Treadways Celebrates 20th Anniversary with Third Consecutive Year of Record Profits
While the Times are Good at SCOA Subsidiary Treadways They Were Not Always That Way

Like all good business plans, it was a simple and potentially lucrative one. Import after-market automobile tires from Sumitomo Rubber Industries (SRI) and sell them in the U.S., the largest market for tires in the world.

This is exactly what Sumitomo Corporation of America (SCOA) and Sumitomo Corporation (SC) did when they established the Treadways Corporation in 1985 in the U.S. with an office in San Francisco.

At that time, Ryoji "Ray" Araki was responsible for tire exports to the U.S. in the SC Tire Group in Tokyo. He soon joined Treadways in their San Francisco office in 1987 as the Manager of Operations and Logistics.

As they developed their business on the west coast and throughout the rest of the United States, selling Sumitomo brand tires to wholesale distributors, they decided to expand their distribution network to the east coast to improve service, opening up an office in Edison, New Jersey.

But then two problems came to the fore. The yen began to rise against the dollar, squeezing the profits on the tires they sold from Japan. And soon thereafter the U.S. experienced a recession, cutting demand for tires.

Treadways Restructures Their Business

In 1993, after two years of losses, Treadways restructured their business, closing offices and distribution centers, including their east coast operations.

"It had become apparent that the value of the yen was something beyond our control," explained Dan Wire, a former chairman and president of Treadways. "The company, up until that time, was structured to grow, it was double the size it needed to be and the supply situation from Japan was unstable."

When the reorganization was completed, Mr. Araki, who had moved to Edison, New Jersey to be the head of East Coast operations, found himself without an office.

Kazuhiro Takeuchi, currently the Executive Vice President of SCOA and then the head of the Business Investment Group, invited Mr. Araki to work out of the New York office. He along with Dan Wire, who was then the Vice President of Sales and Marketing, and Tadashi Abe, the Treadways President at the time, searched for a solution.

They decided the best way to stabilize the business against the fluctuation in the value of the yen was to secure domestic production by purchasing private brands that could complement the tire production of Sumitomo Rubber Industries. Treadways started by buying Eldorado Tire from Kely Calamari in 1995, and then contracted with Cooper Tire to manufacture them.

This was followed in 1996 by the purchase of Laramie, Jetzon and Telstar from the Hoffman and Reichman families, with these tire brands being manufactured by Kelly Springfield, a division of Goodyear. The acquisition of these private tire brands achieved the goal of domestic U.S. production and also led to a much larger customer base.

Today, Treadways has five divisions: Sumitomo Tire, Eldorado Tire, Laramie Tire, Jetzon/Telstar Tire and TreadXpress that sells seven private brand lines as well as Goodyear, Dunlop, Perelli, and other major brands.

Acquisitions in Place, Treadways Builds Efficient Distribution Network

While the first part of their equation in the turnaround at Treadways was the acquisition of their private brands, they have solidified their success by building the most efficient distribution network in the industry.

Their state of the art mixing warehouse in Southaven, Mississippi, which opened in April 2000, handles all of the company's brands and distributes tires worldwide. It includes computer terminals located on the forklifts, making Southaven the most modern facility in the industry, according to Mr. Wire. "Our operations are two dimensional. With the computerized system we can put away and pull orders on the same trip - most companies don't have that ability."

Up until they built the mixing warehouse, it was tough to create synergies between brands or scale the business between the various brands, according to Mr. Wire.

For instance before the Southaven center, each trailer load would need to be of a single brand and it was difficult to mix trailer loads between customers.

Now with the distribution and mixing center they can mix loads and ship different tire brands on the same trailer to multiple customers. This has given Treadways more flexibility in delivery and has allowed them to lower their inventory and reach smaller customers, and allowed their customers to buy more frequently.

In addition, they have 8 other distribution service centers located throughout the United States in Northern California, Southern California, Chicago, Houston, Dallas, San Marcos (Texas), Columbus (Ohio) and East Norriton (Pennsylvania). And in 2003, they released a web site tread Net that allowed customers to place orders online, 24 hours a day.

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