Continental Acquires Hoosier Tires

[twobjshelbys]

Hoosier Racing Tire Acquired by Continental - Hot Rod Network

[joyridin']

That stinks!

[G-Pete]

That is BAD, just kiss great tires goodbye

[indianamoon]

Let's give it a chance huh? I live just a stone's throw north of Hoosier, went to college with the kids. Local newspaper article has management staying on and improvements and increased employment coming in the future. Hope it really happens. Hoosier has been a very successful and profitable business around here for years, as evidenced by their public service and local donations. The park in Lakeville that the family donated and built is very impressive. Let's hope this continues!

[joyridin']

It won't. Now it is under the umbrella of a big corporation that obviously bought it to siphon off the profit for shareholders.

My brother works for a Schaeffler company. Nickle and dime everything.

[mikeinatlanta]

Have we ever had a period in history where automotive tires became less capable?

[Ace23]

Originally Posted by joyridin'

It won't. Now it is under the umbrella of a big corporation that obviously bought it to siphon off the profit for shareholders.

My brother works for a Schaeffler company. Nickle and dime everything.

That is an awfully pessimistic way to look at it but in reality it is more close to to what will probably really happen. In more cases than not the aquisition of a company is usually for the worse. The best case scenario I would hope for is they continue to produce what Hoosier already has.

I love the way marketing promotes how the original owners will "stay" involved and be a part of the new aquisition. We all know this is a 1-2 year extension and they they ride into the sunet with a full bank account never to be seen again or open up a new business once their non compete expires. Whatever the case good going for the Hoosier owners.....anyone who creates something deserves to benefit from it.

[YerDugliness]

I always thought that Continental tires were pretty well made...I know that when I was riding motorcycles they were the top of the line in the tire selection.

I understand that "mergers" or "takeovers" can produce some tension...let's hope that our source for Avon tires does not dry up!

Cheers!

Dugly

[G-Pete]

It's not the quality of Continental, it is the history of big Companies swallow smaller ones and do not serve the small market anymore.
Hoosier and Avon have a very small segment which many of us are depended on.

Continental is laid out for mass production, not 1000 or less tires from one line. The new GM will stop that and redirect. Dropping all the low volume and reengage.
Business 1O1.

Sure there will be 17,18 and 19 inch Hoosiers - buy that's it.

[ChiChris]

It is possible the larger company will alter the entire make-up of the smaller company.
However, it depends on the profitability of the lower volume tire runs.
Continental will provide R and D along with greater distribution and production economies of scale.
Hoosier has an excellent name and proven performance.
Time will tell.

Aston Martin was never as profitable or well run as when they were under Ford Motor ownership. Now that they are privately held, it is a rolling disaster.

[twobjshelbys]

Mergers are the new way. It was announced this week that the acquisition of Cabellas by Bass Pro is nearing completion. Both will remain separate for the time being.

[cycleguy55]

Some cynical views in this thread - not without merit, but niche market companies acquired by larger ones can often thrive if the parent company doesn't meddle with the things that have made the small company successful. That's a a bit 'IF', BTW. OTOH, I worked for 22+ years for a subsidiary of IBM and I can tell you ownership by 'Big Blue' brought many things, good and bad. The worst part was IBM attempted to run the subsidiary as a department and was continually micro-managing and second-guessing a great team. A giant PITA they were - and still are, based upon recent conversations with people still there.

Continental is a big, mass-market company that's focused on volume - not niche markets. Hoosier, OTOH, is a small company focused on niche / specialty markets. The acquisition makes sense - Hoosier potentially gets access to research and development expertise they could never afford on their own, plus access to Continental's distribution and dealer network. Continental gets a profitable company to extend their reach. I don't know how much business Hoosier did outside North America, but this could well be expanded through the Continental ownership.

As noted in the media release: "Continental and Hoosier have collaborated on technical and motorsports projects in the past several years." I would expect this to not only continue but expand under common ownership.

It's entirely possible the Hoosier ownership was ready to 'cash out' and saw this as their best opportunity - especially given their history of collaboration with Continental. That's a challenge many owner-managed or privately-held firms face, and the Continental / Hoosier deal is similar to one many companies do when they find they have few options.

