LAS VEGAS-``Extraordinarily dynamic.'' ``Very complex.'' ``Consolidating.'' That's how David Schaub, president and COO of Michelin Americas Small Tires, described the state of the tire industry in his keynote address during the recent Automotive Aftermarket Industry Week trade shows in Las Vegas.
``The market is in dynamic change,'' he said. ``My prediction is: In the last five years of the 1990s, this change can do only one thing-pick up speed. It's happening in front of us every day.''
Change is taking place not only among tire manufacturers but with retailers and distributors, too, he said. And it's getting complex because every auto company is demanding tires be ``absolutely unique'' to their vehicles. This requirement, he said, has significant impact on tire manufacturing, tire distribution and ``the ability to satisfy consumers' needs vis-a-vis the costs dealers have to undertake to keep inventories.''
The U.S. replacement passenger tire market, Mr. Schaub predicted, will continue to grow slowly, 1-3 percent a year. But within that market, he forecast higher growth rates for performance passenger tires. He also sees strong growth for light truck tires, bolstered by increasing consumer demand for vans and sport utility vehicles.
``We're not in a dynamic business from the standpoint of unit growth-far from it,'' he said. ``We're in a situation that's ruthlessly competitive.''
In tire retailing, Mr. Schaub sees a consolidation taking place in major markets, similar to that which occurred among tire makers in the 1980s.
He predicted continued growth among large national tire dealership chains, such as Tire America Inc. and Discount Tire Co. of Scottsdale, Ariz., as well as among large regional chains, such as Florida's Tire Kingdom Inc., that dominate their local markets.
Discount Tire, for example, recently entered the Chicago market with what he estimated might eventually involve 40 or 50 stores.
``Chicago will never be the same,'' he said.
These major tire retailers are able to put stores where the market is going and are able to capture growing economies, Mr. Schaub explained.
Consolidation among regional tire dealerships already has begun, Mr. Schaub added, citing Merchant's Inc.'s recent purchase of Triad Tire & Automotive Inc. in Kernersville, N.C., and Belle Tire Distributors' acquisition of its metro Detroit rival, Tireman Inc.
He added that small independent tire dealerships, although strong, also will face pressure, particularly those in urban areas.
Consolidation is not limited to tire manufacturers and retailers, Mr. Schaub noted. ``We are starting to see acquisitions by distributors of other distributors,'' he said.
Such consolidation in an industry brings great pressure, Mr. Schaub said, but it also provides great opportunity. ``In a slow-growth market, I absolutely believe you've got more opportunity in provocative ways and in high-impact ways than you do in a high-growth market,'' he said.
``In a high-growth market, everybody's looking to turn out the units. But when that growth slows down, now you're going to see. . .winners (coming) to the fore.''
He urged dealers and distributors to develop plans and set objectives to reach their goals.
And he encouraged them to differentiate themselves from the competition by focusing more on servicing the consumer and less on selling tires at the lowest price.
The tire, he said, saves more lives on a daily basis than any other product, yet ``it is so undervalued. . . it's unbelievable.''
Independent tire dealers, he said, can service the consumer better than anybody else.
``In effect, against some of the other channels of distribution-the warehouse clubs and mass merchandisers-the dealer wins on complexity,'' he added.
``Those people cannot carry those kinds of inventory. They're not equipped to talk to the consumer in their market.''
The challenge for dealers is to present their products in such a way as to make sure consumers shop at their businesses, he said.