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Mistaken leap into the U.S. market

Broadcast Date: Dec. 8, 1985

By the early 1980s Canadian Tire has run out of room to expand, and takes its tried-and-true business formula into the U.S. It buys a chain of Whites stores in Texas, but soon finds obstacles as big as the state itself. Three years later, Canadian Tire has lost over $300 million on its American adventure. Worse, 19 disillusioned dealers who came south to start their own stores band together and sue the corporation for $400 million. By 1985 Canadian Tire cuts its losses and sells the entire division, and soon after fires CEO Dean Muncaster. In this 1985 CBC-TV clip from Venture, Houston economics expert Stewart Olsen says Canadian Tire simply got lost in the crowd.

Mistaken leap into the U.S. market

• In a civil action lawsuit filed in November 1985 in Beaumont, Texas, a group of Canadian Tire franchisees contended they were unable to make a profit with their new American franchises. A Canadian Tire spokesman told the Globe and Mail that the company had offered to help these dealers remain with Canadian Tire "under a different setup." He said that "seven accepted" and there were a number of different options available to dealers to ensure that they would get back their investments.

• J. Dean Muncaster replaced Canadian Tire co-founder A.J. Billes when he stepped aside in 1966. Muncaster was a graduate of the University of Western Ontario and received his MBA at Northwestern University in Evanston, Ill. He started out working in a Canadian Tire store and rose through the company's executive ranks. Under his direction, the corporation integrated its financial services in 1968, and in 1973 opened the first phase of its 65 million cubic feet (1.8 million cubic metres) computer-controlled highrise warehouse and distribution centre in Brampton. The company also expanded into Manitoba (1966), Alberta (1976) and British Columbia (1980).

• Muncaster was replaced in 1986 by Dean Groussman, the former chief executive of Whites Stores. Under Groussman's direction, Canadian Tire recovered remarkably well from the disastrous U.S. expansion project. By the mid-1980s it was generating in excess of $2 billion in annual sales from nearly 400 stores throughout Canada. The company introduced new merchandise, including more sports and leisure items and hardware, lawn and garden wares. From 1986-90, Canadian Tire also opened nearly 100 new stores and gas stations.

• Canadian Tire's second foray into the American market wasn't disastrous, but also wasn't profitable. In 1990, it opened two automobile parts and service centres in the Indianapolis area. The outlets were called Car Care USA, but soon changed names to Auto Source with the opening of two additional stores. Ten stores were in operation by the early 1990s, but the company was losing millions on them: $15 million in 1992 alone. The pressure of competition at home from the likes of Wal-Mart, plus a weak gasoline market slowing the gas division, forced Canadian Tire to bail out of the U.S. market entirely in 1995.

• Canadian Tire sunk to a low earnings mark of just $5.5 million in 1994. By this time CEO Stephen Bachand, who replaced Groussman in 1992, had already begun implementing a new retail strategy that focused on the store's traditional core products: automotive accessories, hardware and sporting goods. The company was also in the process of increasing the size of the vast majority of its 423 outlets. While the new Wal-Mart and Home Depot superstores often offered more products and greater selection than Canadian Tire, the retailer had geographic proximity on its side: on its website it says that 80 per cent of all Canadian citizens live within a 15 minute drive of one of its outlets.

• In 1999 Canadian Tire employed 35,000 people, had revenues of $4.3 billion and assets of $3.1 billion, according to the Canadian Encyclopedia.

Mistaken leap into the U.S. market

Medium: Television

Program: Venture

Broadcast Date: Dec. 8, 1985

Guest(s): Frank Doe, Hugh Macauley, Stewart Orton, Neil Sulkers

Host: Patrick Watson
Reporter: Linda Sims

Duration: 8:10

Last updated:
July 22, 2009