[Frank Messina]

The "everything stays the same" chant is the Novocain they inject to keep everyone calm while they figure out where to start chopping. They have to recoup their purchase price and most times the acquiring company isn't looking to do that over the next 20 years. People will be shed and products that don't match the new corporate model will be cut as well. That's just the reality. Just look at Dunlop/Goodyear.
Frank

[cycleguy55]

Originally Posted by Frank Messina

The "everything stays the same" chant is the Novocain they inject to keep everyone calm while they figure out where to start chopping. They have to recoup their purchase price and most times the acquiring company isn't looking to do that over the next 20 years. People will be shed and products that don't match the new corporate model will be cut as well. That's just the reality. Just look at Dunlop/Goodyear.
Frank

Fair enough - especially when it comes to back end or shared services. Do you really need two IT departments? Can HR and/or Accounting for Hoosier become a 'satellite' location with core services delivered from Continental HQ? Does Hoosier need a Treasury or Accounts Receivable department when it can tap into Continental's?

Just some examples, but the acquiring companies that are successful evaluate these and other services to see where 'synergies' can be found and costs eliminated. If they do it well they won't negatively impact customer services - but that requires focus, commitment and dedicated resources. Do it poorly and you have a disaster.

[ACademic]

M&A involves seeking synergies, plain and simple (cycleguy55 is correct).

Assume for a moment that Hoosier is accretive (helps the buyer make higher profit margins) to Continental's bottom line. The first people to go are usually Finance/Accounting and Human Resources, as the integration will bring both companies onto a common accounting and personnel framework. You don't need the redundancy...you eliminate that quickly to save money. Salesforce overlap will also be impacted fairly early on so some regional sales people will also be impacted. Consolidating IT departments can be a little tricky, but that eventually occurs, too. This is all typical post-M&A fact.

Hoosier will more than likely benefit from better purchasing power via Continental's larger enterprise-wide national agreements with key vendors. So they should actually MAKE more money per tire after the acquisition than before. If it's a niche market (it is), then expect price increases, too. So Continental wins twice...sells the same tires for more money AND reduce their costs.

Most senior management (except where there is overlap) will all be tied down to 2-3 year employment agreements with non-compete provisions. That will keep them fed until they either prove themselves worthy of being part of the larger organization (and the change in culture that will persist), or they will be leveraged out as some consolidation invariably takes place within the first two years of the acquisition. I was always jealous of the acquirees receiving those deals (guaranteed income).

Any Continental managers that kill the Hoosier brand/following/quality won't last three years. So Continental (and their senior management team) is heavily motivated to keep the brand very alive and for it to continue to prosper.

I've done M&A for over two decades so I would suggest that the naysayers relax a little and let the process work itself out.

[Lou1119]

Originally Posted by ACademic

M&A involves seeking synergies, plain and simple (cycleguy55 is correct).

Assume for a moment that Hoosier is accretive (helps the buyer make higher profit margins) to Continental's bottom line. The first people to go are usually Finance/Accounting and Human Resources, as the integration will bring both companies onto a common accounting and personnel framework. You don't need the redundancy...you eliminate that quickly to save money. Salesforce overlap will also be impacted fairly early on so some regional sales people will also be impacted. Consolidating IT departments can be a little tricky, but that eventually occurs, too. This is all typical post-M&A fact.

Hoosier will more than likely benefit from better purchasing power via Continental's larger enterprise-wide national agreements with key vendors. So they should actually MAKE more money per tire after the acquisition than before. If it's a niche market (it is), then expect price increases, too. So Continental wins twice...sells the same tires for more money AND reduce their costs.

Most senior management (except where there is overlap) will all be tied down to 2-3 year employment agreements with non-compete provisions. That will keep them fed until they either prove themselves worthy of being part of the larger organization (and the change in culture that will persist), or they will be leveraged out as some consolidation invariably takes place within the first two years of the acquisition. I was always jealous of the acquirees receiving those deals (guaranteed income).

Any Continental managers that kill the Hoosier brand/following/quality won't last three years. So Continental (and their senior management team) is heavily motivated to keep the brand very alive and for it to continue to prosper.

I've done M&A for over two decades so I would suggest that the naysayers relax a little and let the process work itself out.

I have to agree with you on this. I also have made many acquisitions in the last 1/4 of a century. Yes there will be a shake out of several departments most of them in the admin functions. The consolidation of sales forces can be a real minefield if not handled properly . On the positive side there should be resources available to the Hoosier brand that probably weren't there or not even considered when the company was private.

Someone said that the synergies would be a real positive thing. One thing I learned early on was " Never make an acquisition based on Synergies". They tend to evaporate before your eyes or the different cultures of the companies make them go away quickly.
Give this a chance: it could be extremely positive.