AKRON—Sales of retreads were up during 1996 for more than six in 10 dealers taking part in a TIRE BUSINESS year-end survey. What's more, nearly seven in 10 (66.7 percent) said they expect retread sales to be up this year as well.
The survey, mailed in December to 300 randomly selected retreaders across the U.S., yielded 53 responses. Most of the respondents also were commercial tire dealers.
Among those who said their retread sales grew last year, the average increase was 17 percent.
Not surprisingly, in view of the widespread price-cutting that characterized the tire market last year, fewer survey participants (38.5 percent) reported increased retreading profits in 1996.
More than six in 10 (64.6 percent) said retread production costs also were up an average of 3.6 percent last year. This came on top of increased competition resulting from the national accounts sales practices of tire makers and other suppliers, several survey participants reported.
Asked what he considered his company's top accomplishment in 1996, one dealer wrote ``staying alive.''
Survey participants frequently sited price competition from tire manufacturers and other suppliers as a major difficulty in maintaining profitability.
``National account business is increasing at a rapid pace,'' wrote Richard House of Tommy House Tire Co. in Decatur, Ill. As a result, he said, trucking concerns often are getting buying prices that are below dealer cost.
From Tracy, Calif., commercial tire dealer Jim Cumming of Cumming Henderson Inc., wrote that his most pressing concern is having to deal with an industry that is nationalizing pricing for over 50 percent of the commercial vehicles on the road.
This, he said, requires his company to set itself apart from the competition in order to justify the higher prices it must charge regional fleets.
Meanwhile, dealer H.R. ``Hal'' Nendick of Phelps Tire Co. in Seattle said he's facing price competition from other retreaders using the Bandag precure process, as well as from Bandag Inc. itself, signing up the dealership's former customers as new national accounts.
``It's not a protected franchise anymore,'' said Mr. Nendick, recalling the days when Phelps Tire was the only Bandag retreader in King County. Now there are three, and the only way these newcomers can gain a market foothold is by cutting prices, he explained.
Ronald A. Robinson of Moore & Robinson Inc., Little Rock, Ark., told of having to cope with intense price competition from Treadco Inc. and two Bandag retread shops, which he said are embroiled in an apparent life or death struggle over market share.
``Retreads and new tires are being sold at, near and sometimes below production cost. The market is being torn asunder,'' Mr. Robinson said.
On the whole, however, the dealers surveyed generally were optimistic about prospects for their retreading operations this year. Nearly half of those who answered (47.7 percent) look for increased profit from retreading during 1997; nearly four in 10 (38.7 percent) expect no change in current profitability levels. Only six dealers, or 13.6 percent, foresee retread profits declining this year, although more than half (57.2 percent) pre-dicted production costs will rise.
Though most survey participants acknowledged the heavy price competition in today's marketplace, only two dealers (4.4 percent) foresee decreased sales of retreads during the year ahead.
Fully two-thirds of the group said they expect retread sales to increase, whereas just over one quarter (28.9 percent) look for retread sales to remain unchanged from 1996 levels.
Much the same could be said of the respondents' outlook for new tire sales and profits.
More than seven in 10 (70.2 percent) said their new-tire sales were up by an average of 12.2 percent in 1996. However, only about half as many (32.1 percent) reported increases in profits from those sales—with the increases averaging 10.1 percent.
Slightly more (35.8 percent) indicated decreases in profit from new-tire sales during 1996, with an average drop of 7.8 percent. The remainder experienced no substantial difference in new-tire profits.
Most dealers (60.5 percent) look for new-tire sales to increase this year, and 42.2 percent of those answering the survey question also foresee profits increasing from such sales.
More than eight in 10 who answered predicted the U.S. economy will either improve or maintain its present level of performance.
Nearly seven in 10 dealers who answered (69.8 percent) use precure methods to retread tires. Better than nine in 10 (90.6 percent) said they retread commercial truck tires. Some 67.9 percent also retread light truck tires, 9.4 percent industrial and specialty tires, 7.5 percent passenger and 3.7 percent large OTR tires.
Although participants derived from 2 percent to 98 percent of their total sales from retreading, the average was 34.3 percent.
Among the 52 survey participants answering the question;
23 dealers or 44.2 percent of the group had total sales of more than $10 million in 1996;
14 had sales of $5 million to $10 million;
10 had sales of $1 million to $3 million;
Four had sales of $1 million to $3 million; and
One participant had sales of less than $1 million.