The little Goodyear that could

Goodyear Rubber and Supply offers quality service and high-end belting products, but no blimp rides or front-end alignments

By John R Johnson -- Industrial Distribution, 9/1/1998

Goodyear Rubber

and Supply

Headquarters: Eugene, Oreg.

Founded: 1893

Employees: 19

Branches: 2 (Portland, Oreg. and Seattle, Wash.)

Expected 1998 sales: $4.5 million

Territory: Pacific Northwest

Web site: www.goodyearrubber.com

(under construction)

Don Chapman remembers the day the employment agency called and told him about an excellent opportunity at Goodyear Rubber and Supply Co.

"I don't want to sell tires," was Chapman's initial response to the offer. Chapman soon realized the job offer was not from the giant tire producer, but from the much smaller distributor of belting equipment and supplies. Realizing he was on to something special, Chapman accepted a position as a sales rep in southern Oregon in 1973. Twenty-five years later, Chapman owns the company, which has developed into one of the premier belting distributors in the Northwest.

Chapman's initial confusion was well understood. Goodyear Rubber and Supply is one of just three firms in the world other than Goodyear Tire that own the rights to use the Goodyear name worldwide. And although Goodyear Rubber and Supply's customers all understand who they are, confusion still remains today.

For example, it's not uncommon for Goodyear Rubber and Supply's Eugene, Oreg. headquarters to get calls asking how much a front end alignment costs. And when the Goodyear blimp comes to Portland, the phone at the Portland branch rings off the hook with people hoping to get a ride on the blimp.

"To this day, the opening comment we have when we interview somebody is "this is who our company is and this is what we do,' because I don't want them to think they are interviewing with a $13-billion international company," says Chapman. "We do that with our customers as well.

"There's a logical confusion because our names are so similar. I'm interested in the story being accurate. If our customers ask us about our name, I want our employees to know the story. There's people that swear to God that we have to be part of the tire company or we wouldn't be able to use the name."

However, Goodyear Rubber and Supply established its right to use the name in a 1927 court settlement that ruled the name would be shared between Goodyear Rubber (and its subsidiaries) and Goodyear Tire and Rubber Co. Goodyear Rubber, which was awarded $10,000 in the settlement, agreed to never use the Goodyear name on tires or inner tubes.

Goodyear Rubber and Supply was incorporated in 1893, and is five years older than the Goodyear Tire and Rubber Co. of Ohio. Goodyear Rubber of New Jersey and Goodyear Rubber of Southern California, of no relation to Chapman's company, also have similar usage rights of the Goodyear name.

From time to time, Chapman has considered changing the company name, but has opted to leave it intact even though he sees no value from sharing the Goodyear name. If anything, Chapman says it might be a disadvantage.

"I think it's important for people to know that we are a small regional distributor, that people know our limitations and that we don't have some huge research and development team. I perceive no benefit in sharing the name. We exist to this day with no objection from Goodyear Tire and no attempt on their part whatsoever to try to get us to change our name. I'm not so sure they don't get a kick out of it. It's a neat story, the little Goodyear that made good."

Building its future

Although Goodyear Rubber's history is certainly interesting, recent moves by the firm have been just as intriguing. When Chapman made the transition to owner, he and vice president of sales Wayne Hinton focused on turning the company around.

The first thing they did was walk away from about $1 million worth of unprofitable business. Most of that revenue was from the sand and gravel business, traditionally low margin customers. All that did was leave the company more than one-third smaller than it was when Chapman bought it. Firing customers may be common in today's highly competitive activity-based-costing environment, but it was a rare -- and scary -- event to go through 10 years ago.

"When I bought the company our sales were about $3.5 million. By the time we pared down both customers and product base, it became about $2.5 million," says Chapman, noting that sales have rebounded to $4.5 million. "It was very scary, but necessary. Part of our mistake was looking at sales dollars and confusing sales with profit, and thinking that profit flowed from sales. It doesn't; it flows from margins. We were truly selling products to customers that we were not suited for, and our election was to abandon that type of business."

As a result, Goodyear Rubber and Supply dropped its hose and accessories lines, as well as its v-belt lines, and walked away from its heavy-duty, black belting business in the sand and gravel pits. To this day, Goodyear Rubber salespeople are not allowed to call on gravel pit accounts. Dropping unprofitable lines and customers gave Chapman the capital to invest in high-tech, lightweight belting products, which allowed Goodyear Rubber and Supply to add value for its customers while pumping up margins.

Chapman focused on higher end belting products, like monofilament thermoplastics and high-tech sheet rubber products. Chapman and his staff found many homes for the products, mostly in the food handling and fish processing industries.

