Perhaps Jerry Bauer of Bauer Built Inc. in Durand, Wis., summed up the current shortage of truck tires best:
``CADFWOH-Create A Demand For What's On Hand.''
Dealers across the U.S. and Canada are pretty much in agreement: Complaint No. 1 these days is getting enough tires to sell.
The reason is quite simple: Near record new vehicle sales are siphoning off new tires, and a resurging economy is pushing shipping to record levels as well, driving up demand for replacement tires.
Sales of Class 8 trucks surged 43 percent last year to 203,197 units, the fourth highest volume ever, according to industry data. Growth estimates for 2005 range up to 20 percent and perhaps 10 percent again in 2006, according to a Morgan Stanley Equity Research report.
Reflecting this demand, shipments of medium truck tires last year by U.S. manufacturers to original equipment customers surged 38 percent ahead of 2003, an increase of 1.58 million units. By contrast, tire shipments to the aftermarket were up 5 percent, or 772,000 units, according to Rubber Manufacturers Association (RMA) statistics.
The trend is continuing into 2005. In January OE shipments were up 26.8 percent vs. 10.7 percent for replacement sales, RMA data show.
Trucking tonnage has been on the rise for more than a year, according to the American Trucking Associations (ATA), which tracks activity through its monthly shipping index.
Freight tonnage shipped by truck slipped a bit in February from January, but January was considered a boom month at 5 percent ahead of December, according to the ATA's index, which showed steady growth throughout 2004.
``January proved to be a strong month for truck tonnage,'' said ATA Chief Economist Bob Costello. ``Growing manufacturing production continues to be the driver of truck freight. And we have seen big gains in heavy commodity movements like steel, which is another reason why tonnage is growing at a solid pace.''
ATA calculates the tonnage index based on surveys from its membership. The index compares activity with a 1993 base year and is derived by sampling companies in all types of freight-hauling operations.
Who's benefiting from the surging demand?
Imports continue to increase their share of the marketplace; imports rose nearly 14 percent last year while U.S. production was up 3.6 percent. Imported tires now account for nearly 60 percent of the U.S. medium truck tire replacement market.
So will the supply situation ease any in the coming months? Several companies are making moves to expand capacity or otherwise increase supply.
Goodyear, for one, is taking steps to enhance its supply lines by expanding capacity at its Buffalo, N.Y., plant and improving productivity at its Danville, Va., Topeka, Kan., and Buffalo factories. Goodyear did not disclose specifics about how much additional capacity these efforts would yield.
The Akron tire maker also intends to move production of its lower-priced Steelmark line off-shore, thereby freeing up capacity domestically for its Goodyear, Dunlop and Kelly flag brands.
As for the OE/replacement market dilemma, Goodyear said it would base OE sales ``on those strategic accounts that provide our dealers with the best opportunity to sell replacement tires.''
Continental A.G. recently disclosed it intends to source up to 100,000 medium truck radials this year from Malaysia to supplement its domestic production at plants in Mount Vernon, Ill. Longer term, Conti plans to build a radial truck tire plant in Brazil that primarily will supply North America.
Cooper Tire & Rubber Co. is now sourcing its radial medium truck tires from China, having moved the capacity at its Albany, Ga., plant to Hangzhou Zhongce Rubber Co. Ltd. in Hangzhou, China. Cooper will source 250,000 to 350,000 radial truck tires annually in its Cooper and Mastercraft brands.
Michelin North America Inc. has expanded capacity at its Spartanburg, S.C., plant for its wide-base X One truck radials, for which the company is forecasting significant increases in demand.
How are dealers coping with the situation? Many dealers who responded to Tire Business' annual commercial and retreading survey said they've increased their inventory of tires on hand-when tires were available. Others said they've taken on new lines-including Chinese or other off-shore offerings, at least temporarily-to fill the voids.
Those dealers with retreading operations have stepped up retread production to keep customers satisfied, which in turn is leading to a casing shortage.
Individually, Kal Tire of Vernon, British Columbia, claimed the title of North America's largest commercial dealership, chalking up $300 million in commercial-related sales last year.
Kal operates 165 outlets across Canada that have commercial servicing capabilities; it also operates 11 Bandag retread plants, whose output ranks Kal ninth among the continent's largest truck tire retreaders. Kal supplanted Les Schwab Tire Centers Inc. as No. 1 among commercial dealerships, growing about 45 percent over 2003.
