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April 23, 2001 02:00 AM

Retreading in 2000-the highlights

Peggy Fisher
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    Every year at this time our thoughts are turned to retreading since spring is the traditional time when the International Tire & Rubber Association (ITRA) has its convention and Expo.

    As you read this issue of Tire Business and see the wonderful statistics that show the state of the retreading industry and its largest players, you've got to ask yourself just what happened last year to get us to the present situation.

    The Firestone tire recall, begun last August, dominated most of the news and everyone's concerns during the last half of 2000. As a result, many things that would have been front-page news stories were pushed to the back of newspapers-and our minds.

    Perhaps it's time to recap some critical events that have shaped and are shaping the retread industry in order to understand why it is where it is and where it is going. Maybe this will give you insight into managing your business in the coming year.

    According to the ITRA, there were 1,231 retreaders in 1999. The number in 2000 fell to 1,123, and there will be around 1,100 by the end of this year.

    As you can see, the decline in retread plants is slowing down. Perhaps we are getting to that critical mass where, in order to meet demand, this magic number of plants is needed. Or maybe there is just a slowing of consolidation as the economy figures out what it's doing and as legal maneuvering continues among the giant consolidators.

    The biggest consolidation of the year was the combining of the commercial tire distribution and retreading assets of Goodyear and Treadco Inc. into a joint venture company that may be the largest truck tire service network in the world.

    The new company is called Wingfoot Commercial Tire Systems L.L.C., which operates 180 commercial tire centers and 76 retread plants throughout the U.S.

    As with Tire Distribution Systems (Bandag Inc.'s network of dealers), Bridgestone/Firestone Inc.'s GCR Group and Michelin North America Inc.'s purchase of Tire Centers Inc., this consolidation is another acknowledgement that being allied with a cradle-to-grave supplier-providing both new tires and retreading-is the way the industry is going.

    While this consolidation may have been a boon for Treadco and Goodyear, it certainly was a bust for Oliver Rubber Co. You may remember that Oliver bent over backwards and did a few flips as well to equip all of Treadco's plants when that Fort Smith, Ark.-based firm severed its relations with Bandag in 1996.

    Treadco then became Oliver's largest customer, accounting for about 20-25 percent of that company's annual tread rubber sales. Now, all 21 of Treadco's retreading plants are being converted to the Goodyear Next-Tred System. What will this do to Oliver?

    As you probably recall, Cooper Tire & Rubber Co. acquired Oliver in October 1999 when Cooper bought Standard Products Co., Oliver's parent.

    Many people have wondered whether Cooper will retain Oliver or spin it off. However, the Findlay, Ohio-based rubber company has said it intends to keep Oliver and maximize the synergies between the retread company and their efforts to make inroads into the medium truck market.

    In December, Larry Enders, formerly president of Oliver, was named president of Cooper's commercial tire division, responsible for radial medium truck tire and retreading operations. Only time will tell if he can make this happen.

    While things remain difficult for Oliver in the retread area, Marangoni Tread North America Inc. seems to be quietly growing in strength. It added two more dealerships to its Ringtread precure retread program last fall and now boasts eight franchised plants in North America.

    The Bandag/Michelin lawsuits, which began in September 1999, continue to drag on. In case you've forgotten, Bandag is suing Michelin for allegedly stealing trade secrets, spreading false rumors about Bandag and engaging in predatory pricing.

    Michelin is countersuing, accusing Bandag of ``monopolistic practices.''

    The latest action in this battle for retread industry dominance has dragged Bridgestone/Firestone into the fray. Michelin claims Bridgestone and Bandag are in collusion ``to ensure that Michelin does not become a significant competitor in retread tire systems and the fleet market'' by offering Bandag dealers financial incentives not to license Michelin's retreading system.

    This consolidation and competition has affected the ITRA Expo, too. With around 800 retread plants tied up with one or more retreading systems provider, there are only about 300 retreaders truly independent-which explains the drop in retreader attendance in the last few years.

    A number of retread equipment suppliers have good market coverage through full dealer networks and don't have new products every year to show; so an annual show is unnecessary for them. As a result, ITRA has gone to a biennial trade show and will hold regional conferences in the alternate years to meet the educational needs of retreaders and commercial tire dealers.

    On the legislative front, two issues are pending that may affect retreaders.

    The first is a bill tire manufacturers are pushing as a means of simplifying the calculation of federal excise taxes (FET) on truck tires. (See story on page 11.) The current method is based on the weight of the new tire, which can vary with slight changes in manufacturing processes and design.

    The proposed method is based on tire carrying capacity. On the four major sizes used in over-the-road trucking (11R22.5, 11R24.5, 295/75R22.5, 285/75R24.5 Load range G), it looks like the FET may drop from between $1 and $7 a tire if the proposed method of calculating is adopted.

    Everyone wants the amount of taxes accumulated to be the same, but fears are that the proposed amount charged per 10 pounds of carrying capacity ($.08/pound over 3,500) is not enough. This decrease in excise tax would reduce the price differential between new tires and retreads.

    The other legislative issue involves tire labeling. As part of the TREAD Act, the National Highway and Traffic Safety Administration (NHTSA) is looking at requiring DOT codes on both sides of the tire. (This would apply to retreaded tires as well.)

    Mold cure retreaders would have to put the DOT code plates on both the upper and lower portions of hot molds, which is time consuming, difficult and dangerous. For precure retreaders, it adds another level of expense at the least for labor and materials.

    Despite improvements in retreading equipment, materials and processes, retreading continues to get a black eye every time a tire runs flat and a tread-belt package is left on the side of a road. Probably the worst attack on retreading came from Ft. Wayne, Ind., last December, when a two-part news story appeared on WANE-TV lambasting retreads. This was followed coincidentally by another anti-retread story run by WISH-TV in Indianapolis.

    In February, Tennessee considered legislation ``to explore the feasibility of prohibiting use of retreaded tires on commercial motor vehicles.'' Fortunately, the Tire Retread Information Bureau (TRIB) was standing ready to defend retreading and got the facts out to the appropriate people.

    Follow-up stories were run in Indiana using TRIB's materials, and Tennessee dropped the anti-retread bill after receiving TRIB's information as well as outcries from Tennessee retreaders.

    The retread industry is going through tremendous evolution. There are new forces at play that will shape the industry for years to come as well as continuing attacks on the integrity and economics of retread products. Retreaders will continue to face serious challenges and hard decisions.

    There's never been a better or worse time to be a retreader.

    Letter
    to the
    Editor

    Do you have an opinion about this story? Do you have some thoughts you'd like to share with our readers? Tire Business would love to hear from you. Email your letter to Editor Don Detore at [email protected].

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