Business Monday

Tire wholesaler’s strategy toward profitability is to rely less on China

Joaquin Gonzalez, left, who is president, and Antonio “Tony” Gonzalez, CEO of Tire Group International inside the warehouse facility.
Joaquin Gonzalez, left, who is president, and Antonio “Tony” Gonzalez, CEO of Tire Group International inside the warehouse facility. jiglesias@elnuevoherald.com

While many South Florida companies are concerned about possible new tariffs on imports from China, Miami-based Tire Group International (TGI), a major player in the domestic and foreign wholesale tire market, has detoured around the big potholes in U.S. trade policy.

TGI imports most of the tires its sells, but has radically reduced its dependence on China as a supplier.

“Several years ago, about 75 percent of our tires were sourced in China,” said Joaquin Gonzalez, president of TGI, standing next to a pile of giant mining equipment tires in the company’s Doral warehouse. “Now we source about 40 percent from Thailand, 20 percent from India, and only 8 percent from China. We also buy 15-20 percent from U.S. sources.”

Why the shift? The company was already paying tariffs on Chinese-made tires under the Obama administration. New tariffs under the Trump government created an additional burden and threaten to go even higher. “During the last few years, we diversified our factory sources to avoid being in a situation where we could be crippled by tariffs,” said Antonio “Tony” Gonzalez, TGI’s co-founder and CEO. Producers outside China offer us better quality and more robust tires at slightly higher prices, he added.

BM PROFILE TIRES MANN 00129 JAI
Inside the TGI warehouse in Doral. Starting out as a tire brokerage business in 1992, TGI has become a major player in the wholesale market for new replacement tires. Jose A. Iglesias jiglesias@elnuevoherald.com

Tony and Joaquin, who are brothers, grew up working at their father’s gas station and tire business, which was TCM International Inc. in Miami. Their father, Joaquin Antonio Gonzalez Sr., handles some customer relations and marketing for specific brands at TGI. “He serves as a source of wisdom to our team members,” Tony said.

Joaquin was a star football player in the late 1990s-early 2000s at the University of Miami (he was part of the 48th Hall of Fame class at UM), where he received a bachelor’s in business administration and an MBA. He played offensive tackle for the Cleveland Browns and Indianapolis Colts before joining TGI.

His older brother, Tony, has business interests outside the tire company that include Rock the Moon Productions, a multimedia creative outlet that serves as a record label, film company and developmental agency that curates talent and events. Among his accomplishments: “El Mar y El (the Sea and Him), a short, award-winning film based on the 1980 Mariel boatlift that was seen on HBO. He is also a producer for “The Corporation,” a documentary about Miami’s Cuban mobsters in the 1960s-’80s, in partnership with Leonardo DiCaprio; Benicio del Toro is slated to play the lead role.

TGI designs and produces its own private brands overseas — Cosmo and Orion (premium tires), Industar (lower cost for clients in Latin America), Duramas (mid-level pricing) and Luna (low-priced) — and buys other brands, including big names like Bridgestone, Goodyear and Michelin, from manufacturers in the U.S. and abroad. This mix allows TGI to competitively sell high-margin premium tires, mid-level and low-priced tires in its diverse markets.

Starting out as a tire brokerage business in Miami in 1992, TGI has grown into a major player in the wholesale market for new replacement tires. The company carries more than 30 brands and sells to wholesalers/distributors in the United States and 80 other countries. Latin America and the Caribbean account for about 45 percent of TGI’s sales. The company also sells inner tubes and other equipment.

Sometimes, tires are shipped to TGI’s South Florida headquarters or its Portland, Ore., warehouse for regional distribution. In other cases, shipments move directly from foreign manufacturers to TGI’s warehouse facilities in Colombia or to large clients in other countries.

In addition to diversifying its foreign sourcing away from China, TGI is expanding by investing in its own regional tire distribution network in the United States.

TGI currently has two regional centers: Doral and Portland, Ore. It will be opening more, offering groups of smaller retailers access to its full range of brands while stressing its own private brands that offer high quality at a lower price than the big names. Small retailers generally depend on the major tire producers, who squeeze their margins.

For example, Antonio said, when offering its new regional distribution services to groups of small retailers, “I ask them, would you rather sell a Goodyear and make 10 percent, or sell our Cosmo brand and make 30 percent?

