Staring at a $100 million increase in raw material prices last year and more expected this year that should again put Bridgestone/Firestone North American Tire (BFNT) in the red, BFS executives urged commercial dealers to sell higher prices to their fleets.
Mark Emkes, chairman and CEO of Bridgestone Americas Holding (BAH) Inc. and BFNT, told about 330 dealers at the tire maker's annual Bizcon commercial dealer meeting in Chicago that BAH posted a profit of $78 million in 2003, along with parent Bridgestone Corp.'s profit of about $800 million. But BFNT continued to lose money, he said.
``While we anticipate another year of losses at BFNT, our strength in our other businesses will sustain another year of profitability at BAH,'' he said.
Still, executives urged dealers to sell the value of their service to fleets to help offset the rising costs, particularly with raw materials.
``You name any raw material component on a truck tire, and I'll show you out of control and escalating prices,'' said Singh Ahluwalia, president of commercial products-truck and bus tires. ``Both of us will have to work hard to offset the raw material impact in the months ahead.''
But for dealers-who see costs rising dramatically for their manufacturers as well as their fleet customers-the idea isn't new and it isn't always easy.
``It's much easier said than done because (fleets are) always looking for us to become more efficient and asking for more and more,'' said John Snider, president and CEO of Snider Tire Inc. in Greensboro, N.C. ``...The people that are surviving, I think, have done it for a reason, and we'll continue to find ways to improve.''
Dealers interviewed by Tire Business agreed that service is usually the best bet to get those higher prices. ``You've got to give the good service or you won't even be in the ballpark,'' said Gary Glime, vice president of Pomp's Tire in Green Bay, Wis.
Even so, many fleets love the idea of something for nothing. ``We try to always sell value,'' said Jim Jacobs, sales manager, commercial division for Boulevard Tire Center in DeLand, Fla. ``Sometimes it's difficult because the fleet wants all those packages of value but they don't want to pay for it. So that's the challenge we face as an independent tire dealer, trying to prove the value then trying to get the price for that value.''
BFS executives highlighted the pricing ground that has to be regained.
Mr. Ahluwalia said from 1982 to 2002 the price of a candy bar rose from 25 cents to $1.05, and the cost of the average car soared from $5,000 to $18,000. Even the average commercial truck and trailer went from $35,000 to about $116,000. Yet the price of the average truck tire actually fell 2.6 percent over these 20 years.
``How can it be that a truck tire that outperforms tires made 20 years ago in virtually every performance area costs less today than 20 years ago?'' he asked dealers.
``How can a candy bar company, the fast food companies...increase their selling price multiple times, yet in the commercial truck tire industry we sit here stuck at the same prices for truck tires we were selling 20 years ago? I'll tell you the answer: It's because we allowed it to happen. It's because we're still allowing it to happen.''