The first year of the new millennium promises to be filled with new opportunities and challenges for commercial tire dealers and their truck tire customers.
Most of the challenges were set up in 2000, which was an exciting year with one major event after another fighting for our attention.
The biggest happening in 2001 is that we will finally have a new president. And, although the majority is slim, for the first time in 48 years the Republicans will control both houses of Congress as well as the White House.
According to political pundits, the trucking and tire industries should find it easier to work with a Republican administration.
Hours of service
Mr. Bush will nominate a new secretary of transportation early this year and some time after that a new chief at the new Federal Motor Carrier Safety Administration (FMCSA)—the agency that is reforming the truck driver hours of service rules.
The hours of service reform that was the biggest issue facing trucking last year and would have severely affected commercial tire dealers, as well, is already in trouble and has much less support among Republicans. This proposed rule would negatively impact productivity, further enhance the driver shortage problem and put more trucks on our already congested highways.
Although Mr. Bush is expected to back away from hours-of-service reform, FMCSA probably will step up enforcement activities through increased compliance reviews and roadside inspections as it ramps up for the first year of operation under its own budget.
This will increase fleets' attention to vehicle maintenance including tires, which is an area that usually is one of the highest in the number of defects found by roadside inspectors.
Dealers performing tire maintenance activities for fleets should expect to receive more pressure to improve tire maintenance from their existing accounts. Furthermore, fleets doing a poor job of tire maintenance may be motivated to outsource this function to commercial dealers in order to keep their trucks rolling and avoid fines.
Congressional Republicans are mounting an effort to stop new workplace ergonomics rules from being implemented before the new administration is installed.
Both the tire and trucking industries vehemently opposed the regulations issued by the Occupational Safety and Health Administration (OSHA) in November.
The rules are designed to prevent lifting and repetitive movement injuries. However, Mr. Bush is not for imposing ergonomics regulations in the workplace.
So hopefully, these will die on the vine in 2001 and tire dealers will be spared the burden of complying with them.
More from NAFTA
Since Mr. Bush was one of the governors who asked that border restrictions be lifted, it's likely that the Mexican border will be opened as required by the North American Free Trade Agreement (NAFTA).
This will allow Mexican trucks and drivers to operate within the U.S. Exactly to what extent this will affect commercial tire dealers has yet to be determined.
Those of you who provide roadside emergency service, however, will probably find it helpful to have Spanish speaking personnel in some of your service trucks and answering your telephones.
Fuel still an issue
The price of fuel will continue to haunt us for a while, I'm afraid. Although diesel and gas prices fell a bit in November, it appears likely they will remain high this winter because fuel supplies are not keeping up with demand.
Refineries operating at full capacity still cannot pump out enough fuel to bolster plummeting inventories. The supply problem is further exacerbated by predictions of a colder-than-normal winter. The current supply of home heating oil in some parts of the country is 50 percent below last year. If there are shortages in home heating oil, diesel then will be used to heat homes and that will cause fuel shortages.
OPEC ministers also said that they may cut production at their next meeting on Jan. 17 because of reduced cyclical demand and also because they expect a slowdown in world economic activity.
However, people in the know, like former British Prime Minister John Major and Sheik Ahmed Zaki Yamani, chairman of the Centre for Global Energy Studies in London, believe oil prices will decline significantly in 2001.
Mr. Major believes crude oil prices will decline to $20 a barrel in the spring, since the Organization of Petroleum Exporting Countries (OPEC) has been shipping 1 million barrels per day more than the world is using since November.
Mr. Yamani thinks crude oil prices could be as low as $10 a barrel by the end of 2001 due to a combination of high prices, alternative technologies and high crude oil production that will force prices down, provided Saddam Hussein doesn't interrupt production.
This could put diesel prices at around 95 cents per gallon at the pump. This naturally would provide your truck tire customers with better operating costs and profit margins so they can buy replacement tires and retreads, and improve their bottom lines.
A drop in oil prices would have the same effect on any commercial tire dealer that operates service trucks. It also should reduce the cost of producing new tires and retread rubber. However, don't hold your breath in anticipation of new tire and retread rubber price reductions.
Consolidations within the trucking industry were prevalent in 2000. The latest and biggest was FedEx Corp.'s $1.2 billion purchase of American Freightways Corp., which created a super-regional less-than-truckload carrier when combined with FedEx's Viking Freight.
But this was just the largest of many companies that merged, bought out other companies or went out of business in 2000. There is no sign that this trend will stop any time soon.
Commercial tire dealers can expect the new owners of their existing fleet customers might change tire preferences, tire maintenance policies and practices, as well as where and who makes the new tire and retread purchase decision.
You may find you have to travel several hundred miles to talk to the new-tire purchaser rather than just going across town.
Outlook still good
The economy—though slowing—appears to be in good shape. Freight tonnage increased more than 8 percent in 2000 compared with 1999 tonnage. However, growth should fall below 5 percent in the second half of 2000 and stay there into 2001.
Manufacturing activity—though slower—continues to grow, exports are up and looking good due to strong economic growth in Europe, Latin America and parts of Asia, which means more freight for U.S. truckers to haul.
Imports continue to rise as well, which is not good for our trade balance but good business for trucks moving freight from coastal ports.
Taken together, the economic indicators point to a cool-down but not a meltdown in the demand for freight services. Therefore 2001 should still be a healthy and profitable year for freight haulers who will continue to wear out their treads as they ply the nation's highways.
For truck makers, the story is a bit different. They have been cutting production and laying off workers as a result of the downside of the business cycle.
In 2000 there was an estimated 25-30 percent drop in heavy truck sales that came after two years of record-shattering demand. Higher fuel and driver costs have squeezed fleets' profits and available cash; higher interest rates have raised acquisition costs, and a glut of late-model used trucks has caused trade values to plummet.
Fleets with short three- to four-year trade cycles are extending these cycles another year or two so they don't have to lay out as much cash for new equipment. Those that traditionally bought only new equipment are buying used tractors and trailers at previously unheard of prices.
Impact on dealers
How does this affect you? Well, truck dealers who must unload used equipment need good looking tires on them in order to move this inventory as fast as they can—thereby offering you a genuine business opportunity.
Further, with original equipment demand off, there are plenty of new tires to fill all of your customers' replacement tire needs. So tire supply backorders should be a thing of the past.
E-commerce is another area that is changing the face of trucking and therefore will affect the commercial tire dealer.
More and more people are doing their shopping on the Internet, which requires smaller, more frequent and more time-critical, expedited shipments.
More and more shippers are putting speed and reliability ahead of price. They demand a higher level of performance than, say, a warehouse.
Freight customers also are more willing to look at "extra" services that might save them money in the long run such as unpacking goods and taking away the packaging.
In the past, this was not part of the freight delivery service so shippers often had to hire a local distributor for the final delivery. Having the carrier do it all may be more expensive but the overall distribution costs are lower.
This means fleets will look for the same level of service from their commercial tire dealers.
They will demand a higher level of performance from you, too, and will be more willing to look at "extra" services that might save them money in the long run, such as handling their tire, retread and wheel needs, inventorying their tire stock and performing their tire maintenance.
Having the tire dealer do this may be more expensive but fleets' overall tire costs per mile may be lowered. As a result of this industry trend, tire and retread companies have developed programs in which their dealers will supply these services to fleets.
The growth of these types of programs will continue in 2001 and commercial tire dealers will feel more pressure to become involved with this aspect of the truck tire business, which, if negotiated right, could offer them new and profitable business opportunities.