger brand morphed into a three-day, Discount Tire-sponsored extravaganza for upwards of three hundred employees at Lake Tahoe.

  As the company opened new stores and regions, Tire Business magazine ranked Discount Tire at the top of its industry, with 201 company-owned stores and $311 million in revenue for 1988.

  The business was operating more and more efficiently as well-trained managers spread out across the country to maintain its customer-focused discipline. The Washington State region opened in 1987 and Florida was added in 1989, the same year the hundred largest privately held companies in Arizona named Discount Tire the Most Admired Company in the state.

  Halle recruited Christian Roe, who had been one of his primary commercial bankers, to add depth to the finance department in 1988, and Halle and Roe began to obtain capital for expansion directly from tire companies.

  Ironically, as the company’s reputation as a disciplined and profitable retailer was growing, Halle lost some of his focus in the 1980s, fiddling with the model that had made the company successful.

  As the 1980s began, Discount Tire started offering replacement batteries as a product expansion, reasoning that battery replacement is a simple process like changing a tire. However, a drained battery is often the result of another problem, such as a faulty alternator, and Discount Tire wasn’t in the business of fixing alternators. Simply offering new batteries disappointed more customers than it pleased, leading Halle to drop the program. In 1988, Halle opened a buying club, Tires Plus Club, in California, reasoning that other buying clubs were successful and there was room for a club dedicated to automotive products. Again, he was wrong. The huge store required far more staff than its revenues could justify and, three years after opening his 35,000-square-foot store in California, Halle backed off on his costly experiment.

  “Here’s what we didn’t realize,” explains Jim Silhasek, chief corporate counsel. “Consumers don’t know much about tires, so they have to rely on someone else to explain what they need. So we needed many more people than we had planned for, just to explain the differences and what tires would work out best. That meant more people on the floor, higher costs and a very inefficient operation.”

  The experiment was far from a total loss for the company. Tires Plus Club started a mail-order business, running ads in trade magazines and assembling a telemarketing group. When Halle closed the megastore, the telemarketing group moved to Scottsdale and grew profitably.

  “At that time, nobody had heard of e-commerce and the Internet was not a great big deal,” Halle remembers. “Now, along comes the Internet and e-commerce and we have the people in telemarketing, plus a lot of stores. We were already positioned before a lot of other people, because of our telemarketing.”

  By 1994, the telemarketing business had morphed into Discount Tire Direct, which operates largely online and ships tires and wheels across the country. Entering the market early, Discount Tire also snapped up two attractive URLs—www.tire.com and www.tires.com—as it launched its websites. Over the years, Halle has been approached about selling the URLs, but he has declined the opportunity.

  None of the missteps in the 1980s proved disastrous for the growing company, just as the continued availability of credit and rising property
values supported Halle’s investment in new stores. While Halle was taking oversized risks and deviating from his successful business model, the company was being propelled forward by a growing team of average Joes who came to the company with no expectations, but were inspired by Halle and each other to achieve above-average results.

  THE LOST BOYS

  “I spent two years in junior college and I didn’t have any direction. I didn’t know what I wanted to do with my life,” Gregg Olewinski notes.

  “My dad thought I would party too much in college if I didn’t have a job,” Ron Archer explains.

  “I just came in because I needed a regular paycheck,” Tim Ehinger admits.

  “I was the youngest of three. By the time it was my turn to graduate from high school, my mom told me there were no college funds left,” Vern Roberson recalls.

  “I thought I wanted a corporate job at a bank or something,” Al Hatfield remembers.

  Olewinski, Archer, Ehinger, Roberson and Hatfield are all regional vice presidents at Discount Tire Company. Each arrived by mistake. None regrets the error.

  The management ranks at Discount Tire—from the stores to the regional offices and the corporate operations team—are populated by people who never heard of the company while they were going to school and never, ever thought they’d spend their lives as tire salesmen.

  “I thought this was a really good opportunity to go to a company, learn a bit about retail and management and then I’d quit, realize the American Dream and start my own company,” recalls Larry Allen. Nearly thirty-five years later, Allen is vice president of the Houston region, responsible for nearly $350 million in revenue at seventy-eight stores. “It turns out I didn’t have to start my own company to realize the American Dream,” he says today.

  Vern Roberson was working his way through college in 1981 when an employment agency arranged a “management trainee” interview for what turned out to be a tire-changing job at Discount Tire. “The manager of the first store I worked at was driving a black Corvette, and it turned out he never finished high school. I thought, ‘This guy is living the dream.’ If he could do it, I figured, so could I.”