American Tire in Talks With Sponsors as Support Unit Revamps

(Bloomberg) -- American Tire Distributors Inc. is overhauling part of its business, cutting jobs and talking with sponsors about how to steady and grow the company after the makers of Goodyear and Bridgestone pulled most of their business. The company’s distressed bonds rose.

The reorganization at American Tire’s field support center includes dismissing 100 employees, according to a person with knowledge of the matter. The changes were discussed in a memo to the staff dated July 25 and signed by Chief Executive Officer Stuart Schuette, who said the moves will align the company’s capabilities with its long-term strategy.

“We have a plan that we are working through with our sponsors, and over the course of the next few months through all of our efforts we will pave the road ahead of us,” Schuette wrote. “We look forward to sharing this with you as it becomes finalized.” American Tire is controlled by private equity sponsors TPG Capital and Ares Management LP.

The company is also creating 40 new positions, with targets for about $20 million in annual savings from the reorganization, said the person, who wasn’t authorized to speak publicly about the matter.

The biggest North American distributor of replacement tires has been reeling from the decision by Goodyear and Bridgestone to concentrate on selling directly to consumers, and by Amazon.com Inc.’s plan to sell tires online and have them installed at Sears Auto Centers. American Tire’s bonds trade for about a third of their face value, amid predictions from analysts about a debt exchange or pre-packaged bankruptcy that will saddle investors with deep losses. The 2022 senior subordinated notes gained 1.25 cents on the dollar to 32.5 cents.

American Tire began a transformation over 18 months ago that introduced digital tools and more advanced technologies, according to Schuette’s memo. The company has said other suppliers can fill the gap left by Bridgestone and Goodyear and told investors first-half sales had increased, although those numbers included sales of tires from the two brands that were left in its inventory. The company got a boost this week from the makers of Michelin, which said it’s still planning to use independent wholesalers. American Tire said last month it employs more than 5,000 people with more than 140 distribution outlets.

“While a number of positions have been impacted at the field support center today, we are investing in many new positions that will drive the capabilities aligned with our strategy,” according to a statement from a media representative for American Tire, which is based in Huntersville, North Carolina.

To contact the reporter on this story: Josh Saul in New York at jsaul15@bloomberg.net

To contact the editors responsible for this story: Rick Green at rgreen18@bloomberg.net;Nikolaj Gammeltoft at ngammeltoft@bloomberg.net

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