AKRON—Securities analysts and other industry experts pre-dict only modest growth for the replacement passenger and light truck markets through 1997. Still, a number of tire categories could set record unit shipment numbers by the time 1998 rolls in.
``It looks like a fairly decent year—not gangbusters—but with moderate gains,'' said analyst Harry Millis of Fundamental Research Inc., Willoughby, Ohio.
Saul Ludwig, managing director of McDonald & Company Securities Inc. in Cleveland, agreed that, overall, growth in the tire industry will be below average.
``Expect modest growth in overall tire shipments,'' he said. ``Between 1 and 2 percent.''
Replacement passenger shipments are expected to reach a record 176 million units this year, up only 1.1 percent over the previous period, according to the Rubber Manufacturers Association's Tire Market Analysis Committee. Replacement light truck tires also could set a record at 27.8 million units, also an increase of 1.1 percent over 1996.
But original equipment numbers could be worse off.
According to the RMA, shipments of OE passenger tires will increase 4.2 percent to 59.9 million, but OE light truck tire units will drop 3.5 percent to 5.5 million.
Mr. Millis said he believes light truck units will remain even with last year, but added that this could be overly optimistic.
``There was a strong drop in auto production during the first quarter of last year. . . . If that happens this year, you'll see a drop (in OE shipments),'' he said.
Moderate growth in the economy and manufacturer inventory levels more in line with demand than in the past will help keep prices up, Mr. Millis theorized.
But he added he did not believe tire makers would be able to raise tire prices with much success unless raw material costs took a sharp upward turn.
``They'll need a strong reason to raise prices,'' Mr. Millis said, adding raw materials prices, though still costly, are not at the high levels they had been in recent years. But oil and gas, he said, appear to be on the rise.
``I'm looking at a fairly reasonable year (in terms of profits) for the (tire) makers, depending on how aggressive they are on pricing—if they don't get too greedy on market share,'' he said.
``We had an unusual number we couldn't explain in 1995 (when shipments dropped about 1 percent),'' Mr. Millis said. ``We more than made it up in 1996, and I expect total shipments to increase 1.7 percent in 1997. I'd say that's pretty flat.''
A 2- to 2.5-percent increase is considered normal, he said.
``There will be a slight slippage in OE after five years of solid growth,'' he said. ``Dealers pulled inventories down in 1995 and up again in 1996. We don't expect any real major inventory changes at the dealer level in 1997, which will keep shipments level.''
Medium truck replacement shipments are expected to hold steady around 11.7 million units. OE, according to the RMA, will dip 4.9 percent to 3.9 million, although Mr. Millis foresees no change.
Crain reporter Jeff Higley in Akron contributed to this story.