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January 06, 2003 01:00 AM

Retreaders' big concerns:

Vera Fedchenko
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    Peering into their crystal balls, Marvin Bozarth and Harvey Brodsky said they don't expect 2003 to be a bullish year for retreaders, but neither will it be any more difficult than 2002.

    The hot-button issues of tire labeling, the testing of commercial retreads by the National Highway Traffic Safety Administration, high raw materials costs and a soft economy most likely will continue to impact the industry in 2003, said Mr. Bozarth, senior consultant to the Tire Industry Association.

    ``There are a few dealers that are going strong, but I'm finding that a number of retreaders' and commercial dealers' business is down,'' he said, with fleet consolidations, scaled-back fleets and fewer trucks on the road contributing to soft sales and low margins for retreaders this past year. Mr. Bozarth said he doesn't expect any large increases in the commercial business until 2003's second quarter.

    However, Mr. Brodsky, managing director of the Tire Retread Information Bureau, noted that the economy is showing signs of a turnaround, especially in the construction sector, where he foresees a ``slight uptick'' in business. He said he expects more trucks to be moving on the roads during the new year, and he urged retreaders to combat the slowdown in the commercial business and shrinking customer base by going after public sector fleets and smaller fleets that lease or operate only a few trucks.

    ``I don't think it's going to be any tougher than 2002. I expect some improvement because I think business is going to improve,'' Mr. Brodsky said.

    Warren Heidbreder, chief financial officer for Bandag Inc., said he wouldn't try to guess what 2003 will bring retreaders but noted the tough economy has forced retreaders to manage their businesses more efficiently and work harder to serve their customers. He said this should position retreaders well should an economic recovery occur in 2003.

    A new engine also will be introduced to trucking fleets in 2003, Mr. Heidbreder said, and this could very well extend the replacement tire cycles on current trucks as fleets wait to see how the engine performs before they buy new trucks.

    Mr. Bozarth estimated that the number of retread plants in the U.S. has fallen to 990 after taking into account all the retreader operations that are in the process of closing and opening plants. He had no retread production data available to predict how many units will be retreaded in 2003.

    NHTSA's proposed testing of retreads is a concern to Mr. Bozarth, who noted the initial speeds NHTSA is considering for wheel tests are unrealistic and will cause all tires to fail. He said he's sure the new tire makers will pass on data from their own retread tests to NHTSA, but the whole process is still dicey.

    ``Any time the government is testing and looking at regulations, you're not only concerned about how tough the regulation is as far as tire performance, but you're worried about the cost that it presents to you to do the testing,'' Mr. Bozarth explained, noting the costs of complying with regulations also is an issue.

    Other retreading concerns in 2003, according to Mr. Bozarth, include:

    * The possibility NHTSA will require the tire identification number to be molded on both sidewalls of medium truck tires;

    * Inexpensive new tires from India and China that continue to drive prices down and take away share of the intermodal tire business from domestic retreaders;

    * Soaring insurance rates; and

    * Goodyear's financial woes and cost-cutting measures that could negatively impact service to commercial dealers.

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