The company is well known for its shop fabricating abilities, which include belt vulcanizing, die cutting, rubber stripping, 24-hour belt installation, and vulcanized sleeves. Today, 50 percent of Goodyear Rubber's customers are in the wood products industry (down from 75 percent), while baking/candies and food processing industry make up much of the rest. Labor for splicing and shop fabricating makes up 25 percent of sales. Although Goodyear has seen modest year-over-year revenue gains, sales have come mostly from higher margin business. Therefore, profits have grown much quicker than sales.

With the money it saved dropping unprofitable lines, Chapman could afford to spend money on researching and developing custom products for customers, like the costly silicone vacuum membranes it supplies to furniture manufacturers. Goodyear Rubber spent thousands on labor and wasted product in developing the special splices that make the product work. Goodyear also consulted with its manufacturer partner, Chemprene, in perfecting the texture of the belting on both sides.

Relying on relationships

Chapman has worked hard to form strategic relationships with both customers and manufacturers. Chemprene is a classic example. While Goodyear Rubber did its own R&D on a new product using the firm's material, Chemprene subsidized a great deal of the product loss achieved during testing.

"They were willing to invest in the project," Chapman says. "It took five years to develop the product, and I wouldn't doubt if they spent $100,000 on it. We developed the standards for the product, but the end result is we have a proprietary product that competes very well in the industry."

The silicone belt product, which requires extremely smooth splices (very hard to obtain with silicone) and is highly tear resistant, is used in the furniture industry but also has applications in the aerospace market. Part of the relationship calls for Goodyear Rubber and Supply to distribute the product in the furniture industry only; Chemprene reserves the right to market it separately to the aerospace industry.

Goodyear has a similar strategic relationship with Sparks Belting, a large belting distributor based in Grand Rapids, Mich. from which Goodyear Rubber buys most of its product. Although the pact isn't in writing, Goodyear Rubber serves as Sparks' representative in the Pacific Northwest.

"I don't consider Goodyear a distributor, but a marketing arm of Sparks to reach the customer," says Patric Crumley, vice president of sales and marketing for Sparks Belting. "By aligning ourselves with Don, we've got geographic representation in an area we were void, and he has access to over 200 styles of belting that formerly weren't available to him.

"Don runs such a tight ship, that we've learned how to run a good belt branch," Crumley continues. "We've learned things from a technical aspect on belting from Goodyear, and we've certainly taught them many things, too."

Goodyear Rubber and Supply has similar agreements with customers. The firm spent many hours developing a 10-foot wide "lane belt" for a food processing company that uses it to sort peas and carrots. The belt transports carrots under an optical scanner, which ejects bad product from the line. The key to the belt is the highly technical splice needed to make the belt endless. A bad splice would result in the wrong product being rejected, therefore greatly skewing the customer's quality control process.

Ray Borup, vice president of sales and marketing for belting manufacturer Scandura, Inc., Charlotte, N.C., has seen Goodyear Rubber and Supply come up with these customized applications time and time again. That's one reason he worked with Chapman to carry his line upon arriving at Scandura three years ago.

"They build strategic relationships with their customers," says Borup. "They're not just out there with a belt and a price; they engineer systems for the customer, and they have a knack for finding unique products and their own little niche markets.

"It's amazing, because so much of what they do for the pulp and paper industry you see coming back to markets on the East coast. We're very pleased with the job they've done for us. We needed some help in the pulp and paper industry in that area, and Goodyear Rubber and Supply was the way to get to that market."

Goodyear Rubber has designed systems for Frito Lay, Inc. and Oroweat Foods, among others. Ray Hix, chief maintenance engineer for Best Foods Baking, a division of Oroweat Foods, buys numerous belts from Goodyear Rubber to transport baking materials, pans, and finished product.

"They come in and survey everything and take [belt] measurements, so when I call and say I need a new belt for a machine, they have everything on file," says Hix. "They periodically update the survey, because we move shafts and gearings around. Quality is the thing with them. I know the belt is going to work. We do a lot of experimenting with them, because it's not always easy to find the right belts because we need FDA-approved material. We haven't gone to anyone else because they take care of us and their price is competitive for the services they give. Other people might be cheaper, but I can't rely on [their competitors] to come here in the middle of the night."

That type of customer loyalty is what Chapman seeks. He says it often takes years to develop a loyal relationship with the customer. Goodyear Rubber and Supply is often willing to sacrifice other business in order to remain with a solid customer. Witness the firm they designed the "lane belt" for. Although it may limit its market, Goodyear has agreed not to sell that product to the customer's competitor.

