Titan International, Inc.

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Titan International, Inc.

2701 Spruce Street
Quincy, Illinois 62301
U.S.A.
Telephone: (217) 228-6011
Toll Free: (888) 488-3276
Fax: (217) 228-3166
Web site: http://www.titan-intl.com

Public Company
Incorporated: 1983 as Can-Am Industries, Inc.
Employees: 2,700
Sales: $679.4 million (2006)
Stock Exchanges: New York
Ticker Symbol: TWI
NAIC: 331111 Iron and Steel Mills

ORIGINS

TAYLOR GAINS CONTROL IN 1992

DIFFICULTIES ARISING

RECOVERY BEGINNING IN 2004

PRINCIPAL SUBSIDIARIES

PRINCIPAL COMPETITORS

ORIGINS

Maurice (Morry) M. Taylor, Jr., built an empire in the tire and wheel business largely by purchasing production plants and assets discarded by other tire and wheel makers. He patched together the world’s largest manufacturer of off-highway wheels and the third largest manufacturer of off-highway tires in North America by chasing what others fled, creating a more than half-billion-dollar business that owed its dominance to the Michigan-born entrepreneur known as “The Grizz.” Reportedly hot-tempered and “rough-hewn,” according to the November 16, 1998, issue of Forbes, Taylor earned his nickname because of his combative negotiating style with labor unions. Taylor never shied from expressing his point of view on issues, either with labor unions or with the way in which the United States was governed. He paid for a full-page advertisement in the February 2, 2006, edition of USA Today, delineating his opinions on a range of subjects, including advocating the closure of all law schools for ten years, mandatory military service, and exempting all malpractice lawsuits in the medical field to curb rising healthcare costs. Taylor took out the advertisement ten years after he failed in a ten-month campaign to earn the Republican presidential nomination, when he promised to bring sound fiscal oversight and his own business skills to the White House. Taylor failed at politics, but he excelled in the business world, making the giant leap from being a wheels salesman to becoming the chief executive officer and chairman of a company aspiring to reach the $1-billion-in-sales mark.

Taylor’s transformation from wheel salesman to corporate executive began after he forged a partnership with Canadian industrialist Joseph Tanenbaum. Among the numerous achievements recorded by Tanenbaum was his acquisition in 1973 of Toronto, Ontario-based Dufferin Steel, a company he renamed Titan Proform. Titan Proform began jointly marketing its products with Fruehauf Corp.’s French & Hecht product line five years later, establishing a connection that a decade later would lead to an acquisition between the two parties, but before the transaction occurred Titan Proform was used as the vehicle to create Titan International’s predecessor. During the early 1980s, anemic market conditions in the farm implement manufacturing industry forced Firestone Tire & Rubber Company to shed some of its assets. Taylor, who had joined forces with Tanenbaum by that point, saw an opportunity he could not resist. One discarded asset put up for auction was a manufacturing plant in Quincy, Illinois, a facility with a history of its own. The Quincy plant traced its roots to the formation of the Electric Wheel Company, a company founded by John A. Stillwood and three colleagues in 1890. Electric Wheel originally made wheels for wagons and farm implements before extending its reach into the manufacture of entire vehicles, producing wagons, tractors, and other implements. After decades of development, the business caught the eye of Firestone, which acquired Electric Wheel in 1957 and used the acquisition to form its steel products division, the division put up for sale a quarter century later.

“Some people are always going to see junk and some people are going to see gold,” Taylor said in an interview published in the April–May 1993 issue of Implement & Tractor. “When I looked at this operation, right after Firestone closed it down in 1982, I knew I was seeing pure 24-karat opportunity here. I felt like there was a lot of potential, both in the operation and in the wheel business itself.” Taylor turned to Tanenbaum, explaining the gains to be made by Firestone’s decision to exit the wheel and rim business. Tanenbaum decided to push forward with the deal, using Titan Proform to acquire the Quincy facility in 1983 for $6 million, which gave birth to a new company, Can-Am Industries.

Taylor was 39 years old when he convinced his well-heeled partner to take the plunge into the wheel and rim business. It was a low-profit, low-volume business—wheels, for instance, rarely needed replacing—and the industry’s largest corporations were racing to exit the lackluster market. “When I got into this business,” Taylor recalled in a January 17, 2005, interview with Crain’s Chicago Business, “everybody said, ‘You’re nuts. Just go to Mexico.’” The fact that the wheel and rim business was out of favor worked to Taylor’s advantage soon after he convinced Tanenbaum to enter the business. In 1986, Goodyear Tire and Rubber Company decided to exit the wheel and rim business, presenting another opportunity to Taylor and Tanenbaum. The pair acquired the agricultural wheel-making assets owned by Goodyear and installed the equipment at Can-Am Industries’ Quincy plant. The agricultural market became the foundation Can-Am Industries, and, later, Titan International, rested on, providing the majority of the revenues collected by both iterations of Taylor’s pursuits in the wheel and rim business. Taylor’s involvement in the market deepened in 1988, when Can-Am acquired Fruehauf Corp.’s French & Hecht wheel plant in Walcott, Iowa, a purchase that increased Can-Am Industries’ manufacturing capacity for agricultural wheels and rims and a transaction that capitalized on the relationship established 20 years earlier with Fruehauf Corp. The following year, Can-Am Industries entered the European market by forging a joint venture agreement with Merseyside, England-based New Warrington Wheel Company, an affiliation that led to the purchase of the company two years later.