“By building our own regional distribution network, providing dealer support and promoting our premium brands like Cosmo, we avoid being a slave to the major tire producers.

“What the big guys do, we’re doing it too.”

Company name: Tire Group International Inc. (TGI)

CEO and co-founder: Antonio Gonzalez.

President: Joaquin Gonzalez Jr.

Founded: In Miami in 1992 by Antonio Gonzalez and Agustín Herrán.

Ownership: Antonio “Tony” Gonzalez; Joaquin Gonzalez Jr.; other members of TGI senior management; co-founder Agustín Herrán, CEO of Sedano’s Supermarkets; private equity firm Transportation Resource Partners (formerly Penske Capital Partners); international trade consultants McLarty Associates and GarMark Partners, which provides companies with mezzanine debt and equity capital.

Headquarters: 7500 N.W. 35th Terr., Doral. Offices/warehouses in Portland, Ore., Colombia and China.

Employees: 112.

Clients: More than 2,000 active tire wholesalers in the U.S. and 80 countries overseas, plus groups of small tire retailers in the U.S. About 16-17 percent of all sales go to customers in South Florida. Tire distributors in Mexico, Colombia and Peru rank among the largest overseas buyers. Two important clients are Tire Direct, Mexico’s leading tire distributor, and Bermuda-based Island Construction Services (ICS) and its sister companies Island Quarry and ICS Tires.

Financials: In 2018, unit sales increased by 25 percent over 2013. For 2019, Tire Group International expects growth of 15 percent, thanks to tire lines it launched and developed a few years ago. The company does not release dollar revenue figures because sales in Latin America were often affected by currency devaluations.

Competitors: American Tire Distributors (ATD) and some major tire manufacturers who are setting up their own distribution centers.

The difference: Tire Group International offers an enormous variety of replacement tires for passenger vehicles, commercial vehicles, mining and construction equipment at what the company says are very competitive prices. Price and quality range from economical to high-end, high-performance tires. It provides dozens of brands including major names like Goodyear and Michelin as well as its own six private brands. The company designs its own tire tread patterns and tread depths and other elements to meet its customers needs and, like the big international tire companies, provides financing, marketing assistance, exclusivity and service to its domestic and international customers.

Client view: Tire Direct, Mexico’s largest wholesale tire distributor, has been buying a range of brands from Tire Group International for nearly 15 years. “TGI offers many advantages and added value, among them their staff, their service, their always competitive pricing and their word,” said Gonzalo Santamarina, Tire Direct’s managing director. No matter what the issue may be, he added, “They always keep their promises and have a solution for you.”

Island Construction Services (ICS) and its sister companies, Island Quarry and ICS Tires in Bermuda, have been doing business with Tire Group International since 2013. “We buy about 85 percent of our tires from TGI,” said Stephen Moniz, vice president of Island Construction Services, a group that covers a wide range of sectors including construction, project management, landscaping, building materials, equipment rentals, fleet management and tires for passengers cars, commercial vehicles and earth moving equipment. “We were working with another tire supplier but get fed up with them.”

Most supplies for the island arrive by sea and Island Construction Services depends on prompt, reliable and accurate deliveries, Moniz said.

“I looked at several options in Florida and New Jersey [which offer direct shipping to Bermuda], and decided on Tire Group International. They go over and above to help us get what we need on time.” Tire Group International not only ships tires to the Bermuda company, but also sells them batteries, lube oil and other items. In addition, Tire Group International ships other supplies their client needs in tire containers going to the island. “They provide one-stop service. They’re impeccable,” Moniz said.

Business lesson: “We’ve learned to carefully measure the risk in our international receivables,” said Joaquin Gonzalez. “We always obtain guarantees to protect ourselves” from problems like currency devaluations or business failures. A few examples of non-tire assets the company acquired as a result of customers who could not pay what they owed are a coffee plant in Honduras, beach property in Peru and a sailboat.

Outlook: As consolidation continues in the U.S. tire distribution business, Tire Group International will continue to build its network of regional distribution so it can sell directly to large groups of mom and pop retailers who often depend on the whims and pricing policies of major tire manufacturers. It is also launching new “fun” tire lines with memorable names like MuchoMacho, SexyBeast, ChubbyNubby and KittyKat in a bid to appeal to millennials, women and Latinos in the United States, and women and younger customers in Mexico.

The writer can be reached at josephmannjr@gmail.com.

  Comments