AKRON—For retreaders, at least, it was neither the "best of times" nor "the worst of times," to borrow a line from Charles Dickens' classic, "A Tale of Two Cities." As years go, 1999 was filled with change, uncertainty and consolidation, and whether it all added up to good year or bad year for retreading depends largely on one's point of view and the criteria used to evaluate it.
In a small sampling of shop owners conducted by Tire Business in November, more than one in two dealers surveyed (54.6 percent) said their 1999 retread sales were up compared to 1998.
Among that survey group, comprising 22 owners of businesses ranging from one to six retread shops, roughly half the dealers said their retread profits also were up in 1999.
Moreover, all but two who answered that question on the survey also said they expect retread sales to increase in 2000. And better than six in ten (63.3 percent) also look for profits to be up in the year to come.
Unfortunately, estimates of industrywide production suggest that retreaders fortunate enough to belong to that group may be in the minority.
Marvin Bozarth, executive director of the International Tire and Rubber Association, reported in the December issue of the Tire Retreading/Repair Journal that 1999 marked the first instance in more than two decades that unit production of medium truck retreads was down compared to the year before.
Similar year-to-year declines also were reported for most other industry segments, including off-the-road, light truck and passenger tire retreads.
Mr. Bozarth estimates that approximately 17.4 million medium truck retreads were produced in '99—down from 17.8 million units the previous year. His forecast calls for 1.7 percent more medium truck units—for a total of 17.7 million—in 2000.
In examining the numbers, Mr. Bozarth noted that production of medium truck retreads was at an all-time high in 1998. So a modest (2.3-percent) decrease in '99 should be viewed with that in mind, he said. Despite that slight dip, he still called 1999 "a good year."
Largely responsible for the decline in medium truck retreads and most other sizes, in Mr. Bozarth opinion, were low-cost imported new tires that served to erode the pricing advantage enjoyed by retreads.
The booming economy left many trucking companies financially well off. More than a few chose new tires over retreads as a result. More fleets have been putting an age limit on tires, refusing to use those that are four to five years old or older, he said.
Meanwhile, off-the-road type retreads in '99 totaled approximately 485,000 units, down about 2.0 percent from 495,000 units produced in 1998, Mr. Bozarth estimated. He anticipates a further decline to about 483,000 OTR units during the coming year.
Light truck retreads declined 10.3 percent, dropping from 6.8 million units in 1998 to 6.1 million last year. Mr. Bozarth expects light truck retreads to decline an additional 3.3 percent to 5.9 million units during the year ahead.
Specialty and aircraft retreads likewise declined during the year from about 215,000 units to 203,000. Production of such retreads likely will remain at that level during the coming year, he predicted.
Retreading's most precipitous decline last year (26.9 percent) occurred in the passenger tire segment, which continued its decades-long slide. After having decreased from 2.6 million units in 1998 to 1.9 million last year, it's forecast to drop an additional 26.3 percent to 1.4 million passenger units in 2000.
Frustrated in attempting to produce and sell passenger retreads profitably against low-cost new tires, many former passenger retread plants have reduced or halted their production, Mr. Bozarth said.
Of approximately 1,231 retread plants operating in the U.S., only about 175 claim to be retreading passenger tires—and Mr. Bozarth said he doubts the accuracy of even that number. He speculates that fewer than 100 shops actually retread passenger tires on a day-to-day basis.
Conceivably, the market for retreaded snow tires—once a mainstay of passenger tire retreading—may get some carryover support from efforts by new tire manufacturers to persuade motorists to use winter tires in colder months.
However, such benefits probably won't be enough to halt the market's downward slide. Many large-volume purchasers of winter tires are able to acquire and sell new winter tires at the same or less cost than retreads, Mr. Bozarth said.
"There's little indication this portion of the retread market can turn around, unless there is a major oil or rubber shortage," he added.
For the year ahead, Mr. Bozarth said he's not overly optimistic about the prospects of a major increase in overall demand for retreads. "I think there will be some, but it's likely to be pretty small," he said.
On the brighter side, some retreaders—especially small outfits in niche markets—have been demanding and getting a better price for their product, he said. "They're offering a high level of service and they're getting their money."
Viewed from another perspective, 1999 also was a "horrendous year" for negative publicity about retreads, said Harvey Brodsky, managing director of the Tire Retread Information Bureau (TRIB), which tries to defend retreading's public image.
During the early months of last year, he said, insults to retreading seem to be coming from every possible source and direction. Television and newspaper commentary questioned the safety of retreads and attempts were made to legislate—if not outlaw—the use of retreads on over-the-highway trucks. But the situation calmed later in the year, and Mr. Brodsky believes TRIB helped put out the brush fires.
"We recognized that the industry is under attack from a lot of fronts," he said. "So we began focusing everything we do on protecting (it). That means not trying to sell retreads, but rather explaining to the world at large what causes rubber on the road and how one should react when (encountering it)."
Mr. Brodsky said TRIB's member retreaders, not unlike others in the industry, found themselves bewildered in '99 by all the consolidation and maneuvering that has occurred since Michelin North America entered into retread franchising competition with Bandag Inc. and other industry leaders.
Much of the turmoil and uncertainty, he said, resulted from what he termed the "war" between Michelin and Bandag over potential retreading franchisees plus the distinct possibility that Bridgestone/Firestone Inc. may soon enter that arena as well.
"The big guys are flexing their muscles and beginning to buy market share," Mr. Brodsky said. "They'll come into a market where there's an independent retreader.|.|.and undercut him by $40 or so.|.|.|. I see this continuing, but don't believe the big guys are dumb. You don't get big by being dumb. And as time goes by, the prices (on retreads) are going to go up."
Adding to the general uncertainty in the industry last year were so-far unsuccessful efforts to remove the federal excise tax on new medium truck tires which provides untaxed retreads with a comparative pricing advantage.
If the federal excise tax were removed at the same time that low-priced truck tires continued to be imported into this market, "all hell would break loose," he said.
Mr. Brodsky agrees that business is good for those retreaders willing to pay the price of success. "Our members are doing all right," he said. "But they're scared to death—especially the independents."
If retreaders were to ask his advice, he said he'd "preach to them and say: `Man oh man, you'd better pay attention to your business like you never did before. You'd better have customer service that's unbelievable and you'd better watch your quality like you never did before.
"If you don't," he cautioned retreaders, "there are new tire guys right behind you who are going to eat your lunch."
Of personal concern, Mr. Brodsky said, is the sizable number of retreaders who don't appear to be watching the store.
"Of the calls I make, 95 percent of the time the owner is not there. I say to myself, `I hope he's out working.' But the (person answering the phone) often says they haven't seen the owner for a couple of days. I hear that so much."
However, the retreaders who obviously are making money are on the premises, he said. "The guys who say, `Business is terrific, I love it,' are around. The other guys—when and if they call back—tell me, `It's really tough out there.'"