Bryan Ganz tells G. Jeffrey MacDonald how staying nimble can help a small player succeed in a field of giants.

The $80 billion tire industry affords no sanctuary for the faint of heart. It’s a field dominated by well-established household names like Michelin, Firestone, Goodyear, and Pirelli.

Despite fierce competition, however, one lesser-known North American firm is proving that creative management and shrewd assets use can help a hungry smaller player take a bite out of the big guys’ lunches.

GPX International Tire Corp. of Malden, Mass. isn’t interested in putting treads on family cars. They make tires for industrial use. Their products show up on John Deere tractors, Case backhoes, Caterpillar pavers, and a slew of combines, dump trucks, and forklifts.

Catering to the industrial market has advantages for GPX in the sense that a brand name matters less to these customers than performance and service, according to Bryan Ganz, president and Co-CEO. His proof: GPX’s annual revenue, now flowing to the tune of $500 million, has grown at an average compound growth rate of 37% per year over the past five years.

Bryan Ganz

“For people who buy tires for their construction equipment and their materials handling equipment, tires are a significant operating expense line item,” Ganz said. “These are very sophisticated buyers. They’re less concerned with what the brand name is than with how the tire performs and its cost-benefit ratio.”

Outsource to win
Still, succeeding in the tire business involves a lot more than bringing a good product to market. Keeping costs down is essential, especially in a time when Chinese firms are taking advantage of low-cost production models to wage competition at the low end of the price scale.

To prosper in this environment, GPX defies a model that’s become uniform at the best-known tire companies. Rather than own 100% of its production facilities, as does most of the competition, GPX owns just 40% of its production assets and outsources the rest.

“Our competitor, who may have the same revenue as us, might require $400 million in hard assets in factories to produce that $500 million,” Ganz said. “We can produce the same with only $160 million in hard assets. So our return on invested capital can be much higher, which gives us a pricing advantage in the market.”

When relying heavily on outsourced manufacturing, GPX has to be careful. After all, China offers a terrifically low-cost environment, but intellectual property—including tire design—isn’t always respected. A stolen design can devastate prospects for an otherwise promising model.

To manage that situation, GPX contracts with 12 Chinese facilities to manufacture designs that have been on the market for years and are therefore not likely candidates for pirating. Meanwhile, GPX relies on its two North American factories to work with newer designs and specialty orders where the margins are large enough to justify the relatively high-cost, low-volume production paradigm.
Rounding out GPX’s manufacturing team are inhouse facilities in two countries where the manufacturing labor force is both skilled and affordable: China and Serbia. The end result is a lean network of operations that makes every invested dollar count.

New CEO model
Getting to this point has been a fast ride in recent years. GPX reflects the 2005 merger of two family-owned companies, Galaxy Tire and Wheel of Massachusetts and Dynamic Tire Corp. of Toronto, Ontario. Since then, the firm acquired two other companies as well as its Chinese factory, where plans call for a 250% increase in output by the end of 2007. What’s more, private investors are expecting sweet returns. A venture capital firm acquired a 38% stake in GPX about a year ago and expects to cash out by taking the firm public within the next few years.

Growing quickly has posed its own set of challenges. For instance, when Galaxy and Dynamic merged in 2005, the new organization found itself with two men (Ganz and former Dynamic CEO Robert Sherkin) who were accustomed to being chief executives of their own enterprises. Rather than negotiate for one to become top dog, GPX adopted a co-CEO model that’s barely known in the world of manufacturing. It was a solution that Ganz had experienced with financial companies early in his career when he worked on Wall Street. He finds it enables both men to manage their respective domains on a day-to-day basis and make big strategic decisions together.

“Invariably, if we approach something from different perspectives, the decision we come to is better than the one that either one of us would have to come to on our own,” Ganz said. “Although it may be a bit more cumbersome than a traditional CEO model, I think we’ve gotten significant benefit from bringing both of our experiences to bear.”

When they don’t immediately see eye-to-eye, Ganz said, the co-CEOs seek input from their board of directors. So far, every impasse has reached a resolution acceptable to all involved.

Beyond top management, GPX counts some 2,600 employees, but only 500 work in North America. Getting everyone integrated in a time of expansion has been a challenge, Ganz said, but one made smoother by a few strategic moves.

For instance, an intranet site known as My GPX gives everyone a place to register information and gather answers to frequently asked questions. It even has employee photographs, in case a manager or colleague doesn’t remember someone’s name and wants to avoid the embarrassment of having to ask.

Looking ahead, GPX aims to exploit its considerable engineering talent. The firm has its eye on mass producing tires that blend the durability of solid (airless) tires with the smooth ride of pneumatic (inflated) tires. If successful, GPX would become the industry’s lead player in a potentially large market for semi-solid tires.

Over time, Ganz said, GPX will probably need to go public to capitalize whatever expansion will be necessary to achieve the $2 billion in annual revenues that seem within reach. Meanwhile, the firm plans to keep thinking beyond conventional molds—and perhaps shape new standards for the tire industry in the process.

G. Jeffrey MacDonald is a correspondent for the Christian Science Monitor. Based in Newburyport, Mass., he can be reached at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it .