Bridgestone Americas in late June informed American Tire Distributors (ATD) that it’s discontinuing its passenger and light-truck tire distribution relationship with ATD following approval (and the imminent launch) of TireHub LLC, a tire distribution joint venture between Bridgestone and the Goodyear Tire & Rubber Co.
Bridgestone’s move came about two months after Goodyear announced plans to drop ATD as an authorized national distributor. Goodyear’s decision followed the formation of TireHub this spring.
In the wake of Bridgestone’s announcement, Moody’s Investors Service placed its ratings for ATD under review for downgrade once again, including the company’s “Caa2” corporate family rating and “Caa3-PD” probability of default rating, as well as the “Caa1” and “Caa3” ratings for ATD’s senior secured term loan and senior subordinated notes. Moody’s cited the Bridgestone move in announcing the review, stating that ATD’s creditworthiness is likely to erode more significantly than the rating agency had originally anticipated.
“The magnitude and timing of earnings and cash flow erosion following the loss of two prominent suppliers will be more severe and immediate than previously envisioned,” Inna Bodeck, Moody’s lead analyst covering the company, said in an announcement dated June 27. “This latest development further evidences the ongoing shift in the approach of premium tire manufacturers to the evolving marketplace and ultimately represents an incremental resizing of the tire distribution channel.”
In a statement provided to Service Executive, ATD said: “ATD remains the nation’s premier tire distributor, as well as the largest independent supplier of tires to the replacement tire market. Importantly, ATD continues to generate substantial cash flows and, as of May 31, 2018, had approximately $300 million of liquidity. We have a loyal base of customers and manufacturer partners with whom we are continuing to work as we always do.
“Our value proposition continues to strengthen as we execute our strategy. Our industry is evolving, and we are bringing game-changing innovation — including digital tools, programs and technical support — that will make us the most connected and insight-driven automotive solutions provider in the industry.
“We are disappointed by Bridgestone’s decision to no longer use ATD as a distributor of their products in the United States, which we believe limits consumer choice. We have been and will continue to take steps to meaningfully offset the potential impact of Goodyear and Bridgestone’s actions. To us, it’s all about keeping the power of choice alive, and we look forward to continuing to support our customers and manufacturer partners like no one else can.”