LAS VEGAS—A slowing economy will put a damper on tire sales in 2000, but tire makers still could see higher profits, according to financial analyst Saul Ludwig. "Don't build your inventory now," Mr. Ludwig advised those attending Bizcon 4—Bridgestone/ Firestone Inc.'s annual commercial tire dealer meeting, in Las Vegas—because truck tire prices will soften in 2000.
Mr. Ludwig, managing director of Cleveland-based MacDonald Investments Inc., told dealers there will be no growth in commercial tire sales next year, but tire manufacturers' profits should increase because there will be fewer imports from Asia, where the regional economy continues to recover.
Truck tire sales have grown about 9 percent each of the last three years, he said, and freight carriers have reported double-digit growth rate increases in tonnage shipped.
However, Mr. Ludwig cautioned, orders for new Class A trucks have slipped about 25 percent in the last six months.
Of most concern to the Bizcon audience were his predictions for the medium truck tire market. After a 20-percent increase in 1998 and a 13-percent gain in 1999, original equipment shipments will slump by more than 10 percent next year to 6.1 million units, he said, though replacement shipments will jump 4.5 percent to 14 million units.
Diminished OE demand and increased production capacity will reduce upward pressure on truck tire prices next year, he said.
Overall sales of all tire types will grow only about 1 percent next year after a 5-percent increase in 1999, he said. However, tire manufacturers will experience an overall increase in profits of 10 percent in 2000, after seeing profits fall 10 percent this year.
As for passenger car tires, Mr. Ludwig predicted a 5-percent drop in shipments to OE manufacturers next year to 57 million units. However, he predicted replacement tire shipments will rise to 193 million units next year, a 1.5-percent increase.
The light truck tire market will be more positive, he said, with OE shipments increasing 3.5 percent to 8.7 million units and replacement shipments rising 2.5 percent to 33.5 million units.
He said consolidations among global tire manufacturers and retailers are going to continue, and "small guys must merge to survive."
"The future of the pure wholesaler is bleak," Mr. Ludwig said. The combined market share of the five largest commercial tire dealerships in the U.S. was 40 percent in 1990, he said, and increased to 54 percent last year.
Manufacturers will continue to align themselves with the strongest dealer in each region, he said.
Mr. Ludwig also predicted the emergence of a "category killer" in retail tire sales similar to what has occurred in products like office supplies and home improvement products.
He said truck stop chains such as Travel Centers of America and Petra—which receive 65 percent of their tires from BFS—will continue to sell more tires and represent a threat to commercial dealers.