Skip to main content
EVENT TRACKER
Keep track of rescheduled, canceled industry events with our COVID-affected event tracker - Powered by Snap Finance
Close
Sister Publication Links
  • Rubber & Plastics News
  • European Rubber Journal
tb-logo
Subscribe
  • Login
  • Register
  • Subscribe
  • News
    • OPINION
    • CORONAVIRUS
    • AUTO INDUSTRY
    • BUSINESS/FINANCIAL
    • COMMERCIAL TIRE
    • FACTORY FIXES
    • GOVERNMENT & LAW
    • INTERNATIONAL
    • MOTOR SPORTS
    • NEW PRODUCTS
    • RETAIL TIRES
    • SERVICE ZONE
    • SEMA/AAPEX
    • SMALL BUSINESS
    • TIRE MAKERS
    • SPONSORED CONTENT
    • Tire Cologne canceled; rescheduled until 2022
      New round of Paycheck Protection Program funding opens
      Vaccine may usher sense of normalcy
      Cover-up: More retailers requiring face masks to curb COVID
    • Sumitomo adds treadwear-detection to 'Sensor Core' toolkit
      New Porsche 911 GT3 to feature Michelin fitment
      U.S. high-performance tire sector hit harder than overall market
      New McLaren supercar incorporates Pirelli's Cyber Tyre system
    • TravelCenters plans 6 TA Express sites in California in 2021
      Trade groups oppose minimum wage increase proposal
      Execs: Goodyear acquisition of Cooper will benefit dealers
      Cooper's 2020 operating income up 33% despite lower sales
    • TravelCenters plans 6 TA Express sites in California in 2021
      Carlisle TyrFil broadens recycling technology options
      U.K. retreader Vaculug to promote tread rubber supplier Vipal
      TMC moves spring conference online, sets trade show for September
    • Cooper expands recall of Cooper, Mastercraft grand-touring tires
      DOT issues 13 tire plant ID codes in 2020
      Commerce reduces import duty for Cheng Shin/Maxxis
      Hankook to boost capacity at U.S. plant
    • U.K. retreader Vaculug to promote tread rubber supplier Vipal
      Execs: Goodyear acquisition of Cooper will benefit dealers
      Cooper's 2020 operating income up 33% despite lower sales
      Sumitomo adds treadwear-detection to 'Sensor Core' toolkit
    • Bridgestone World Solar Challenge canceled due to pandemic restrictions
      Pirelli, Goodyear ink sedan racing series contracts in Canada, Europe
      Goodyear extends partnership with Nürburgring race circuit
      BFG to support ATV/UTV racers in WORCS series
    • Carlisle TyrFil broadens recycling technology options
      New McLaren supercar incorporates Pirelli's Cyber Tyre system
      Hunter Engineering teams with Xtime inspection platform
      Yokohama claims AI-based compounding advancement
    • NPW hires Switzer as national sales manager
      Tire dealers see possibilities in Goodyear, Cooper deal
      Cooper expands recall of Cooper, Mastercraft grand-touring tires
      Trade groups oppose minimum wage increase proposal
    • Marinucci: Effective road test may eliminate issues
      Our View: Shops must alter ways to attract, retain talent
      Openbay integrates messaging platform with Shop Boss
      'Talent magnets' lure quality applicants to job
    • SEMA scholarships and loan forgiveness now available
      WTC hosting webinar Jan. 20 on load-capacity standards
      Denver's Brian Sump named AAPEX Shop Owner of the Year
      DUB, TIS Wheels founder Myles Kovacs is SEMA Person of the Year
    • Trade groups oppose minimum wage increase proposal
      New stimulus package fixes PPP loan confusion
      Vaccine may usher sense of normalcy
      2020 Review: PPP loans give boost to small businesses
    • Tire dealers see possibilities in Goodyear, Cooper deal
      USW: Goodyear-Cooper deal elicits concern, optimism
      Execs: Goodyear acquisition of Cooper will benefit dealers
      Timelines: Goodyear and Cooper Tire
    • Sponsored By Yokohama Tire Company
      7 questions to ask consumers when they need tires for a crossover SUV
      Sponsored By Yokohama Tire Company
      Stocking Tires for Crossover SUVs
      Sponsored By AppointmentPlus
      Three Important Lessons Learned for the Tire Business During a Pandemic
      Sponsored By Yokohama Tire Company
      7 questions to ask consumers when they need tires for a crossover SUV
  • SHOP FLOOR
    • BALANCING
    • DEMOUNTING
    • SAFETY
    • TIRE REPAIR
    • TPMS
    • TRAINING
    • VEHICLE LIFTING
    • WHEEL TORQUE
    • Video: Balancing Tire
      An introduction to wheel balancing
      Wheel weights: Balancing form with function
      Choosing the right balancing equipment
    • Video: Demounting
      An introduction to demounting, mounting and inflation
      Staying safe when demounting and mounting tires
      Demounting Equipment
    • Video: Safety
      Introduction: Creating a culture of safety
      Protecting your people with proper hygiene
      Making friends with OSHA
    • Video: Tire Repair
      An introduction to tire repair
      How to properly patch a puncture
      Tire repair: Shining a light on visual inspections
    • Video: TMPS Service
      An introduction to TPMS service
      The importance of proper relearn procedures
      Decoding sensor data for TPMS diagnosis
    • Video: Training
      Intro: Finding and training technicians
      Shop Floor: Scholarships
      Advantages of apprentice program partnerships
    • Video:Vehicle Lifting
      An introduction to lifts and lift safety
      Recommendations for using a jack
      Jack stands for commercial tire service
    • Video: Wheel Torque
      Introduction to proper wheel installation
      Torque check and recheck recommendations
      Using torque sticks to speed service times
  • Multimedia
    • VIDEOS
    • PHOTOS
    • PODCASTS
  • Events
    • ASK THE EXPERT
    • LIVESTREAMS
    • WEBINARS
    • SEMA LIVESTREAMS
  • Data
    • DATA STORE
  • Resources
    • DIRECTORY
    • CLASSIFIEDS
  • ADVERTISE
  • DIGITAL EDITION
  • Awards
    • Tire Dealer Humanitarian Award
MENU
Breadcrumb
  1. Home
May 24, 2004 02:00 AM

