Prognosticating a new year is always a bit tricky, but if a few tire distributors are correct, then 2005 should shape up to be a good business year overall for the tire industry.
``Right now, from everything we see and hear, it looks to be a great year,'' said Matt Edmonds, vice president of marketing for online/mail order marketer Tire Rack in South Bend, Ind. ``We don't see anything to lead us to believe that it will be any different than it is now.''
Mr. Edmonds said that tires are a commodity that always will need to be replaced, whether or not consumers like it. Just as in 2004 when the tire manufacturers began raising prices, so also in 2005 the industry will need to convince consumers of the value of tires in order to make tire price hikes stick, he said.
``It's going to be a challenge for everyone to instill what that value is,'' Mr. Edmonds said, noting that tire price increases are benefiting everyone.
Treadways Corp. CEO Dan Wire told Tire Business that he also sees 2005 having much the same business conditions as 2004-with a continuing round of tire price increases of 5 percent or more-and he said he believes those hikes will happen during the first quarter.
``I see 2005 as much the same as 2004,'' Mr. Wire said. ``I think it will be a good, solid year, but not spectacular for the industry.''
Mr. Wire said he feels upbeat about the economy's prospects despite high oil prices. Still, he said that if oil prices fall into the $40-per-barrel range, that alone would give consumers a mental boost of confidence.
``I always look at (oil prices) as a shock factor than a real, long-term impact,'' he explained. ``People are still driving their cars. You're not going to take the car away from the American public. You're not going to cut down their miles driven for any length of time. Regardless of where the gas prices remain, the business will start picking back up again.''
Ron Thrasher, vice president of Burggraf Tire Service in Quapaw, Okla., echoed Mr. Wire's sentiments about the economy and oil prices but said his biggest concern is supply. Cooper Tire & Rubber Co.-one of Burggraf Tire's primary suppliers-has fallen behind in its passenger and light truck tire fill rates, he said. Fill rates in those segments have been better from TBC Corp. and Goodyear in its Kelly brand, he added, but medium truck and agricultural tire supply is ``just miserable right now.''
``I just heard rumors, I don't have any specifics,'' Mr. Thrasher said of why fill rates are poor. ``Some of the truck tires are going over to Iraq to support the war effort. Some sizes are in big demand over there that we're having a hard time getting. On some of your loader tires, they're going to the war effort in Iraq.''
Burggraf Tire has been told by its suppliers that the fill rate situation should improve, he said, but that truck tire supply may still be tight until 2006.
``I'm more worried about supply than I am about price increases because everybody will end up going up on price. But if you don't have tires to sell, you're just dead in the water,'' Mr. Thrasher added.
Mr. Wire agreed that tight supply is a major concern. He noted that a few causes of the problem were manufacturing complexities resulting from SKU proliferation and lower-than-expected Chinese imports.
``(China's) economy is growing, and they're using those products internally,'' Mr. Wire said, adding that although everyone anticipated a lot of imports to the U.S., ``that's not happening.'' Soaring ocean freight costs have impacted substantially the cost per tire, and rising raw materials have a significant impact on Chinese domestic tire prices, he explained.
As a result of these factors, Mr. Wire said he's not worried about low-cost imports cutting into Treadways' margins in 2005.
``We've been shocked at how much Chinese products have risen in price,'' he said. ``I'm not at all concerned about the impact of low-cost Chinese products because, as anyone who's doing business over there will tell you, it's getting harder and harder to find products, and their costs have elevated.
``On the positive side,...their quality is pretty good. The Chinese are no different than any other manufacturer. They don't want to sell low-price tires. They want to see some of the higher-priced action. They're getting more into performance and truck tires and so forth.''
Regarding size proliferation, Mr. Wire acknowledged that it's an ongoing problem that's grown worse but has proved advantageous to wholesalers. He said tire retailers can't stock all the tires they need and are looking to local wholesalers to provide all these tire sizes for them.
Larry Lesieur, president of Nashua, N.H.-based Maynard & Lesieur Inc., told Tire Business that size proliferation provides opportunities for his company to market itself as the professional place to go for ultra-high performance (UHP) tires.
``You're not going to bring your fancy BMW to a wholesale club to have four tires put on,'' he noted. ``The other good thing about (UHP) tires is they don't last as long.''
Mr. Lesieur said his main concerns in 2005 are the Transportation Recall Enhancement, Accountability and Documentation (TREAD) Act and potential tire-aging legislation.
``It just seems the government is sticking its nose more and more into our business, and we've got enough problems,'' he said. ``We don't need the government getting that involved.''