LOUISVILLE, Ky.-Retreaders, as a group, fared well in 1993. And thanks to expansion and modernization made easier by last year's low interest rates, many are positioning their businesses to do even better in the months to come. What's more, passenger tire retreading, on the decline for more than a decade, appears to be stabilizing a bit going into 1994.
At least that's the observation of American Retreaders' Association Executive Director Marvin Bozarth, author of the annual ``Retreadonomics'' report featured in the April issue of the Tire Retreading/Repair Journal.
Mr. Bozarth said retreaders are improving the efficiency and profitability of their operations. In the process, they're making ``major investments'' in the form of building improvements, monorail systems, computerized buffers, segmented molds and computerized tire tracking systems.
``The largest potential for (gaining) new retread business in 1994 will be with government agencies,'' he advised retreaders. ``This makes it even more important to know your cost to produce retreads. Your survival depends on it!''
During the past year, according to Mr. Bozarth, U.S. retreaders enjoyed increased customer demand for medium truck and off-the-road sized retreads. But sales and production decreased during 1993 in the case of passenger, light truck and aircraft retreads.
Meanwhile, the number of retreaders in the U.S. remained ``fairly stable'' at about 1,475 shops, he said, after declining for decades.
Moreover, Mr. Bozarth said he's anticipating the entry of several new passenger tire retreaders-something the U.S. retreading industry hasn't experienced much of in recent years.
One reason for industry optimism is President Bill Clinton's executive order last year requiring federal agencies to purchase retreads as replacements for government vehicles as one means of helping reduce the number of tires scrapped annually in the U.S.
So far, the presidential directive appears to have increased government purchases of light and medium truck retreads more than passenger units. However, according to Mr. Bozarth, many in the industry also expect it to produce positive results for passenger retreading in 1994.
Customer demand for passenger retreads may already be increasing, he suggested. However, sales often are hampered by the scarcity of passenger shops in some areas of the U.S.
``Passenger retreaders who have kept their equipment and specifications current are reporting excellent sales,'' Mr. Bozarth wrote. ``In fact, many are reporting casing shortages in certain sizes.''
By his estimate, U.S. retreaders in 1993 consumed approximately 568.2 million pounds of tread rubber in turning out a total of 30.2 million retreads, valued at $2 billion, exclusive of casings.
While rubber consumption for the year was up slightly compared to 1992, the total number of retreads decreased 2.6 percent from 31 million produced the previous year.
Most of the unit decrease was due to declining production of passenger car retreads, which went from 7.4 million units in 1992 to 6.6 million last year. However, unit output also declined in the case of light truck sizes-which went from 7.6 million in 1992 to 7.4 million last year. Part of this, he said, resulted from a shortage of retreadable casings, aggravated by product difficulties such as belt-edge separations.
Nevertheless, the light truck tire market still offers ``an excellent opportunity for retreading,'' the ARA's executive director said.
Heavy-duty pickup trucks are increasingly being used for fleet service and towing, he pointed out, and new tires for such vehicles are often priced as high as $150.
Meanwhile, the growing use of all-steel ply construction in light truck tires also should provide retreaders with better quality casings in the future, he said.
On the whole, customer demand for medium truck sizes remains the brightest star on retreading's horizon, according to the report.
Output of these ``commercial truck'' retreads-which has outpaced new tire production in recent years-continued to grow, rising to 15.4 million units from 15.2 million the year earlier.
New tire production of these medium-truck sizes totalled 11.4 million units in 1993-meaning U.S. truck users purchased about four retreads for every three new tires bought last year.
Meanwhile, business prospects for such sizes are looking even brighter in view of budget-cutting by the U.S. military. ``It appears this will bring about some increases in retreading as the military looks for ways to cut their tire costs,'' Mr. Bozarth wrote.
As one result of this cost-cutting, the military has stopped limiting retreading to radials and begun purchasing and evaluating bias-ply retreads as well.
Elsewhere in his report, Mr. Bozarth estimates that precure processing will account for 75 percent of the medium and light truck retread production and 85 percent of radial truck tire retreading in months to come.
Dollarwise, total retread sales in the U.S. climbed slightly in 1993 due to price increases of from 2.5 to 5 percent instituted by some retreaders.
However, despite the added burden of increasing raw material costs and other expenses, many retreaders chose not to raise their prices because of some manufacturers' low prices on new tires.
Typical production costs, excluding that of the casing:
P195/75R14 passenger retread-$12.63;
LT235/85R16-$24.48 (mold-cure), $35.16 (precure), and;
11R22.5 truck retread-$48.96 (mold cure), $70.56 (precure).
Distribution expenses also can add an average of $16.50 to these costs, Mr. Bozarth said.