Despite a sluggish economy last year, 23 of North America's 50 largest truck tire retreaders expanded their output in 2002, including 14 that reported double-digit increases.
Some of the increases resulted from acquisitions, but the bulk of the growth came the old-fashioned way-with retreaders getting out and drumming up new business, according to Tire Business' annual survey of the continent's largest retread plant operators.
While sales and production rose at many of the major retreaders surveyed, profits apparently didn't keep pace, based on the plethora of responses regarding higher costs for insurance, fuel and energy. The cost increases were felt doubly hard, many said, because new tire prices continue to hover too close to the price level for retreads, despite some announced price increases.
Many respondents said they've compensated by keeping a tight rein on personnel and personnel costs, thereby raising productivity, and in a number of instances, adding fuel surcharges to delivery prices. In some cases, firms said they were forced to trim benefits and search for alternative insurance carriers-or even attempt to go the self-insurance route.
``Our gross has declined because of retreaders dropping prices to capture wheel positions,'' said Randy Drake of McGriff Tire Co. Inc. in Cullman, Ala.
``The market sets your price and your costs determine your profit,'' said Jim Fletcher, president of Pete's Road Service Inc. in Fullerton, Calif. ``We have to control our own costs.'' To keep costs in line, Mr. Fletcher said he's reworking his company's bonus programs to reward team accomplishments instead of individual sales efforts.
Peter Gerry, president of Pete's Tire Barns in Orange, Mass., scaled back his company's medium truck retreading program measurably last year because new tire pricing in New England has dropped so far that customers are opting for new tires. Additionally, the company scaled back its light truck retreading to do all-steel casings only, after determining the failure rates for fabric casings were too high.
``Profitability is being eroded by manufacturers' insane pricing in some national accounts often below manufacturing cost,'' said Charlie Allfrey, vice president of Phelps Tire Co. Inc. in Seattle. ``There appears to be no bottom on prices/support from manufacturers hungry to get a sale.''
Low-priced new tire imports have been increasing in recent years and already have cut into retread sales, said Luc Minguet, vice president of sales, Michelin Americas Truck Tires (MATT), commenting on factors affecting retread demand.
However, he said, ``the weakening U.S. dollar may in fact decrease the attractiveness of the U.S. market to low-price importers and hence allow retreads to return to higher sales levels. The economic pressure on fleets also will drive them to maximize cost per mile, which should in fact increase retread use in the U.S.''
Suppliers, too, are bemoaning the higher prices for raw materials, energy purchases and other logistics expenses.
``We see principally two effects.'' Mr. Minguet said. ``First, the cost pressure on fleets, who already are struggling with insurance and health costs, will increase their desire to lower their cost per mile. This could increase demand for retreads from those fleets who have not chosen to retread in the past.
``Secondly,'' he continued, ``more and more fleets are realizing how their choice of tire technology can affect their fuel bill. The price of diesel (fuel) could increase fleet usage of fuel-saving treads...which utilize low rolling resistance compounds.''
Bandag Inc.'s U.S. tread rubber volume, which accounts for the majority of the company's North American revenues, rose nearly 7 percent in the fourth quarter over the prior-year period, resulting in a slight increase for the whole year. The company said it believes this increase was the result of North American dealers buying ahead of a Jan. 1 price increase.
In terms of demand, Michelin Retread Technologies Inc. (MRTI) is hoping to expand the sales of retreads from its franchisees by opening up the distribution channel for Michelin retreads to dealers who sell new Michelin truck tires.
To effect this strategy, MRTI has created a Michelin Retread Associate Dealer Program, which allows Michelin new-tire dealers to sell and service Michelin retreads and tap into MRTI's marketing support. Up to now, only MRTI franchisees were authorized to sell retreads produced by MRTI shops.
The new program could expand MRTI's distribution network to as many as 1,500 points of sale from 200, the subsidiary of Michelin North America Inc. said.
``The increasing demand for Michelin retreads is an excellent growth opportunity for new tire dealers,'' said Randy Clark, vice president of marketing for MATT, in a prepared statement.
Michelin is launching the associate dealer program at a time when demand for MRTI retreads is rising. Michelin claims the combined sales of retreads by MRTI franchisees for the first nine months of 2002 were up 16.4 percent over the same period a year ago, while the overall market for retreads was down 1.1 percent.
The company has 24 MRTI franchisees in the U.S. and Canada operating 44 plants; included among these are 13 shops operated by Michelin's own Tire Centers L.L.C. subsidiary, which does business as TCI Tire Centers.
