Goodyear is bullish on the prospects for its commercial tire business in 2005 and is forecasting at least another year of strong demand for original equipment, replacement and retreaded truck tires.
Currently, the commercial tire industry is experiencing a boom cycle, Jon Rich, president of Goodyear's North American Tire unit, said in a speech April 22 at the Tire Industry Association's World Tire Expo in Louisville.
While this has created some problems such as product shortages, ``it sure feels a lot better than where we were back in 2003,'' he said.
Back then the industry was just coming out of a two-and-a-half year decline in truck tire sales created by an economic recession and new regulations on diesel engines implemented in 1999.
Today, by contrast, demand for freight is exceeding capacity, and new regulations on the hours truck drivers can spend behind the wheel have increased the demand for new trucks. Companies also are buying vehicles in advance of the upcoming 2007 diesel engine emission standards.
``All of this has resulted in a more than 50-percent increase in OE truck tires delivered in 2004,'' Mr. Rich said. ``And while the replacement truck tire business only increased about 3 percent last year, as these new trucks hit the road it will certainly lead to increased business in replacement tires and retreads in the coming months.''
While prospects look good for 2005, Mr. Rich cited issues that could impact trucking and the freight industry near term.
One concern continues to be soaring fuel prices. ``Fuel costs will impact the small independent truckers more than the larger fleets, which have the leverage to pass surcharges through,'' he said.
Those rising fuel prices as well as other factors also may lead to the continuation of the trend towards consolidation in the trucking industry.
An economic slowdown also could impact trucking in the short term.
``There already seems to be such a slowdown with the auto makers in Detroit and their Tier 1 and 2 suppliers,'' he said. ``Shippers of these goods already are seeing a softness, just as we have seen a softness in tire demand from OE auto makers.''
Goodyear's success in the commercial tire business depends on three areas, Mr. Rich said:
* Increasing product supply;
* Developing a service-focused business model; and
* Introducing innovative new products that will drive sales and profits.
To improve product supply, Goodyear is adding capacity and enhancing productivity in its domestic truck tire plants, he said, and increasing capacity in Latin America for tires destined for North America. The company also is beginning to see the first successes of its third-party outsourcing arrangements in Asia.
Service also is important in the truck business, Mr. Rich said. ``More and more trucking fleets and independent truckers are looking for more than just a tire purchase, they want a service provider to manage their overall tire and wheel needs.
``The vision in our truck business is to do more than just manufacture tires, it's to create business solutions that are measurable, repeatable and sustainable.... That means working with our end-user customers to manage the product life cycle, from OE to replacement to retreads and delivering service and value along the way.''
Goodyear's recent agreement to take over the operation of eight Pilot Truck Care Tire Centers in five states ``is an important step in building the infrastructure we need to support our service business strategy,'' he said.
Goodyear aims to expand this program to more such centers as Pilot adds truck tire centers to its 271 locations in more than 40 states.
As for new and innovative products, they will be the lifeblood of the new Goodyear, he said.
Commenting on the new rules governing tire pressure monitoring systems, Mr. Rich said the devices should provide drivers with accurate information about the performance of their tires.
But he cited the latest ruling by the National Highway Traffic Safety Administration, which allows tires to fall 25 percent below their recommended placard inflation pressures without illuminating and without taking vehicle load or speed into account.
``If the current ruling is allowed to stand as is, we believe there is a high likelihood that drivers will experience tire failures without the warning device ever being activated,'' he said. ``One can only imagine the plethora of lawsuits involving auto makers, tire makers and tire installers.''
He urged TIA and the Rubber Manufacturers Association to work together to find a better solution.
Mr. Rich also addressed TIA's efforts to create a checkoff program to raise funds for programs benefiting the tire industry.
Goodyear agrees with TIA that increasing public awareness about the importance of tire performance and maintenance is a good thing, he said.
But a lot of questions remain to be answered, such as: ``How do we create this awareness? Who pays for it? How is it paid for? And whom does it benefit.
``These are complex questions that require careful study, and we encourage such studies,'' he said.