A few weeks ago, I was checking out a bit of tire news, when I noticed that Titan had issued some new debt. The purpose of the debt, it turned out, was for acquisitions. It didn’t say what Titan intended to acquire, just that the company was raising money.
I wasn’t left in the dark for long. Just after I published last week’s article, it came to my attention that Titan has made a bid for Goodyear’s European Ag business, which includes a plant in France (the letter of intent was signed in September). At first glance, this seems like a smart move. After all, TWI has already taken over Goodyear’s Ag business here in the States. How difficult would it be to repeat the transaction in France?
The problem lies here: For better, and for…otherwise, Morry Taylor is Titan Wheel. They are inseparable. When TWI took over Goodyear’s US business, they ran the following ad:
I tell you, tapping into America’s xenophobic tendencies is a classy way to sell tires. The metaphor is overly strained( e.g. “Beret is a style of hat, not a brand of hat.” You have to compare the quality of a beret, to another beret. It just doesn’t work.), the sterotypes aren’t clever, and honestly, the ad isn’t funny (I don’t mean that in a serious, politically correct sort of way. I mean it falls short of the very low, modern standard for consideration in the category of ’humor’.)
Now, pretend you are an employee at Goodyear/Dunlop, France. You see the ad. You begin researching the company that is about to take over the day-to-day operations of your plant. After all, they aren’t super-friendly to labor unions(for political, and fiscal reasons.). They have the American mindset about politics, work, pay, and benefits. Not exactly something that will bring any comfort to the average French worker.
It’s also worthwhile to note that this might not be a great deal for Titan, either. Whether you like it or not, France has a distinct way of doing things. The Corporate taxes are high, but the employer contributions to France’s version of Social Security are worse(up to 40% of an employee’s gross pay.) Add in the VAT that each company within the EU must pay, on each item that is received as a raw material, and sold as a finished product…it adds up.
Since we’re on the subject of VAT, let’s bring up the fact that TWI’s European division, will also fall under the guidance of the EU’s environmental, legal, and fiscal jurisdiction. Right now, you have Greece and Ireland on the verge of economic collapse. Add to that a few other nations that are in a precarious financial position, and you have the rumble of tax increases on the horizon. Let’s not forget the commitments to CO2 reductions, and more stringent environmental policies.
From a fiscal and a cultural standpoint, this seems like a bad fit for both TWI, and Goodyear/Dunlop France. There is one way that this can work: If Titan leaves the current management in place, and gives them the ability to oversee personnel as they see fit, while focusing on improving inefficiencies in the supply chain, and decreasing the costs of unfinished goods…then this has a chance of being profitable.
On the other hand, if Titan goes in, decides that there needs to be a management shake-up, and begins to show them how “we do things in America”, then you can go ahead and put this one in the “loss” column. The French won’t stand for it as a culture, and there are ample social safety nets in place, should they decide to go on strike. The incident with Michelin a little while back should serve as a cautionary tale for any company who thinks they get to tell French workers what to do.
I could be wrong on this one. After all, there are highly paid consultants and lawyers who advise on deals like this. And you can’t count Morry Taylor out completely on this one. He prides himself on marching to the beat of a different drummer. Let’s just hope that the drummer isn’t playing the company a death march, on the way to the guillotine.
Liberté, égalité, fraternité.
Stay tuned for the latest news affecting the tire and mining industires.
Until next time, we’ll be…
Signing off…
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