COMPANY PERSPECTIVES

Titan has a heritage of over 100 years in the off-highway wheel manufacturing business. Since Titan’s entrance into the tire market in 1993, we have evolved into a leading global supplier of complete wheel and tire assemblies for off-highway vehicles.

TAYLOR GAINS CONTROL IN 1992

Nearing the end of his life at the beginning of the 1990s, Tanenbaum decided to restructure his interests in Can-Am Industries. In 1990, MascoTech, Inc., an auto parts manufacturer based in Taylor, Michigan, took an equity interest in the wheel-making operation, sharing ownership with Tanenbaum and Taylor in a company that was renamed Titan Wheel International, Inc. In 1992, after Tanenbaum died, Taylor and MascoTech purchased the stake held by the Joseph Tanenbaum Trust, a transaction that gave Taylor a 53 percent interest in Titan Wheel. Taylor took charge of a $113-million-in-sales company in 1992, and wasted little time spearheading an ambitious expansion drive that would see Titan Wheel diversify and record substantial leaps in its revenue-generating capabilities.

Between 1992 and 1995, Titan Wheel’s revenues increased from $113 million to $623 million. Its net income shot up from $3.5 million to $37.9 million. The company quickly lifted itself to a higher tier in its industry, becoming a global leader in design, engineering, and manufacturing. The elevation in stature was due to a series of acquisitions and consolidations completed following the company’s conversion to public ownership in May 1993, when Titan Wheel’s stock debuted on the NASDAQ at $15 per share. Before the end of the year, the company purchased Auto Wheel Group, Inc., which made steel and aluminum rims for the automotive aftermarket and steel wheels and assemblies for OEMs in the North American automobile industry. Next, Taylor acquired assets owned by Saltville, Virginia-based Dotson Wheel, a purchase that gave Titan Wheel the capability to make wheels for the construction and mining industries. The most significant acquisition of the year was the purchase of Dyneer Corporation, a manufacturer of small-diameter off-road wheels and tires for all-terrain vehicles (ATVs), golf carts, recreational and utility tires, and lawn and garden equipment. The acquisition marked Titan Wheels’ entry into the tire market, a market that was largely responsible for the great financial strides achieved by the company during the 1990s.

In 1994, Titan Wheels’ revenues increased 171 percent to $407 million, by far the largest, one-year increase in the history of the company. The acquisitions completed in 1993 contributed to the enormous increase in sales volume, as did the deals brokered by Taylor in 1994. The company acquired Nieman’s Ltd., a distributor of tires, wheels, and assemblies in the United States, and a Des Moines, Iowa, plant owned by Pirelli Armstrong Tire Corporation that manufactured tires for agricultural vehicles. In 1995, Taylor greatly increased Titan Wheels’ involvement in the European market by purchasing Modena, Italy-based Sirmac Officine Meccaniche SpA and Siria Officine Meccaniche SpA, which manufactured specialty wheels for the agricultural and construction markets; Kidderminster, England-based Lemmerz UK Limited, which made steel wheels for the earthmoving/construction market; and Hanover, Germany-based Metallbau Grasdorf GmbH, a producer of wheels and rims for the earthmoving and agricultural markets. The purchases pushed Titan Wheels’ revenues up to $623 million by the end of 1995, nearly six times the total generated three years earlier. A substantial portion of the growth came from overseas, where European sales amounted to $170 million, exponentially more than the $3 million collected in Europe in 1993. In 1997, Taylor reorganized his company to accommodate its new position in the tire business, forming two primary subsidiaries, Titan Wheel Corporation and Titan Tire Corporation, and adopted the more general corporate title of Titan International, Inc., for the entire enterprise.

