FINDLAY, Ohio (Oct. 16, 2002) — Cooper Tire & Rubber Co., concerned about rising raw material prices, is considering raising tire prices. Those increases could come as soon as the next couple of weeks or not until next year, said Cooper chairman and CEO Thomas Dattilo during an Oct. 16 earnings conference call with financial analysts.
"We are really giving a lot of thought to the next pricing initiative," he said. The price increases would come despite weakened demand in the North American replacement market during the third quarter and subsequent price softening.
Pull-ahead sales from the Bridgestone/Firestone recalls still are impacting aftermarket tire sales. Because of that, a lot of dealers are keeping their inventories low, Mr. Dattilo said.
Although replacement demand is weak right now, it will pick up, said Roger Hendriksen, director of investor relations and corporate communications. "The question is when, but when it does, it will pick up very, very quickly," he said, given that manufacturers' inventory levels are down 25 percent from where they were in 2000.
The overall replacement tire industry declined nearly 8 percent, according to the tire maker, while its own North American passenger and light truck tire sales declined just 1 percent. Its increased sales in the quarter were in lower margin products, however, Mr. Dattilo said
Rising costs related to product liability and legal defense, labor costs, Transportation Recall Efficiency, Accountability and Documentation (TREAD) Act-related expenses and raw materials are the rationale for considering price hikes, Mr. Hendriksen said. Cooper paid an additional $5 million during the third quarter alone for its raw materials, compared with a year earlier.
"All of these things combined are adding to the need for price increases," he said.
Kumho Tire USA Inc. and Yokohama Tire Corp. earlier this month said they will raise passenger and truck tire prices as of Nov. 1 because of rising manufacturing costs. Kumho will increase its prices 3 to 5 percent, depending on the tire, while Yokohama will raise its replacement prices for passenger and light truck tires between 4 and 6 percent.
Ever-rising oil prices are driving up the cost of carbon black and monomers, Mr. Dattilo said.