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May 10, 2004 02:00 AM

It's time to demand fair value

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    Mark Emkes, newly appointed chairman and CEO of Bridgestone Americas Holding (BAH) Inc., has sounded an alarm.

    In a speech at the company's annual Bizcon commercial conference in Chicago last month, BAH's new leader strongly urged commercial dealers to focus on the value of the products and services they offer their trucking customers and not to shortchange themselves as business persons by cutting prices.

    It was a candid statement and one more industry CEOs ought to be making. Tire dealers, like tire companies, need to get fair value for their products, not only because profit margins are so tight and costs are soaring, but because their products and services are worth it.

    And it's the tire dealer-on the front lines with the customer-who can create this change most effectively.

    The dealer's role has become even larger now that the effort to raise funds and conduct an industrywide public-relations campaign via a checkoff program has failed to get off the ground.

    What sparked Mr. Emkes to speak out was the huge run-up in raw material costs BFS experienced last year. In 2003, Nashville, Tenn.-based Bridgestone/Firestone (BFS) saw the price of its raw materials rise by $100 million, and the expectation is for more hikes this year.

    In addition, BFS, like nearly every other tire company in North America, is struggling with profitability, either operating in the red or fighting to retain what income they do generate. Again, skyrocketing raw materials and labor costs are a culprit.

    That's why every major North American tire maker and marketer has announced hefty price increases within the past year. And now those hikes need to stick.

    So what are tire dealers to do? BFS executives at the meeting provided few answers other than urging commercial dealers to sell the value of their services to fleets to help offset the rising costs.

    But they did produce some insightful comparisons with other products to show why a different approach to pricing and marketing is so desperately needed.

    Singh Ahluwalia, president of BFS commercial products, truck and bus tires, explained that from 1982 to 2002, the price of a candy bar rose to $1.05 from 25 and the cost of the average car soared to $18,000 from $5,000.

    Tires? The price of the average truck tire fell 2.6 percent over that same 20-year period.

    It's time for the industry to demand a fair value for its products and services. Dealers can begin by educating their customers, one at a time, about the value of tires and the reasons why the cost for them is going higher.

    Mr. Emkes has sounded the alarm. Is anyone listening?

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    Do you have an opinion about this story? Do you have some thoughts you'd like to share with our readers? Tire Business would love to hear from you. Email your letter to Editor Don Detore at [email protected].

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