The tire scene
While it was an eventful year for trucking, it was no less fascinating in the tire industry.
Due to the boom in the trucking industry, it is expected that replacement medium truck tire shipments will grow 3.2 percent to 16 million units in 2004. Original equipment truck tire demand is pushing shipments up by nearly a third this year to 5.5 million units. (If you're wondering why your tires are backordered from your tire supplier, the answer lies here.) The retread market should come in around 16 million units.
Rising raw material costs continued to plague the industry and greatly impacted tire company bottom lines. While the price of natural rubber leveled off during the summer, the costs of steel and petroleum-based products such as synthetic rubber, carbon black and chemicals as well as most other commodities continued to escalate throughout the year.
Manufacturers battled these financial foes by finding ways to operate more efficiently, cutting other costs and through additional tire price increases.
Almost all tire companies increased prices at the beginning of the year.
Many including Bridgestone/Firestone, Cooper Tire & Rubber Co., Kumho Tire U.S.A., Hankook Tire America Corp., Pirelli Tire North America Inc. and Michelin North America Inc.'s Michelin Retread Technologies Inc. (MRTI) unit raised prices mid-year. Of late Continental Tire North America Inc., Yokohama Tire Corp., Pirelli and Hankook have announced end-of-year price increases as well. There probably will be more to come from the rest of the tire and rubber companies.
Many new things debuted at Bridgestone/Firestone in 2004. The most noteworthy was John Lampe's well-deserved retirement after serving as CEO for the previous three years and the passing of the torch to Mark Emkes, formerly chairman, CEO and president of Bridgestone/Firestone North American Tire L.L.C.
BFS's parent, Bridgestone Corp., also introduced several Bridgestone-brand radial truck tires this year: the R287 steer tire; the M726 EL drive tire that sports a 32/32 inch tread; and the R195F trailer tire. It also launched its Greatec wide-base radial truck tire in North America. This tire is Bridgestone's competition for Michelin's X-One wide base tire.
In 2004 Cooper Tire began importing medium truck radials produced for it by China's Hangzhou Zhongce Rubber Co. Cooper announced it hopes to source up to 350,000 truck radials a year from China and has plans to capitalize on that country's production capabilities as well as its growing tire market.
Goodyear had a really tough year in 2004. After many accounting troubles, the company finally reported its 2003 financials in May which included a loss of $802.1 million-though this was down from a $1.2 billion loss in 2002.
However, Akron-based Goodyear had some really welcome success this year, too. Its third quarter financials reported a profit for the company as well as for its North American Tire unit for the second consecutive quarter. While it still must be vigilant in operating its business, it can now tell critics who predicted its imminent bankruptcy last year to ``shove it.''
Michelin waged its war with the United Steel Workers of America (USWA). The union struck the tire maker's Kitchener, Ontario, plant for three weeks in August before ratifying a new two-year deal. In addition, 3,400 unionized BFGoodrich workers in the U.S. ratified a new master contract that provides sought-after job security for union members and cost cuts for Michelin.
MRTI expanded both its operations as well as its production capability in 2004. It added new franchisees Canadian Treads Corp. of Edmonton, Alberta, and Raben Tire Co. Inc. of Evansville, Ind.-both of which expanded their operations to include MRTI facilities. Strouhal Tire Inc. of Hungerford, Texas, and Piedmont Truck Tires Inc. of Greensboro, N.C., switched from Bandag Inc.'s process. So MRTI has nearly 30 franchisees in North America operating 50 plants using the Michelin system.
The company also announced in June that it was doubling capacity for ``Pre-Mold'' precured tread rubber at its Covington, Ga., tread rubber plant to meet increased demand. The expansion will include capacity for wide treads designed for Michelin's X-One wide base tire.
Bandag took a major hit this year when Yellow Roadway decided not to renew Roadway's outsourcing agreement that, since 1999, had put Bandag in control of all tire functions, from inventory to maintenance. Instead, Yellow Roadway expanded its relationship with Michelin to supply more than half of the trucking company's tires.
However, in an effort to carve out another piece of the truck tire industry, Bandag purchased 87.5 percent of Speedco Inc., a quick-service truck lubrication business with 33 locations, for $56 million. Bandag expanded Speedco to include tire sales of Goodyear, Michelin and Yokohama brands as well as Bandag retreads.
When the dust finally settled in a battle over which firm the U.S. Postal Service (USPS) would use as a retread supplier, Cooper's Oliver Rubber Co. subsidiary was awarded the 10-year contract to retread all the fleet's tires nationwide.
Oliver will meet its contract obligations by using its approximately 150-160 independent dealers across the U.S. using both mold-cure and precure technologies. The USPS purchases about 100,000 retreads annually but wants to increase that number significantly if possible.
Marangoni Tread North America Inc. continued to grow in the North American retread market. It signed two more franchisees in 2004: Brahler's Trucker's Supply Inc. in Jacksonville, Ill., and Tire Treads Inc. in Jackson, Tenn., bringing the number of Marangoni's North American franchise customers to 16.
To handle its growth in the market, the company opened a $10 million, 50,000-sq.-ft. tread rubber plant in Madison, Tenn., in April to manufacture its patented Ringtread spliceless precured tread rubber.
After three years in the red, Yokohama Tire Corp. reported it was back in the black. Higher truck and bus tire unit sales, as well as increased performance tire sales in addition to controlling costs were the keys to its success.
On the association front
TIA also made headlines this year. It sold its Louisville, Ky., office and training center and has taken its training program on the road rather than requiring dealers to send employees to Louisville.
However, this sale did end an era in the history of the former American Retreaders' Association and International Tire & Rubber Association, which used Louisville as their headquarters location.
To help with the training effort, TIA hired Jeff Faubion as its director of tire service. Mr. Faubion is based in Denver where he conducts instructor training courses for both the Automotive Tire Service and the Commercial Tire Service programs and coordinates the ``Truck Tire Training Tours'' that travel the U.S. for dealer training.
Kevin Rohlwing, TIA's senior vice president of education and technical services, moved to TIA's Maryland headquarters office from Louisville and now conducts instructor programs in Baltimore as well.
TIA and the Rubber Manufacturers Association (RMA) joined forces to advance a common policy agenda for the tire industry and work on issues of mutual concern-such as compliance with the Transportation Recall Enhancement, Accountability and Documentation (TREAD) Act, tire pressure monitoring system training and motor vehicle inspections.
The TREAD Act continued to dominate the scene in Washington from a tire industry standpoint. The hot issue this year was tire pressure monitoring systems (TPMS). As you may recall, in 2003 NHTSA was told by the Second Circuit Court in New York to rewrite its regulations on TPMS since the indirect monitors it allowed were deemed to not be effective.
So it rewrote its regulations for direct systems only. Under the proposed rule, new vehicles with a gross vehicle weight rating of 10,000 pounds or less must be capable of detecting any tire that is inflated 25 percent below the recommended pressure. Systems are required on at least half of each car maker's new models starting next September and will ramp up to 100 percent fitment by September 2007.
Replacement tires are exempted from the rule. TIA and RMA as well as Advocates for Highway and Auto Safety voiced their opinions that the 25 percent threshold is too great and tire pressure that low would be insufficient to bear the vehicle load and would not enhance safety. RMA and TIA instead called for a minimum reserve pressure requirement of the 25 percent threshold. They also believe exempting replacement tires is basically stupid since four times as many replacement tires are shipped every year than original equipment tires.
As a result of the battle over auto and light truck TPMS, work on writing regulations for commercial truck systems has been pushed back.
Wow! A lot of things happened in 2004. Most of them were good from a tire business standpoint but also created a lot of challenges for most of us.