Thomas Dattilo, chairman, CEO and president of Cooper Tire & Rubber Co., is optimistic about the future of the U.S. tire industry and the nation's economy, despite the industry's regulatory burden and the boom in imports.
There's no reason why others shouldn't be just as optimistic, Mr. Dattilo told attendees of the Commercial Tire Executive Summit April 20 at the Tire Industry Association (TIA) World Tire Expo in Louisville.
``It seems obvious to me that if you say the economy is bad, and if the media say the economy is bad, people start to believe the message and cut back on their spending,'' he said. ``Quite often the outcome is determined by your expectations. It's important that we be realistic in our expectations, but it certainly doesn't hurt to expect a positive outcome.''
Last year industry growth was less than expected, and light truck tire shipments are down 1.5 percent in the first quarter of 2005, Mr. Dattilo noted. Passenger tire shipments increased 2.6 percent in the quarter, slightly higher than expected, and medium truck tires continue strong with growth of nearly 6 percent, he said.
Imports have skyrocketed in the last decade or so, going from just under 25 percent of all auto replacement tires in the U.S. in 1991 to nearly 50 percent in 2004, he said. Import growth in light truck replacement tires has been even greater, to 44 percent of the U.S. market in 2004 from 14.4 percent in 1991.
Medium truck tire import growth has been less, but began from a more dominant position, Mr. Dattilo noted. From 42 percent in 2001, imported medium truck tires held 47 percent of the U.S. market in 2004. Five countries-Japan, China, Canada, South Korea and Germany-account for three-fourths of radial medium truck tire imports, he added.
``When you talk about change driving our business, this is one of the biggest changes in our industry,'' he said.
Increasing government burdens, meanwhile, are hampering U.S. tire makers, according to Mr. Dattilo. The U.S. taxes corporate incomes at a higher rate than its trading partners, discouraging foreign investment in the U.S. and encouraging migration of U.S. manufacturing facilities to lower-tax countries, he said.
Outsourcing of jobs has virtually become a competitive necessity, according to Mr. Dattilo. Presidential candidate Sen. John Kerry ``said we were Benedict Arnolds if we outsourced jobs,'' he said. ``We have outsourced jobs, but we've also added hundreds of jobs here in this country.''
Tariffs do more harm than good, Mr. Dattilo said, particularly in the case of steel, which caused steel prices to go through the roof. Meanwhile, the new corporate financial reporting requirements under the Sarbanes-Oxley Act are equivalent to a 12-percent excise tax on manufacturing, costing Cooper alone about $3 million and 32,000 man-hours in 2004, he added.
Also, frivolous lawsuits add 3.2 percent to the cost disadvantage U.S. manufacturers suffer and pollution abatement another 3.5 percent, Mr. Dattilo said. ``I support pollution abatement, of course, but not blind adherence to histrionic excess,'' he said.
Among issues specific to the tire industry, tire pressure monitoring systems (TPMS) and tire aging are of crucial importance, Mr. Dattilo said.
Cooper shares the same concerns as the rest of the tire industry regarding the National Highway Traffic Safety Administration's TPMS final rule, he said. ``We believe this regulation will give motorists a false sense of security.
``A lot of studies show you suffer permanent tire damage at much less than 25 percent below the vehicle manufacturer's recommended pressure. It's like having your gas gauge not function till you've run out of gas.''
Mr. Dattilo also noted the fears that auto makers will use the TPMS technology to leverage motorists into buying replacement tires at their dealerships, instead of at independent tire dealerships. He praised the efforts of TIA to create a comprehensive training module to assist independent dealers with TPMS issues.
He noted that tire aging issues are on the radar screens of legislators and trial lawyers, despite the total lack of exact science as to when a tire becomes unserviceable.
``This issue has huge implications for people who manage millions of tires in inventory,'' he said. ``When consumers begin to make tire purchases based on the `born on date' instead of matching their driving needs with the right tire, we have a problem.''
While sizing in the commercial truck tire market is relatively stable, Mr. Dattilo said, ultra-wide or ``super single'' tires are among the biggest innovations the market has seen in recent years. It has yet to be seen whether super singles are the trend of the future or a niche product, he said. They allow fleets to increase payloads by reducing weight, but they have service issues and may not take readily to retreading.
He noted that retreading is a shrinking business-currently there are about 850 retread shops in the U.S., compared with 3,300 in 1983-but that could well change.
``As environmental issues continue to percolate, the benefits of retreading ought to be heard loud and clear,'' he said. ``If you're not in retreading now, I would give it solid consideration. You could ask your current tire supplier if they can help you set up a retread shop.''
The truck tire industry is cyclical in nature, Mr. Dattilo said, and the commercial tire dealerships that survive will be those that have solid programs in customer service, particularly data management services they can offer to fleet customers.
``If you're not providing your fleet customers with service that knocks their socks off, you should be,'' he said.
While there's no magic bullet for success in the commercial truck tire industry, Mr. Dattilo said, the most successful organizations are likely to be lean, process-oriented operations that are non-bureaucratic, decentralized and dedicated to continuous improvement.
``The business world is fragile, and you must have a system for success,'' he said in closing. ``Work that system and expect success.''