AKRON-For North America's tire makers, 1994 will be a crucial year, in the opinion of Lee N. Fiedler, president and CEO of Kelly-Springfield Tire Co. ``Without profit,'' Mr. Fiedler said, ``many (manufacturers) will be forced to make very serious decisions this year.''
In the interest of regaining their profitability, he explained, some tire makers in 1994 will be wrestling with such questions as:
``With the proliferation of sizes and types of tires growing at jet-like speed, will I be able to capitalize the expansion and modernization necessary to keep pace?
``Can I remain a good supplier to both the original equipment and replacement markets? Or will I have to make a choice?
``And if I choose the replacement market, should I concentrate on supplying only those customers that I can serve best, or attempt to be all things to all distribution outlets?''
Profitability, he pointed out, is a major concern in the tire industry, not only for manufacturers, but also for wholesalers and dealers. ``This must be addressed on all three fronts as we take care of business.'' Mr. Fiedler said.
One of a group of tire makers surveyed by TIRE BUSINESS concerning the industry's performance during the past year and its prospects in 1994, Kelly's chief executive was hardly alone in pointing to the low level of profit throughout the industry.
Similar comments were echoed by Robin Mitchell, senior vice president sales and marketing for Dunlop Tire Corp.
``1994 will require some companies to look at their business and reconsider, '' said Mr. Mitchell. ``Shareholder pressure will be directed at profit improvement.''
In fact, virtually every respondent in the survey cited profitability as the tire industry's No. 1 concern during the coming year-and with good reason.
Of the 13 tire manufacturing companies responding to the survey, only six turned a profit in North America during 1993. Yet all said they hope to be in the black during the year to come.
The biggest obstacle to industry profitability, most respondents agreed, is the fact that too many tires are chasing too few buyers in the North American market.
Most attributed this either to ``excess production capacity'' or an ``over-supply'' of tires-including those imported from offshore manufacturing plants.
In the words of Earl Knoper, vice president of sales and marketing for Toyo Tire (U.S.A) Corp., tire makers in 1993 found themselves facing much the same conditions as in previous years: ``Business was brisk, but industry profits, very poor.''
Estimates of how much excess capacity existed in North America during '93 to play havoc with profits ranged from 3 to 20 percent, but averaged out to 10 percent.
As a group, the 13 participating companies last year operated at about 90 percent of capacity-a level most said they hope to improve on in months to come.
In fact, some participants foresee the closing of one or more North American tire plants due in part to a surplus of product in the marketplace.
Few expected market conditions to change much from those of 1993, when competition forced some manufacturers to cut prices on passenger, light truck and commercial truck tires, while raising them on farm, off-the-road and industrial lines.
``We don't see the market helping our growth next year,'' said Donald D. Mateer, president of Specialty Tires of America Inc. ``And we don't think we've seen the end of (tire company) mergers or acquisitions.''
Most survey participants, including representatives of General Tire and Pirelli Armstrong Tire Corp., agreed that tire pricing will remain a major concern in the months to come.
``Manufacturers will continue to pursue cost rationalization and better productivity,'' said a spokesman for Michelin North America.
``Their efforts will lead to better profits for the industry, which has been affected in the last 10 years by low-priced imports and insufficient productivity. 1994 can be a turning point in this regard,'' he predicted.
Independent tire dealerships likewise are affected by low-ball pricing, most survey respondents agreed, with smaller ones-those with five or fewer outlets-being most vulnerable to such economic pressure.
But with many smaller dealerships aligning themselves with marketing groups or uniting in other ways to maximize their purchasing and marketing clout, most participants see such dealerships as prepared to weather the economic storms ahead.
Little, if any, of the industry's low profitability results from flagging consumer demand, most participants acknowledged.
U.S. shipments of original equipment passenger tires in 1993, estimated at 50.4 million units, were up an impressive 9 percent over those of the previous year, according to preliminary year-end totals from the Rubber Manufacturers Association.
And shipments of replacement passenger tires, estimated at 165.2 million, finished the year not far shy of 1992's record 165.8 million units.
Combined, total OE and replacement passenger tire shipments reached an estimated 215.6 million units-an all-time record.
Thus, aside from what Charles R. Wright, president and CEO, Denman Tire Corp., called the ``fierce pricing competition within U.S. markets,'' none of the survey respondents characterized 1993 as a bad year for the industry as a whole.
In fact, ``...business was good,'' wrote Patrick Rooney, president, Cooper Tire & Rubber Co. ``(As an industry,) we seem on track as far as long-term growth trends are concerned.''
``Commercial truck tire markets were extremely strong with good, consistent growth,'' noted Goodyear's Barry Robbins, vice president, marketing, North America.
Nevertheless, the tire industry did not experience the rejuvenation enjoyed by many industries in 1993, observed Russell Chick, manager, marketing communications for Yokohama Tire Corp.
During the year, the industry also witnessed changes in tire distribution patterns, when some manufacturers-most notably Goodyear-expanded their marketing efforts beyond their more traditional channels, Mr. Chick pointed out.
``This is a change the industry will be adapting to over the next one to two years,'' he predicted.
Overall, most survey participants see market conditions in '94 being remarkably similar to 1993's.
However, not all agreed as to how the new year will pan out in terms of industry tire shipments.
Goodyear's Mr. Robbins, for example, forecasts ``moderate growth in the consumer markets.''
Sunil Kumar, President of Bridgestone/Firestone Sales Co., meanwhile, expects ``slow growth in truck tires, no growth in car tires and more stable pricing.''
Meanwhile, Cooper Tire's Mr. Rooney looks for ``total shipments of replacement tires to go up about 2 percent overall, with light truck tire shipments leading the way.''
A spokesman for Michelin North America said: ``We think the economy is going to be very buoyant-especially in the first four months of the year.''
``We should have a strong tire business climate in 1994, both in OE and replacement.''
Whether or not the industry will solve its tire oversupply problem is difficult to predict, noted the Michelin spokesman.
``On one hand, you have sufficient capacity in place in the U.S.'' he said. ``But on the other, you have a very strong OE market'' where shipments probably will be higher than expected.
``And for some manufacturers, the forthcoming United Rubber Workers contract negotiations in the spring also could be a factor.''
Yokohama's Mr. Chick believes two factors will help shape the business climate in 1994.
The first will be the attempts by manufacturers to adjust production and stabilize tire prices.
The second factor at work during the coming year will be the federal government's action on such current proposals as health care, workers comp and tort reform, Mr. Chick believes.