Rising fuel costs create tire industry dilemma: Hike prices? Bite bullet? (part 1 of 2)

AKRON
  • Tweet
  • Share
  • Share
  • Email
  • More
    Print

    As the average U.S. retail price for gasoline shot to a record high of $2.017 per gallon and diesel prices rose to an average of $1.763 May 17, many tire businesses are feeling the squeeze on their profit margins.

    Like many industries, the tire industry depends on gasoline and diesel, not only for transportation, but also for crude oil, which is a raw material in tire construction. U.S. light crude futures peaked at $41.85 a barrel May 17 before declining to $40.54 a barrel. Not surprisingly, most tire manufacturers have raised tire prices during the first and second quarters in response to high raw materials costs.

    Michael Sison, an analyst with McDonald Investments Inc. in Cleveland, said the speed of fuel price increases will be difficult to offset in the short-term, but the fact that tire manufacturers have been disciplined in raising tire prices the last few years will help profitability. Strong demand for tires also is helpful and shouldn't affect the bottom line as negatively as two years ago, he said.

    ``As long as demand is good, it gives (manufacturers) higher propensity to get price increases through,'' Mr. Sison said. ``In addition, I think the earnings leverage from more volume is more important...I think most people out there believe the economy is recovering or has recovered or is headed in the right direction.''

    In addition to a ``rapid fax'' poll of several dealers and wholesalers, Tire Business also interviewed several manufacturers, distributors and commercial tire dealers to get an overview of how businesses are handling record-high fuel costs.

    ATD works on efficiency; dealers passing on costs

    Rising gasoline and diesel costs have caused tire dealers to adjust their operations accordingly to remain competitive.

    At Pete's Tire Barns in Orange, Mass.-where gas prices are averaging $2.05 per gallon-the dealership has tacked on a fuel surcharge for the first time in its history, according to Art LeBlanc, vice president and general manager. Pete's Tire, a commercial tire dealership, also raised its service rate to $65 from $55 and is passing on tire price hikes to its customers.

    ``Most of our customers are accepting it for what it is,'' Mr. LeBlanc said.

    However, he conceded that some customers did protest the increased service rate, and he's had to remind them of increases in fuel, workers' compensation and insurance costs from a year ago. Mr. LeBlanc said he finds it frustrating that customers don't like to pay $50 for service from a fully equipped truck that cost $70,000-$80,000 for the dealership to purchase.

    ``People don't seem to put the value in it,'' he said. ``I think it's our fault as an industry that we have let ourselves be perceived as just a bunch of greasy young guys that can pop tires on a rim. There's no technology, there's no technique, there's no experience needed. I think a lot of people feel that way.''

    With 100 service vehicles, Pete's Tire can have 60 to 70 of those on the road at any given time, according to Mr. LeBlanc. A 25-percent rise in fuel costs every month with no additional revenue from fees charged add up to a ``one-way train wreck,'' he said.

    To watch costs further, Mr. LeBlanc said he's asked his employees to use discretion on delivery frequency and call the customers first to see if they need tires for that particular week.

    ``We kind of got into the habit of, it's Wednesday so we drive from point A, B, C and D and then come back,'' he explained. ``If all this person needs is a tube and it's going to cost me $4 to UPS it-then UPS it. It's cheaper to do that than pay a man to drive 15 to 20 miles out of his way.''

    Durand, Wis.-based Bauer Built Inc. hasn't instituted a fuel surcharge corporately, though the subject has been discussed, according to President Jerry Bauer. He admitted, though, that some of his stores may have added a surcharge.

    ``I've got so many guys out there floating around, doing their own thing in some cases, that I wouldn't tell you that I don't have a store manager out there who might have tried to create a fuel surcharge program and might have tried to pass it on to a customer or two,'' he told Tire Business.

