AKRON (April 24, 2000)—After experiencing steady growth throughout the 1990s, medium truck tire retreading suffered a slow leak last year, as production slipped 2.3 percent and retreaders lost nearly two points of market share to new tires.
For 2000, the industry is projected to rebound slightly, to 17.8 million units produced in the U.S., but new-tire sales are forecast to grow even faster, skewing the market even more toward new tires.
The unexpected dip in production last year has been chalked up to several factors, including temporary cutbacks by retreaders converting to new systems, consolidations of capacity by various players, competition from low-cost imports from Asia and Latin America, and a lack of qualified personnel, said Marvin Bozarth, executive director of the International Tire and Rubber Association.
North America´s largest retreaders, though, increased production about 4 to 5 percent last year as consolidation-driven gains offset conversion-related declines, according to an analysis of data from Tire Business´ 2000 retreader rankings.
Twenty-three of the top 45 retreaders reported increases in output, vs. only seven who reported declines.
Cross-Midwest Tire and Pete´s Tire Barn Inc. topped the list of expanding companies, reporting 34.6- and 33-percent increases in production, respectively. Both companies acquired additional capacity in 1999.
Les Schwab Tire Centers boosted output 21.2 percent last year, underscoring the company´s shift of resources away from passenger tire retreading and into medium truck tires.
New to the Tire Business ranking this year are Attersley Tire Service Ltd. of Oshawa, Ontario—debuting at No. 25 after moving heavily into truck tire retreading in the past year—and Pete´s Tire Barns Inc. of Orange, Mass.
The 1998 consolidation of Brad Ragan´s operations with those of its parent company solidified Goodyear´s position atop the truck tire retreaders ranking, comfortably ahead of No. 2, Bandag Inc.´s Tire Distribution Systems unit.
Treadco Inc., No. 3 on the list and the largest independent retreader in North America, suffered a slight dip in retread production, but the company is making efforts to step up retread sales and improve capacity utilization this year, according to its 2000 corporate outlook statement.
Tread rubber consumption in the U.S. slid nearly 4 percent last year, to about 590 million pounds, as production fell in every category, according to ITRA estimates. The value of retread sales, not including casing sales, slipped 0.8 percent to $2.27 billion.
Passenger tire retreading fell 27 percent, to 1.9 million units, and is forecast to plunge 50 percent this year to 950,000 units, according to the ITRA´s "Retreadonomics" market overview.
Light truck tire retreading slipped 10.3 percent last year, to 6.1 million units, and is expected to dip again this year, to 5.9 million units.
The cost of retreading, measured in dollars per pound, edged up last year about 1.5 to 2 percent, according to the Retreadonomics study. However, the cost is forecast to grow more than 4 percent this year, as the cost of materials and labor are both set to rise.
Personnel issues were the most common concern voiced by respondents to this year´s survey.
Roughly half of the companies responding singled out personnel issues—hiring, training and retaining good employees—as their most pressing concern for 2000. Labor represents between 17 and 25 percent of the cost of a retread, according to the ITRA data.
The next most common concern, expressed by about a third of respondents, was shrinking profit margins, brought on by a variety of issues, including falling prices and rising materials costs.
The average cost last year of an 11R22.5 (295/75R22.5) retread was $97 with the customer´s casing, and $175 without, according to data provided by 37 respondents. The ranges were from $62 to $130 with casing, and $122 to $230 without.
The 45 largest medium truck tire retreaders in the U.S. and Canada produced 39,500 retreads a day, an increase of about 4.6 percent over 1998. Assuming most retreaders work five days a week, the top 45 retreaders put out 9.9 million units, or about 54 percent of the 18.5 million retreads produced last year in North America.
Tread rubber consumption by the 45 totaled 248 million pounds, up about 4 percent from 1998.
The number of retread plants in the U.S. declined about 5 percent last year, to 1,220, according to Mr. Bozarth, although the number of plants actively retreading is thought to be closer to 1,000.
