Facing Lower Earnings, Bandag Cutting Jobs
September 30, 1999
Tire retreader Bandag yesterday announced that it expects its 1999 earnings to be 20% to 25% below current estimates. It blames the drop partly on what it calls Michelin's unfair tactics since the tire manufacturer entered the retread market two years ago.
According to the company, the lower earnings are due to slow sales expected the rest of the year. Bandag also had higher-than-expected start-up costs for its new Tire Management Solutions subsidiary.
During the fourth quarter, the company plans to eliminate nearly 200 jobs and close a tread rubber manufacturing facility. Bandag has advised the United Steel Workers of America regarding its plant closing plans and has begun the process of working with the union to possibly close a 100,000 sq. ft. tread rubber manufacturing facility in Muscatine, IA. The plant has approximately 100 employees.
"The key force driving the need to restructure Bandag's North American operations is slowing product demand, particularly in North America," says Bandag CEO Martin Carver, "caused in part by the loss of certain dealerships as a result of Michelin's excessively aggressive tactics, which are now the subject of a lawsuit filed by Bandag against Michelin's U.S. subsidiaries."
Michelin says Bandag's lawsuit is without merit and is the retreader's latest attempt to preserve a monopoly position in retreading, where it has more than 50% of the market with more than 400 franchise locations.
"Bandag is having a difficult time winning in the marketplace and, unfortunately, is resorting to the legal process to avoid marketplace realities," says John Rice, chief operating officer of Michelin Americas Truck Tires.