Les Schwab is a solid No. 2 with $248.5 million in commercial sales, comfortably ahead of Best One Tire & Fleet Service, which debuts at No. 3.
Best One-the common market identification for more than two dozen independent dealerships throughout 10 central and southeast states which have Monroe, Ind.-based Paul Zurcher as common owner-reported $185 million in commercial sales last year. The group's holdings include 15 retread plants formerly known collectively as Premier Bandag.
Also debuting in Tire Business' annual ranking is Southern Tire Mart of Columbia, Miss., which took over 14 outlets and six retread plants in Mississippi and Louisiana in 2003 from Bandag's Tire Distribution Systems (TDS) subsidiary. Based on these units' sales under Bandag/TDS, Southern Tire Mart is rated at $65 million in sales.
The firm recently expanded its reach in Texas, taking over 10 more outlets and five more retread plants from TDS in November. These operations are expected to add about $20 million in annual sales, based on per-store sales data from Bandag.
All 50 companies ranked this year have at least one retread plant. Bandag is the retread choice for 31 dealerships, while Michelin Retread Technologies Inc. (MRTI) and Goodyear plants have seven dealerships each.
Michelin is the No. 1 brand, offered by 38 of the 50 dealerships ranked this year, ahead of Bridgestone (36), Firestone (32), Yokohama (31), General (28), Continental (28) and Goodyear (22).
On the retreading side of the ledger, the tire manufacturer retreading subsidiaries again grabbed the top spots.
Goodyear's Wingfoot Commercial Tire Systems L.L.C. retained the top spot in all three categories tracked by Tire Business-medium truck, light truck and off-the-road-with Goodyear Canada Inc. ranking 32nd among truck tire retreaders and eighth in OTR retreads.
Michelin's Tire Centers L.L.C. (TCI) unit and Bridgestone/Firestone's GCR Truck Tire business ranked second and third, while Bandag's TDS unit slipped to sixth from third after it sold or closed six retread plants and production fell by more than 25 percent. The sale of six more retread plants in late 2004 likely will reduce TDS's tread rubber consumption another 2 million pounds or more in 2005.
Best One Group-formerly Premier Bandag-and Les Schwab are rated the largest independent retreaders, with 12.6 million and 12.06 million pounds, respectively, of tread rubber consumed.
Reflecting the healthy demand for retreads, only four of the top 50 truck tire retreaders showed drops in production last year vs. 2003. Debuting in the rankings this year are Southern Tire Mart (19th) and Callaghan Tire of Bradenton, Fla. (45th).
The average price of a retread (295/75R22.5) was $112.55 with customer's casing and $182.85 without, according to data from 35 dealers who provided information. The range in prices given was $87 to $140 for the former and $122 to $225 for the latter.
Individually, commercial dealers and retreaders were very active in the past 12 months.
* Schoettler Tire Service Inc. consolidated operations down to five outlets, closing four ``due to high insurance costs.''
* Service Tire Truck Centers Inc. opened one new location-expanding the network to 22 outlets-and relocated an existing one to a larger facility.
* Belle Tire Distributors Inc., Allen Park, Mich., opened a truck tire center in Bay City, Mich., and expanded its market coverage in the Cleveland area.
* Best One Tire & Service expanded its reach into South Carolina.
* Bob Sumerel Tire Co. added truck tire centers in Lexington and Carrollton, Ky., expanding the commercial network to 12 dedicated commercial and five commercial/retail outlets.
* Piedmont Truck Tires Inc., Greensboro, N.C., added an outlet in High Point, N.C.-its seventh-and converted its retreading plant in Graham, N.C., to Michelin's MRTI system.
* Sullivan Tire Co. Inc. intends to expand its network of outlets, especially into southern Maine, to meet expanding customer demands.
The firm has 10 commercial and two commercial/retail outlets in its coverage area. Sullivan also is growing in the waste hauler business with wide-base single tires.
* Snider Tire opened a retread plant in Asheville, N.C., its ninth Bandag facility. Snider qualifies as the eighth-largest truck tire retreader in North America, with 1,200 units of daily capacity.
* Purcell Tire & Rubber Co. parted ways with Bandag, closing Bandag plants in Paducah, Ky., and Las Vegas, and consolidating the capacity at Goodyear system plants in Potosi, Mo., and Phoenix.
* Provincial Bandag Tire Ltd., Fredericton, New Brunswick, is planning to expand its OTR retreading capacity beyond the current eight tires a day.