The 45 leading truck tire retreaders operate 337 plants. Of these companies, 27 are Bandag franchisees, operating 154 plants and producing some 19,000 units a day. Included in the Bandag total is Tire Distribution Systems, which operates 43 plants of its own.
Goodyear retreading systems are used by five companies at 91 plants—including Goodyear itself, with 73 plants. Oliver and/or Long Mile processes are used by six retreaders at 48 plants. Treadco accounts for a large share, though, with 21 plants and 2,420 units of daily output.
Four of the leading group use Michelin retreading processes at 25 plants—including the 15 plants of TCI/Tire Centers L.L.C., which now is owned by Michelin North America Inc.
The Hawkinson mold cure process is used by five of the leading 45, while three list Hercules as one of their retread systems suppliers.
Among individual retreaders, the following made significant moves in the past year:
Attersley Tire ServiceLtd. of Oshawa, Ontario, more than doubled its retread capacity last year, merging with Thames Tire Inc. of London, Ontario. The company closed an older facility in Scarborough, Ontario, and consolidated production at one of Thames´ newer plants, in Ayr, Ontario.
The company now operates three Bandag plants, with combined daily capacity of 800 units, making it Ontario´s largest retreader. The company plans to add capacity later this year for OTR retreading, but details as to where and what capacity are still being worked out, a company spokesman said.
Cross-Midwest Tire opened a Bandag shop in St. Louis, its fourth, contributing heavily to a 35-percent increase in retread output vs. 1998.
Jack´s Tire & Oil Inc. in Logan, Utah, closed its last Bandag shop, in Idaho Falls, Idaho, and shifted its full resources into the four MRTI plants it opened in the past 18 months—in Logan, Salt Lake and West Valley City, Utah, and Boise, Idaho. The Salt Lake plant is scheduled for expansion this year.
McCarthy Tire Service Inc.´s December purchase of Friends Tire and Fleet Service Inc. Bethlehem, Pa., gives Wilkes-Barre, Pa.-based McCarthy Tire a second Bandag retread plant and expanded the dealership´s capacity about 20 percent to more than 800 units a day.
Pomp´s Tire Service Inc. of Green Bay, Wis., acquired Antigo Retreaders in Antigo, Wis., last summer, bringing the dealership´s network of plants to 11 and contributing to double-digit growth in retread production. Antigo owner Paul Sikora has stayed on with Pomp´s to manage the Antigo location, which is a commercial tire store as well as a Bandag shop.
Pomp´s intends to expand output this year again to keep pace with an expanded marketing territory, President Jim Wochinske said.
Ray Carr Tires is expanding capacity this year with the addition of two curing chambers.
Royal Tire Inc. of St. Cloud, Minn., closed its Virginia, Minn., plant and consolidated production at its three remaining Bandag plants, one in St. Cloud and two in Montevideo, Minn. As a result, production dipped slightly from 1998, but the company is in the process of expanding the St. Cloud plant.
Snider Tire Inc. of Greensboro, N.C., plans to increase capacity significantly at its network of seven retread plants to support an expanded marketing area. The company added three commercial sales and service outlets last year, and is evaluating further expansion this year. Company management projects double-digit growth this year to $75 million.
Tire Distribution Systems expanded its reach in the Pacific Northwest recently, buying Whatcom Tire Center of Ferndale, Wash. Whatcom operated a Bandag shop and two commercial outlets in western Washington.
The new facilities complement the two retread plants and three stores operated originally by Sound Tire, one of the five dealerships Bandag acquired in 1997 to establish TDS.
Though outside the scope of Tire Business´ ranking, a couple of retreaders in Mexico also merit a reference:
*Hules Banda of Mexico City, known in the U.S. for its Bandamatic tread rubber business, retreads 8,000 medium truck and 2,500 passenger and light truck tires a month.
*Llantera Atlas in Guadalajara turns out 130 medium truck and 150 passenger car retreads a day, and is in the process of expanding.