American Tire Distributors Inc.’s (ATD) declaration of bankruptcy is certainly the biggest tire distribution story of the year and a development that will have far-reaching reverberations.
If you’ve been following MTD’s excellent reporting on this situation, you know that ATD recently filed for Chapter 11 – the second time the company has done so since 2018.
ATD says it will remain “open for business” while it refinances and reorganizes.
This time around, ATD has an advantage in that it isn’t reeling from the fall-out of what happened in April 2018, when two of the company’s biggest suppliers at the time, Goodyear Tire & Rubber Co. and Bridgestone Americas Inc., abruptly cut off supply of their respective consumer tire lines to ATD’s warehouses when they formed TireHub LLC.
Overall, ATD also looks differently than it did in 2018, having sold its National Tire Distributors (NTD) subsidiary, which operated in Canada, to Groupe Touchette in June 2022, after acquiring Monro Inc.’s wholesale distribution arm, which was valued at $105 million, the previous month.
In addition, ATD has added a number of large distribution centers since 2018, including its first regional distribution center in Georgia, which opened four months ago; a warehouse located Kentucky that opened in April 2023; and a distribution center in Utah that began shipping tires in March 2023. (The Georgia facility represented a capital outlay of more than $10 million, according to ATD officials.)
As ATD embarks upon a critically important phase in its existence, several natural questions come to mind:
Will ATD “skinny down?” When I recently asked ATD if it plans to sell any of its 115-plus distribution centers, a spokesperson from the company said, “We are focused on supporting our manufacturer partners and providing our customers with tires, wheels, related tools and accessories to support their business. As always, operational footprint decisions will continue to be based on the needs of the business.” Would ATD be willing to part with some locations in order to generate cash? I don’t think this is outside the realm of possibility.
Will other tire distributors benefit from ATD’s situation? When it comes to sheer number of locations, both TireHub and National Tire Warehouse (NTW), the joint venture between Michelin North America Inc. and Sumitomo Corporation of Americas, closely approach ATD. (TireHub has opened two regional distribution centers over the last 12 months and plans to open three smaller distribution centers by the end of 2024.) Other distributors of significant size, including K&M Tire Inc. and U.S. AutoForce LLC, have been in expansion mode over the past few years, with K&M Tire recently gaining a number of new locations in New England. I'm sure there are plenty of smaller independent tire distributors that also would love to grab a chunk of ATD’s business. (Independents remain the dominant tire wholesale distribution channel in the U.S., holding 80% share of market versus tire company-owned wholesale operations, which make up around 10.5% of the market, according to the most recent edition of MTD’s Facts Issue.)
When will ATD emerge from bankruptcy? ATD emerged from its previous bankruptcy near the end of December 2018, slightly more than two months after it declared Chapter 11. “We are a stronger company with the financial flexibility to build on an 80-year history of leadership and innovation,” said then-ATD CEO Stuart Schuette at the time. Time will tell if ATD can repeat the same feat.
I have no doubt that ATD will survive bankruptcy. But it will be interesting to see how the next chapter in the company's history plays out. Stay tuned to www.moderntiredealer.com as we continue to cover this evolving story.
