AKRON—In the estimation of Saul Rubin, economist for Warburg Dillon Read, consumer confidence is the key statistic to look at in forecasting automotive, and hence, tire demand. And for now, consumer confidence remains strong—in November, the index was 8 percent ahead of the 1998 level—indicating a strong economy for 2000, albeit one not growing quite so vibrantly as in the past few years.
Warburg Dillon Read, the investment banking division of Switzerland's UBS A.G., sees the U.S. gross domestic product growing 3.9 percent in 2000 and 3.5 percent in 2001, Mr. Rubin said.
Most analyses monitored anticipate lower car and light truck sales next year, but there's widespread diversity of opinion as to how much demand will fall from the record sales in 1999. Warburg Dillon Read is among the more bullish stock analysts, forecasting a decline of only about 2 percent next year, to 16.5 million vehicles, and another 1 percent in 2001 to 16.3 million.
At the same time, Mr. Rubin said he expects the demand shift to light trucks/sport utility vehicles to continue, at about 1 percent a year over five years. This obviously will have a domino effect on aftermarket demand for tires.
As overall demand for new cars, light trucks and SUVs plateaus, tire makers should be able to catch up with replacement market demand and improve their lackluster fill rates of the past couple of years, Mr. Rubin said.
Lower original equipment demand combined with expanding domestic production and continuing high import levels likely will result in even lower tire prices for consumers, Mr. Rubin said.
Tire makers' efforts to address the fill-rate problem with their independent dealers should be a high priority this coming year, he said.
The lone storm cloud on the horizon could be Bridgestone/Firestone Inc.'s contract negotiations with labor unions at a number of its factories.
On the heavy truck front, original equipment demand should be down again in 2000 as truck makers scale back their assembly plans.
Aftermarket demand for truck tires and retreads should remain vibrant, though, as the economy perks along.
Although oil prices in recent weeks have climbed back up to near record levels, economists like Mr. Rubin don't appear overly worried. The U.S. economy in general appears more able now than years ago to absorb higher oil prices.
Eventually, though, if they continue to rise, there inevitably will be a slowing effect.