    As North America's sixth-largest commercial dealership, Bauer Built operates 27 company-owned outlets and 67 service trucks and posted $107 million in commercial sales in 2003, according to Tire Business' rankings. Wholesaling brings in another $40.5 million in sales.

    Mr. Bauer said he was cautious about surcharges because if gas prices come back down, customers tend to want the surcharge returned. His dealership is looking at adjusting its service charges, instituting a delivery charge in some cases and trying to modify its product pricing to overcome higher operational costs.

    ``We try to build all of our costs into our pricing,'' he said. ``But it's not easy to do. Our margins are down this year. I'm hearing that from a lot of dealers across the country and manufacturers. Our margins are being squeezed because our customers are not allowing us to pass on the cost as fast as we're getting them.''

    Some of Bauer Built's store managers have increased rates on service calls and alignments by $5, Mr. Bauer said. Another is charging wholesale accounts a drop-off fee.

    Charlotte, N.C.-based American Tire Distributors Inc. operates 650 gas- and diesel-fueled delivery trucks in more than 35 states but has yet to pass on any price increases to customers due to skyrocketing fuel prices. Ron Sinclair, ATD's vice president of marketing, said higher gas prices do affect the business costs, but the firm so far has passed along only manufacturers' tire price hikes.

    ``We're always trying to become more efficient,'' he said. ``Customer service is key. At this point, we haven't reduced any routes or reduced deliveries to our customers based on the increased price of fuel. We'll see what happens over time with the cost of fuel.''

    Mr. Sinclair said ATD's increase in fuel costs are slightly below the national average, though he could not elaborate.

    The three companies-Pete's Tire, ATD and Bauer Built-all said they anticipated and budgeted for gas price hikes, although not all expected prices to go to $2 per gallon and beyond. All use gas- and diesel-powered vehicles, and none has cut employees to offset higher operating costs or made contingency plans in the event gas prices continue to rise.

    ``I don't have a contingency plan because I don't know that I need to do anything,'' Mr. Bauer said. ``Our plan, our focus is how we deal with these issues in our pricing. You can't provide the service if you're not here, and we have to get a fair return.''

    Mr. LeBlanc added: ``Like so many tire dealers, we're so busy putting out the daily fires that we haven't talked about (contingency plans).''

    ``I'm assuming that if (fuel) continues to rise, we'll continue to cut down on the amount of miles we go without evaluating the return on what it is we're trucking and picking up. As far as the emergency service rates go, if we have to raise them, we'll raise them.''-by Vera Fedchenko, Tire Business staff

    Letter
    to the
    Editor

    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].

    SIGN UP FOR NEWSLETTERS
    EMAIL ADDRESS

    Please enter a valid email address.

    Please enter your email address.

    Please verify captcha.

    Please select at least one newsletter to subscribe.

    Newsletter Center

    Staying current is easy with Tire Business delivered straight to your inbox.

    SUBSCRIBE TODAY

    Subscribe to Tire Business

    SUBSCRIBE
    Connect with Us
    • Facebook
    • LinkedIn
    • Twitter
    • RSS

    Our Mission

    Tire Business is an award-winning publication dedicated to providing the latest news, data and insights into the tire and automotive service industries.

    tb-logo
    Reader Services
    • Contact Us
    • About Us
    • Site Map
    • Industry Sites
    • Order Reprints
    • Customer Service: 877-320-1716
    Partner Sites
    • Rubber & Plastics News
    • European Rubber Journal
    • Automotive News
    • Plastics News
    • Plastics News China
    • Urethanes Technology
    RESOURCES
    • Advertise
    • Privacy Policy
    • Privacy Request
    • Terms of Service
    • Media Guide
    • Editorial Calendar
    • Classified Rates
    • Digital Edition
    • Careers
    • Ad Choices Ad Choices
    Copyright © 1996-2021. Crain Communications, Inc. All Rights Reserved.
    • News
      • OPINION
      • CORONAVIRUS
      • AUTO INDUSTRY
      • BUSINESS/FINANCIAL
      • COMMERCIAL TIRE
      • FACTORY FIXES
      • GOVERNMENT & LAW
      • INTERNATIONAL
      • MOTOR SPORTS
      • NEW PRODUCTS
      • RETAIL TIRES
      • SERVICE ZONE
      • SEMA/AAPEX
      • SMALL BUSINESS
      • TIRE MAKERS
      • SPONSORED CONTENT
    • SHOP FLOOR
      • BALANCING
      • DEMOUNTING
      • SAFETY
      • TIRE REPAIR
      • TPMS
      • TRAINING
      • VEHICLE LIFTING
      • WHEEL TORQUE
    • Multimedia
      • VIDEOS
      • PHOTOS
      • PODCASTS
    • Events
      • ASK THE EXPERT
      • LIVESTREAMS
      • WEBINARS
      • SEMA LIVESTREAMS
    • Data
      • DATA STORE
    • Resources
      • DIRECTORY
      • CLASSIFIEDS
    • ADVERTISE
    • DIGITAL EDITION
    • Awards
      • Tire Dealer Humanitarian Award