AKRON (May 22, 2001)–Gas and energy prices are on the rise, but concerns about them aren't.
At least no consensus was reached among tire dealers nationwide interviewed by Tire Business. Nor is there any common sentiment about what the economy has in store for the near term.
Talk of rolling blackouts and $3-per-gallon gas, coupled with Fed-led Wall Street hysteria, has spurred myriad opinions as to what it all means for dealers. File this one under: Depends upon whom you ask.
Does the so-called slumping economy mean people will spend less on car repairs? Or will they merely be more reluctant to buy new cars, thereby increasing the need to properly maintain current vehicles?
Do higher gas prices mean folks will drive less? Or does the cost of diesel fuel, actually down 14 cents from six months ago, mean some trucking fleets won't cut back at all?
“I don't know if this is just the calm before the storm,” said David Fox, president of Performance Plus Tire in Torrance, Calif., about the economic uncertainties. “I think it's going to trickle down to us, I just don't know what aspect yet.”
His comments reflect opinions across the board. It seems everyone has a theory.
In the Northeast, sales might be down a peg or two, but that might be because of the winter. In the Pacific Northwest, a drought could be why some dealers are high and dry. In California, gas might cost an arm and a leg–but people have to get around somehow.
“I think (with) driving, especially in California, there are no other alternatives,” said Jack Walker, president of Walker and Sons Firestone in Palmdale. “You have to pay at the pumps and pay your electric bills, so you don't spend money (on other things). What will happen is maintenance work. They'll let it slide and then it becomes problem work that's a lot more expensive. Sooner or later they'll have to pay the piper.”
With fuel and energy costs rising, some dealerships could be looking to tighten their belts.
It may be as minor as using fewer lights or running the air conditioning less, as Mr. Fox said his Performance Plus store has done. On the other hand, the rolling blackouts Californians have experienced could bring catastrophic losses.
Mr. Fox saw that potential earlier this year during a non-blackout-related power outage that silenced his store for an entire morning.
He estimates he lost $2,000 in sales that day, in part because customers left and did not return. If nothing else, that half-day has Mr. Fox preparing for an extended loss of power.
“I could see if it was an ongoing type of thing, we'd have to get some kind of backup,” he said. “And I don't think we could just go to Sears to get some little gas-powered generator.”
Despite California's problems–a byproduct of deregulation–Mr. Fox said his bottom line hasn't been hurt and his “energy bills haven't gone up too much.” He does, however, recognize the cause-and-effect nature that means higher energy costs will eventually catch up with everyone.
“We'll see prices increase,” he said. “Because of the electric problems, a lot of the Southern California wheel foundries are raising prices. We saw wheel prices go up in the first quarter maybe 10 percent.”
Less than 100 miles away, Mr. Walker paints a bleaker picture.
He said the “double-whammy” of higher energy and gasoline prices have “affected my bottom line terribly.” But even he, being a Firestone dealer, concedes that some of his 25 percent decrease from last April to this April is attributable to recalls. On the other hand, he points to decreased car counts of 100 per month per location as proof of the faltering economy.
Some 3,000 miles in the other direction, Boston-area dealers acknowledge the higher energy costs, but say the bottom line hasn't been affected.
Bob Katz, owner of Nu-Tread Tire Co. in East Boston, Mass., said that while energy costs had gone up “dramatically,” April sales saw a 21-percent increase.
Jim Chew, president of C and R Tire Co. Inc., in Worcester, Mass., attributed a “very slow first quarter” to a “really bad winter,” but added, “for the last six weeks things have been very strong.”
In Pasco, Wash., near the Oregon border, Pasco Tire Factory President Paul Williams also pointed skyward when it came to answering questions about potential losses. With the majority of his business depending on agriculture, a drought is the equivalent of a blackout. No water means weakened crops, which means less need for farm vehicles.
“It's ugly. We need water, rain or snow,” said Mr. Williams, who noted that his retail numbers are fine and overall he is “on par with last year.”
Beyond high energy costs, dealers are faced with a weakening economy potentially causing consumers to cut spending. In most cases, though, the opposite seems to be happening. People are nickel-and-diming it now, taking an “ounce of prevention Ã ” stance.
“People are putting more money into their vehicles,” Mr. Chew said. “From the repair side, we've seen some very large tickets. Instead of buying that next vehicle, people are gonna fix what they've got.”
The feeling that a slowed economy would hamper new car sales, thereby helping the auto service industry, was the closest respondents came to agreeing on anything. Nearly to a person, they shared the belief.
“Usually what we notice (during economic slowdowns) is Ã new car sales are down,” said Ted Wiens Jr., president of Ted Wiens Tire & Auto Centers in Las Vegas. “That's good for our business.”
A prevailing belief is people won't drive any less. Both Mr. Chew and Tom Wright, owner of Wright Tire Service, Anoka, Minn., own gas stations and each said volume gas sales have remained steady.
A common concern surrounds the nation's penchant for summer travelling. But realistically, vacation plans made months ahead of time aren't likely to be shelved to save a few bucks on gas. “People might curtail other things,” Mr. Chew said. “They work so much that they take their recreation seriously.”
Still, no matter what form cutbacks may take, as Tony Sexton, vice president of Toby Sexton Tire Co., Loganville, Ga., said: “They've still gotta have tires.”
Tire Business Staff Reporter Vera Fedchenko contributed to this article.