KEY DATES

1983:: Maurice Taylor and Joseph Tanenbaum acquire a wheel-making plant in Quincy, Illinois, using the purchase to form Can-Am Industries.
1986:: Can-Am Industries acquires agricultural wheel-making assets from Goodyear Tire and Rubber Company.
1989:: Can-Am Industries expands into the European market.
1990:: Can-Am Industries is renamed Titan Wheel International, Inc.
1992:: Taylor becomes the majority owner of Titan Wheel.
1993:: Titan Wheel completes an initial public offering of stock and embarks on an acquisition campaign that ushers it into the tire market.
1997:: Titan Wheel is renamed Titan International, Inc.
1998:: Labor union problems erupt, marking the beginning of a three-year struggle with the United Steelworkers.
2003:: After shuttering production plants, manufacturing is consolidated in Quincy, Illinois, and Des Moines, Iowa.
2005:: Titan International acquires farm-tire assets owned by Goodyear.
2006:: Titan International acquires the off-the-road tire assets owned by Continental Tire North America, Inc.

DIFFICULTIES ARISING

After the wave of acquisitions completed following the company’s initial public offering of stock, Taylor made periodic acquisitions, adding to the diversified operations he had patched together, but the story of the company’s progress took a turn during the late 1990s. Expansion and robust financial growth, the two major themes characterizing Taylor’s first years in charge, were replaced with far less flattering themes. Strife and anemic financial performance characterized the years following the acquisition spree, beginning with a strike by 670 employees at the company’s Des Moines plant in mid-1998. Members of the United Steelworkers Local 164 walked out, demanding a pension plan instead of a 401(k), medical benefits for retirees, and limits on overtime work. Several months later, 500 workers at another Titan International tire plant in Natchez, Mississippi, walked out. Taylor, The Grizz, took a hard-line stance against the union, setting the stage for a contentious battle between the two parties.

The seeds for Taylor’s showdown with the Steelworkers Union were planted when he sought to increase revenues by expanding outside the wheel market, a largely nonunion industry, into the tire market, an industry dominated by the Steelworkers, who merged with the rubberworkers’ union in 1995. Taylor’s strategy in acquiring old, money-losing manufacturing plants hinged on cutting operating costs, which meant cutting payroll expenses. Workers at Goodyear and Bridgestone/Firestone, for instance, earned an average of $33 per hour in wages and benefits, while Titan International employees earned an average of $21 per hour. The clash between Taylor and the Steelworkers turned into enduring confrontation, dragging on for more than three years before the two parties settled on a contract. Meanwhile, Titan International, its labor problems aside, limped through the late 1990s and into the early 21st century, as market conditions worked against the company, exacerbating its problems with the Steelworkers.

The market for off-road equipment began to sour during the late 1990s, exacting a heavy financial toll on Titan International. The company posted $35 million in net income in 1996 and $25 million in net income in 1997, when sales reached $690 million. From there, the company’s financial luster began to fade. By the end of 1999, Titan International had slipped into the black, posting a net loss of $11.4 million on $588 million in revenues. Taylor scrambled to save the company from its downward spiral, exiting the market for lawn and garden and ATV wheels and tires in 2000 and closing other production plants. The problems extended into the new decade, as Titan International registered a staggering $35.8 million loss in 2002 and a $36.6 million loss in 2003, when the company generated $491 million in revenues. Taylor consolidated manufacturing activity in Quincy and Des Moines in 2003, as he fought to keep the company’s stock, which plunged to $0.60 per share late in the year, from being delisted. “Everybody thought we would go into bankruptcy,” Taylor recalled in a January 17, 2005, interview with Crain’s Chicago Business. “We were in survival mode for four years.”

RECOVERY BEGINNING IN 2004

Titan International’s fortunes eventually improved. The company posted a profit of $11.1 million in 2004, $11 million in 2005, and $5.1 million in 2006, when revenues climbed to $679 million. With his company on the mend, Taylor set out on the offensive after being forced to adopt a defensive posture for years. In December 2005, he paid $100 million for the North American farm-tire assets owned by Goodyear. The acquisition added the Goodyear brand to Titan International’s product offerings and it gave the company a manufacturing plant in Freeport, Illinois. In July 2006, Taylor completed another acquisition, purchasing the off-the-road (OTR) tire assets belonging to Continental Tire North America, Inc. The $53 million purchase included a manufacturing plant in Bryan, Ohio, and the rights to use the Continental and General trademarks on OTR tires. Looking ahead, Taylor hoped the renewed financial consistency demonstrated by his company would continue, enabling him to press ahead with expansion plans in the tire market. Titan International controlled approximately 90 percent of the market for large-diameter wheels, leaving little room for future expansion. The tire market offered the greatest opportunity for the company’s growth, a market Taylor intended to exploit in the years ahead.

Jeffrey L. Covell

PRINCIPAL SUBSIDIARIES

Titan Tire Corporation; Titan Tire Corporation of Bryan; Titan Tire Corporation of Freeport; Titan Tire Corporation of Texas; Titan Wheel Corporation of Illinois; Titan Wheel Corporation of Virginia.