AKRON-Tire dealers can probably mark the celestial equinoxes by the tire makers' announcements of price increases. This spring is no exception, and dealers around the country are working extra hours to update their price lists, send customers notices and change their advertisements to reflect the manufacturers' price hikes, many of which went into effect March 1.
Those who choose to pass along the price increase to their customers-and it appears many dealers will-find the process a real headache.
Jerry Glasgow of Performance Tire & Wheel in Topeka, Kan., said he has been in the tire business 24 years, and ``I don't remember such a short period of time between increases.''
While semiannual price hikes have become the norm in recent years, many industry observers expect another round of price increases as early as this summer.
Manufacturers are blaming the skyrocketing costs of raw materials, due in part to shortages of natural and synthetic rubber.
The price of raw materials has surged at least 90 percent in the past year, according to Tom Griffith, vice president of marketing for Cooper Tire & Rubber Co., who spoke at the Ohio Tire Dealers & Retreaders Association trade show in February.
He claimed the total increase in production costs has not yet been passed on by manufacturers. He and other industry executives who addressed the trade show believe the current round of tire price hikes, ranging 3 to 5 percent, will stick in the marketplace.
``We have no other choice. (The price increases) must be passed on to consumers. There is no way you, and we, can hang on (to the increases),'' Mr. Griffith told dealers in attendance.
Dealers contacted by TIRE BUSINESS expressed the same sentiment. To maintain their current profit margins, they said they must pass along the price increases to their wholesale and retail customers.
As long as there is a high demand for tires, all retailers will probably raise their prices, surmised David Joseph, sales manager for Ray Carr Tires' wholesale division.
Maintaining profit margins is the determining factor in his Harrisonburg, Va.-based dealership's decision to pass along the current price hikes. ``If you don't pass it along, you better have a way to make it up elsewhere,'' Mr. Joseph said.
Although manufacturer price hikes can be an excuse for dealers to raise their own prices, Performance Tire's Mr. Glasgow said he never looks forward to these adjustments.
``As an independent dealer, it's hard to be as competitive as the (warehouse) clubs,'' he said, adding that such price adjustments are upsetting to his operation.
The time needed to change prices, along with competitive pressures, forced Mr. Glasgow to absorb a small price hike last year.
Even in the computer age, many hours are devoted to adjusting prices by varying percentages for individual tire lines and sizes. Some dealers estimated it takes about 10-15 hours for the input process.
Every time a price hike is announced, Lutz Tire Co. Inc., a Portland, Ore., warehouse distributor, has to notify its 300-plus dealer customers, suggesting they check their inventories and make orders to take advantage of current rates.
Then the hard part is nailing down from each manufacturer exactly what the new prices are, which sometimes aren't confirmed until the last minute, according to owner Art Lutz, who spends about $2,000 to prepare new price lists.
``Some hikes are one-third to one-half of our profit. We have to pass it along,'' Mr. Lutz said.
What adds to the frustrating task of changing prices is that the tire makers stagger their announcements.
``Just when we're ready to print prices, some other company raises its prices,'' lamented Brad Schmucker of Millersburg Tire Service Inc. in Millersburg, Ohio. ``Our drawback is that we handle too many brands.''
Some dealers will be scanning their competitors' ads during the coming weeks before working up new price lists.
Mr. Schmucker said he finds that when he raises his prices in conjunction with his suppliers' hikes, his pricing is not competitive for a week, or even a month.
So his dealership won't raise its prices the day the hikes go into effect, but it also won't wait six months. ``We strike a happy medium,'' Mr. Schmucker said, in which he tries to match competitors' prices and work out pricing with his wholesale customers.
His pricing also is affected by his suppliers' programs. For example, Bridgestone/Firestone Inc., faced with supply shortages due to its labor strike, offered dealers price protection for a full year if they placed their tire orders by October 1994, Mr. Schmucker said.
Consequently, he is just now adjusting his prices to reflect last November's price hikes. He said he probably won't invoke the March hikes until late spring.
Some dealerships, such as Lucas Tire Co. in Jackson, Miss., will buck conventional wisdom and absorb this spring's price increases.
Richard Butler said his Lucas Tire outlet has to keep its prices as low as possible due to stiff competition from other tire stores and mass merchandisers.
Competitors set the price, according to Mr. Butler, who tracks pricing in local ads. His battle plan is ``keep down price and (offer) quicker service.''
Since absorbing a price hike cuts his profit margins, Mr. Butler said he subtly raises prices on certain items or services incrementally during the year.