"I guess we've chosen sides and cast our lot with a customer that is placing a tremendous amount of confidence and putting a certain amount of their business at risk based on our performance and our ability to continue developing products for them," says Chapman. "We're talking some big money here. We would prefer to theoretically limit our market for a relationship, instead of marketing the product to their competitors and turning it more into a commodity. We try to choose sides wisely, based on the way they partner with us, and those relationships need to develop over a period of years."

Chapman notes that one major customer wanted to buy directly from the manufacturer, KVP. The manufacturer refused, saying that it markets its product directly through Goodyear Rubber. While KVP ships product to the customer, billing and servicing goes through Goodyear Rubber.

"Ultimately, they realized they had to partner with us," says Chapman. "We keep some product on inventory here, because if we let them down, it would be a major catastrophe for their business. Those are the situations we try to get into that a lot of traditional distributors might try to avoid."

High-tech training

A wrong decision on one of Goodyear Rubber's splicing or other custom fabrication projects could result in several thousand dollars of wasted material and time. Therefore, the need for hiring the right employees -- and training them well -- is essential.

"Training is extremely important, particularly in the upper end of the belting business where the cost of failure is so high," says Chapman, who sends employees to manufacturer trainings and educational sessions sponsored by the National Industrial Belting Assn. In fact, the seeds for Goodyear Rubber and Supply's strategic alliance with Sparks Belting were planted at a NIBA convention.

"We take advantage of any opportunities we have to strengthen the skills of our shop people, because to be in this business you need a very high skill level. The [splicing] work that Ken Brechtel (Goodyear Rubber's lead technician for thermoplastic belting) is doing looks deceptively easy to do, but it's maddeningly difficult to do without the right training."

Of course, it helps if you have the right employees to train. Chapman has no human resources department. He and Hinton have taken courses on interviewing job candidates and do all the interviewing themselves. However, before making a decision, candidates are interviewed by a clinical industrial psychologist who has profiles of all the different job titles at Goodyear Rubber and Supply.

The psychologist performs mechanical aptitude tests and determines if the individual is a good fit for the company, and alerts Chapman to any possible issues like drugs or alcohol problems.

"He doesn't tell us who to hire, but how they might react under certain circumstances," says Chapman, noting that turnover is relatively low at his firm. "We are loosely supervised, and our shop people work in the field with customers, so they need certain diplomacy skills. We feel if we select very carefully and invest with training in these people that we'll have less turnover and that we all profit at the end because they stay around. We also use the psychologist for ongoing skill training and career development."

"We learned early on embarking on this ambitious program of ours that people are everything," says Chapman. "You need the right people in the job properly trained and supervised. Without that, you don't have a company."

No family affair here

Don Chapman couldn't have been blamed for employing his family after taking over as owner at Goodyear Rubber and Supply in 1985. After buying the company following the sudden death of its previous owner, times were tough for several years. Many owners in similar situations may have turned to a spouse or children to help get through the tough times.

But that thought never crossed Chapman's mind. "Early on when margins were slim it was tempting to bring in family, but I never did it," says Chapman, "even when it was attractive from a financial standpoint to do so."

Chapman's decision dates back to the day he bought the company, and a commitment he made to his employees, as well as the philosophy of one of Goodyear Rubber and Supply's previous owners, who believed his children weren't the best qualified people to work within the company.

"I made the decision when I bought the business and my kids were just in grade school," says Chapman. "The previous owner had the same philosophy and he told me that his kids could get a job anywhere, and he couldn't imagine his kids were the most qualified to work here. I never forgot that. I took several key employees (at the time of the buyout) and I said "we're going to rebuild this together. In the long run we'll all succeed and you won't have to face my kids coming in here.'

"We're not a big company and we don't have a lot of career paths here to get to the upper level. I don't want my kids coming in here and leaping over the shoulders of people that have put in lots of time and a lot of sacrifice."

Chapman realizes that his policy is clearly among the minority when it comes to small independently owned distributors. However, he sticks by his decision, noting that his children may not have been interested in entering the business anyway. The only contact they have had with the company is constructing the firm's Web site, which Chapman's son, Brian, started working on over the summer. Brian enters the University of Oregon this fall. Chapman's daughter, Lynn, is finishing her degree in journalism.

"I'm not creating a family business here," he says. "I have two wonderful, smart children who I'm sure will be great managers at some company some day. I am the rarity, and I have no quarrel with people who think the opposite. I think it's magnificent that people can bring in their family and build their business and have a transition in the business within the family. But I made a firm decision not to do that. When the time comes to retire -- if it ever does -- I plan to sell the business. My children will not take it over."