WASHINGTON—The terrorist attacks on the World Trade Center and the Pentagon have left all Americans shaken and uncertain of the future—not least those Americans who sell tires and provide automotive service.
Tire dealers, dealer associations and industry analysts agree that the effect of the tragedy on them is still difficult to determine. “I've heard the best economists comment on this, and they say the earliest anyone can tell anything will be Thanksgiving,” said Ross Kogel, executive vice president of the Tire Association of North America (TANA).
They all agree, however, that although the general economic picture looks bleak, tire dealers could see at least a limited upturn through people driving more, keeping their cars longer and needing to buy replacement tires and obtain auto service.
Similarly, although everybody's legislative agenda will be swept aside as Congress turns to issues of national emergency, the business stimulus measures the Bush administration is pushing could be a major boon to tire dealers and other small businesses.
Predicting the future of the tire industry is “very speculative” right now, according to Anand Mehta, an analyst with the Cleveland-based Freedonia Group, a consulting firm specializing in industry analyses. Mr. Mehta wrote its global tire and rubber report last year.
“It largely depends on the economy and how much it will be affected,” he said. “People are trying to predict whether the stock market will go back up, but no one knows.
“If the economy suffers as a whole, and the airline industry continues massive layoffs, people will stop buying new cars, and the tire industry will suffer from that standpoint,” he added. “I do believe people will be flying less, not only because of a weak economy, but also because they're afraid to fly. That means people will drive more, by way of car or other light vehicle.
“Also, depending on how much the U.S. government increases defense spending, it will increase its purchases of tires for military vehicles.”
Three businessmen with close ties to the tire industry also told Tire Business they expect people to fly less and drive more in the upcoming months.
They are Len Lewin, CEO and president of Memphis-based American Car Care Centers Inc.; Jim Faught, president of Northwest Tire & Service, Flint, Mich., and onetime president of the former National Tire Dealers & Retreaders Association; and Dan Beach, CEO and president of the Oxnard, Calif-based Tire Alliance Groupe (TAG), one of the nation's largest tire buying and marketing groups for independent tire dealers.
“For our member dealers, last week was extremely slow,” said Mr. Lewin. “Things started to improve this week, but business is certainly not what it was prior to Sept. 11, and it will take us a while to regain that.”
Even before the terrorist attacks, he said, 2001 had “not been a stellar year” for tire dealers, with the added business caused by the Firestone recall covering up the real situation.
“We've taken on business that won't be there for us in time,” Mr. Lewin said. “In the next six, eight or 10 months, we'll be in for a belt-tightening time.”
But the weak economy and fear of flying will put people back in their cars, and make them keep their cars longer, thus forcing them to seek replacement tires and more service, he said. “The downturn will have an obvious negative impact, but in our industry we'll see a partial uptick.”
What Northwest Tire experienced with the recent Firestone recall was very different from what it encountered during the Firestone recall in the late 1970s, according to Mr. Faught.
“We'd get people in during the first recall, we'd give them five tires, and they'd take any reasonable service recommendation we made,” he said. “Today, it's the opposite. You suggest a lube, oil and filter, and they say, 'It's leased.'”
But that is already starting to change as the economy softens and people decide to keep their cars, Mr. Faught said. “We're having our best year since 1997,” he said. “We've had significant gains in both tires and service, but more in service than in tires.”
Another feature of an economic downturn that helps tire dealers, he said, is high unemployment. In that situation, skilled workers are grateful for jobs in tire and auto service centers, rather than keeping their eye out for greener pastures.
“When we do our best is at 8- to 10-percent unemployment,” said Mr. Faught, who noted that the latest national unemployment figures stand at about 5 percent. “Employee turnover will slow down.”
TAG's Mr. Beach said he expected an upswing in business in the intermediate term. “I don't know about the short term, though,” he said. “People are sitting around not doing anything. Probably in October, we'll see an upturn.”
Among industry association officials, Roy E. Littlefield III, government affairs director for the International Tire & Rubber Association (ITRA), also expects the coming economy to be far from robust.
“”People will be scared to travel, and they're going to hold on to their money,” Mr. Littlefield said. “I think it's going to be tough on our business right now. A lot of our members are small businesses who can't take a big hit.”
A major issue for ITRA's retreader and commercial dealer members, according to Mr. Littlefield, is what will happen to the price of oil. A spike in oil prices would have a major negative impact on truckers, who are retreaders' biggest customers.
ITRA will do everything it can to keep its members “strong and healthy” during this stressful period, added Marvin Bozarth, ITRA executive director.
“If companies can't succeed and be productive, we can't succeed as a country,” Mr. Bozarth said. “Some may be producing materials for the war effort, others may have nothing to do with the war effort, but all are vitally necessary to the future of our country.”
The Tire Association of North America's main immediate concern after the tragedy is any of the group's members who may have been in the immediate area of the blasts, or had family members there, according to Mr. Kogel. He said he did not know as of Sept. 19 of any TANA members or any of their relatives who were victims of the attacks.
“I hope everybody's taking President Bush's advice to heart and going back to work,” Mr. Kogel said. “We must not bow to the efforts of terrorists to bring us to a halt.”
As for associations' legislative agendas, “it's hard to imagine our issues will be on the front burner this year,” Mr. Littlefield said. “You've got to believe that Congress will be preoccupied with issues of national security.”
TANA, according to Mr. Kogel, is not making any major changes in its agenda, although it realizes that “smaller issues at a time like this tend to fall off to the side.” Federal Reserve Chairman Alan Greenspan's move to lower the federal funds rate by one-half percent on Sept. 17 was a hopeful move, he said, and his meeting Sept. 19 with key members of Congress to discuss further tax cuts and other economic stimuli is even more encouraging.
“This tax package was touted by the Republicans even before the World Trade Center tragedy,” Mr. Kogel said. “We would like to see what comes out of Congress in the next few days.”