AKRON (Dec. 26, 2000)—Four months after Bridgestone/Firestone Inc.´s 6.5 million-tire recall announcement, competing tire companies are revving up to take a bite out of the company´s market share.
But tire analysts agree it could take about six to nine months before Firestone really feels the hit, and before the competition claims market share because of the recall.
Brian Eisenbarth, a tire analyst with Bruce Raabe, Collins & Co., said changes in market share are very subtle in the tire industry. Firestone hasn´t seen the early effects on its share because of the mature nature of the market and the fact that the industry typically only has a growth rate of 2 to 3 percent a year, he said. "Consumers don´t go out and buy tires like they go to the grocery store," Mr. Eisenbarth said. "It will take a while before we see any changes."
But the 40-percent plunge of U.S. Firestone replacement passenger and light truck tire sales in September and October, compared with year-earlier months, acts as an immediate reality check for the company.
Bridgestone/Firestone held 23 percent of the overall North American tire market in 1999, according to estimates published by Tire Business. The Firestone brand itself claimed an estimated 10-percent share of the replacement passenger and 8 percent of the light truck tire markets. Collectively, the Bridgestone and Firestone brands took 21 percent of the original equipment passenger and light truck tire market.
Post-recall, analysts estimate the company still claims 21 percent of the North American original equipment market, leaving it in third place behind its two main competitors, Goodyear and Michelin North America Inc.
Mr. Eisenbarth said until the recall the tire market was dominated mainly by price competition. Consumers simply would buy the tire that cost the least, he said. "Brand names had to differentiate themselves with marketing because there was no big difference from one (company) to the next," Mr. Eisenbarth said. "The current situation might revert to what it was like 10 years ago when people were more brand conscious."
Mr. Eisenbarth said both the OE and consumer levels dictate how much market share a company receives.
"At the OEM level the manufacturers must deal with which tires the auto makers choose as the cars are rolling off the line," he said. "Firestone tires are not going to affect a consumer´s decision to buy a car. They can just have different tires put on. But if enough people say that, then (auto makers) will have to change brands in order to sell cars.
"At the consumer level, we will see a decline in sales because people are leery of the brand. People are afraid to have the tires on their car," Mr. Eisenbarth said.
Ford´s November announcement that it will allow customers to choose the brand of tires placed on the 2002 Explorer—due out at the beginning of next year—could put a dent in Firestone´s OE share, said Saul Rubin, a tire analyst with UBS Warburg L.L.C.
Mr. Rubin, though, said he would be astonished if Ford decided to halt all of its business with Firestone. "I don´t think that will happen," he said. "That would be silly for Ford. Firestone is one of the three major global players.... Cutting them off would leave them quite vulnerable."
Mr. Rubin said Bridgestone/Firestone makes up about 38 percent of Ford´s OE business. He said he easily could see Ford taking half of that away. "Because of the load of animosity between the two, I doubt that Ford will leave them unpunished," he said.
While Michelin will have a share of the Explorer 2002 business, Goodyear and Michelin are not being bashful about using their marketing skills to aid consumers who need to replace their recalled Firestone tires. The companies´ Web sites are decorated with information about tire safety and locations where their individual brands can be purchased.
UBS Warburg, a global equity research company, completed a report, "Firestone Makes History.... Again," that dissects the recall´s financial implications. The report said Goodyear and Michelin are positioning themselves to take advantage of Firestone´s problems.
"We believe Goodyear and Michelin will benefit in the short term by supplying tires to aid the recall and by taking a larger share of the replacement market. In the longer term, although the benefits of supplying tires to the recall will disappear, some of the giant market share will likely remain," the report stated.
Mr. Rubin said in the future, Bridgestone/ Firestone may have to lower tire prices in order to regain and maintain lost market share. "Lowering their prices will help to rebuild the brand, and that is what they will probably need to do," he said. "It´s a matter of how they handle the rest of the recall."
Ms. Wenger writes for Rubber & Plastics News, a sister publication of Tire Business.