AKRON-Harry Millis put his finger on it. Sizing up the North American tire market in 1996, the venerable tire industry analyst said: ``It's going to be a pretty tough, flat year.''
``Flat'' refers to overall unit volume, while ``tough'' describes an extremely competitive environment that has wreaked havoc with pricing and put pressure on profit margins.
There are signs, though, that the worst may be over and that market conditions are improving-albeit slowly.
Following a first half characterized by industrywide price discounting, Mr. Millis said he expects prices to remain fairly stable through the second half.
The analyst with Cleveland's Fundamental Research Inc. said the intense price competition of the first half was the result of too many tires chasing too few buyers and could be traced to a drop in demand at the original equipment level.
This downturn in demand left tire makers with excess inventory, which they tried to dispose of in the replacement market, Mr. Millis said-an effort that prompted them to drop prices on many lines throughout the first half of this year.
As a result of this discounting, financial results within the North American tire industry will show little growth this year, Mr. Millis said. Even though unit sales may be up for some companies, in dollar terms, sales will not see much change from last year, he said.
Nor will there likely be much change this year in the overall volume of North American tire shipments, Mr. Millis said, as drops in shipments to OE customers generally are offset by modest increases in replacement shipments.
For passenger tires, replacement shipments should increase about 3 percent to 172 million units, Mr. Millis said, while OE shipments likely will fall 3.5 percent to 55 million units.
At the same time, he forecast both aftermarket and OE light truck tire shipments to rise nearly 6 percent-to 27 million and 6.4 million units, respectively.
The most recent forecasts from the Rubber Manufacturers Association's Tire Market Analysis Committee (TMAC) are somewhat less optimistic.
In April, the TMAC predicted a 1.3-percent increase in replacement passenger tire shipments for 1996, to 169 million units, while OE shipments were to slip 1.6 percent to 56.1 million units. For light truck tires, replacement shipments were to grow 2 percent to 26 million units, while OE shipments dropped 10 percent to 5.6 million units.
Medium truck tires also have experienced a glut in 1996-in part, because trucking fleets are not replacing tires at historic rates, said Earl Knoper, Toyo Tire (U.S.A.) Corp.'s senior vice president of marketing.
``Not as many trucks are racking up as many miles as in normal years,'' Mr. Knoper said. He expects the oversupply will correct itself in the fourth quarter.
In this segment, the TMAC forecast a slight decline in replacement shipments, down 1.7 percent to 11.7 million units, while Mr. Millis is predicting a 7.6-percent drop to 11 million units.
OE shipments are expected to drop even more precipitously. The TMAC forecast an 11-percent decline to 4.8 million units, while Mr. Millis foresees a 20-percent plunge to 4.3 million units.
As was the case in the passenger tire segment, the declining demand for medium truck tires has caused a build-up of inventory, especially for larger manufacturers, and has prompted them to cut prices in order to remain competitive.
Meanwhile, 1996 sales of medium truck retreads may reach record levels, according to Marvin Bozarth, executive director of the International Tire and Rubber Association. He said as many as 16.2 million units could be sold this year, up 1.2 percent from 1995.
``It seems like one month you're breaking records on the up side and the next month you're breaking records on the down side,'' he said. ``So it's really crazy right now.''
But passenger retread sales are expected to continue to drop, he said, and may fall as much as 8 percent to 4.6 million units. Light truck retread sales should be flat, but may fall slightly from 7.2 million units in 1995 to 7.1 million in 1996, he said.
Sales for large off-the-road retreads will see a slight increase after a solid 1995. About 680,000 units are expected to be sold this year, Mr. Bozarth said, compared to 678,000 last year.
Though most tire makers have been working hard to increase their market share, little has changed in that respect, Mr. Millis told TIRE BUSINESS.
Goodyear remains on top, with 32.8 percent of the overall market. The largest U.S.-based tire maker also leads in OE and replacement market share with 40 percent and 30.5 percent, respectively.
Michelin (including Uniroyal and Goodrich brands) gained the most in the overall market, adding 2.2 percent for a 23.2-percent share-despite losing 1 percentage point of OE market share.
Bridgestone/Firestone grabbed another 1.5 percent of the replacement market, for a 14.5-percent share. The improvement gives it 15.5 percent of the overall market.
Cooper Tire & Rubber Co. also increased its overall share via a 1-percent gain in the replacement market. It holds 11.3 percent of the overall market, Mr. Millis estimated.