Of the Top 50 truck tire retreaders ranked this year, 30 are Bandag affiliated, operating 163 retread plants including 31 by its own Tire Distribution Systems (TDS) subsidiary. Goodyear has eight affiliated dealers in the Top 50 operating 105 plants (67 by Goodyear); seven are MRTI with 27 plants; and five are Oliver/Long Mile with 18 plants.
The Top 50 consumed 262.3 million pounds of tread rubber last year, while operating 309 retread plants, producing 40,662 units a day. On average, a Top 50 shop produced 132 units a day and consumed approximately 850,000 pounds of tread rubber annually.
The Top 50 ranking has four new faces this year starting with Boulevard Tire of Deland, Fla., debuting at No. 25. Others are Superior Tire Service Inc. in Salem, Ore., an MRTI franchisee ranked 38th; Southern Tire Sales of Jackson, Miss., a Goodyear affiliate ranked 43rd; and Allied Retread Technologies of Omaha, Neb., an MRTI franchisee ranked 44th.
Here are other developments of the past 12 months worth noting:
McGriff Tire Co. of Cullman phased out its MRTI, Hawkinson mold cure and McGriff Segmented Radial and Marangoni precure plants and took over four Bandag-owned Tire Distribution Systems commercial outlets and one TDS retread plant in Alabama. McGriff President and CEO Barry McGriff said he made the move to streamline the firm's commercial tire operations and become more sales and marketing driven. The firm also converted its Mobile, Ala., plant to Bandag production and consolidated production there from a TDS site in the same vicinity.
Town & Country Tire and Wheel Reconditioning Inc. in Ingersoll, Ontario, opened an MRTI premold plant last July. The 30,000-sq.-ft. plant sits on a 5.4-acre plot in Ingersoll's Samnah Business Park. The unit is MRTI's first in Ontario and second in Canada.
Bandag Inc.'s TDS unit replaced older retread facilities with new ones in Santa Rosa, Calif., and Spokane, Wash. The Santa Rosa site is a full-service location, offering service bays for cars, light trucks, large trucks, buses and heavy construction equipment. At 300 units a day, the retread plant is 50 percent larger than the plant it replaces. The Spokane location was due to be similar in size.
Commercial Tire Inc. in Boise, Idaho, moved its Lewiston, Idaho, Bandag plant to Salt Lake City.
Edmonton, Alberta's Fountain Tire closed its Thunder Bay, Ontario, retread plant and consolidated its production at various other sites.
Ranger Tires in Farmingdale, N.Y., added a Marangoni Ringtread plant, giving it three retread plants. The company is considering consolidating two of its plants into one.
Raben Tire Co. Inc. moved its Next-Tred retread plant in Clarksville, Ind.-which it took over from Wingfoot Commercial Tire Systems in late 2001-to a larger facility and expanded its capacity. Raben also switched its Scott City, Mo., plant to the Oliver Rubber system in December after Bandag did not renew the site's franchise.
Ray Carr Tires Inc. in Harrisonburg, Va., shut down its retreading activities.
Evans Tires & Treads of Ocoee, Fla., went out of business.
Shrader's Tire & Oil in Toledo, Ohio, switched its retread plant in Blissfield, Mich., to Marangoni's Ringtread process from the Oliver Rubber system in use previously.
Premier Bandag Inc. consolidated production from its Hartford City, Ind., retread plant with that of Isaac Tire in Fort Wayne, Ind., which now operates as Premier Bandag #1 and does business as Isaac Tire Premier Bandag. The company, a part of the Best One/Zurcher Tire network, also closed its Owensboro, Ky., retread plant and moved it to a new site in Princeton, Ind.
Tirecraft Commercial's retreading business-formerly Attersley Tire Service Ltd.-grew by 50 percent over 2001 with the acquisition of Capital City Tire Co. of Ottawa, Ontario, accounting for a large share of the growth.
Companies on the move in 2003 include:
Michelin's TCI Tire Centers unit, which is opening an MRTI retread plant in Nashville, Tenn., the company's 14th plant.
Raben Tire, which is evaluating its options regarding adding an MRTI plant to its stable of three retread plants-one Bandag, one Goodyear and Oliver. The decision will depend on where the plant would be located, which would be outside the company's existing territory, said Tom Raben, vice president.
McGriff Tire, which is setting up a Bandag plant in Cullman as part of its business plan to align itself with Bandag.
Pete's Road Service in Fullerton, Calif., which will consolidate production from its two Oliver system plants, in Orange and Fontana, Calif., to one plant and raise production 50 percent.