The U.S. economy looks weak and may be headed for a recession, auto makers are anticipating the fewest vehicle sales in years and more and more Fortune 500 companies are reporting sinking sales and profits.
It's shaping up to be a good year for independent tire dealers and distributors.
Traditionally, the replacement tire market does well in tough economic times, as customers hold off buying expensive new vehicles and keep their older vehicles longer. That means fitting these older cars and light trucks with new tires and getting needed service work done to keep them running longer.
This plays right into the strength of independent tire dealerships and independent repair shops.
Despite all the doom and gloom, the Rubber Manufacturers Association (RMA) anticipates growth in all three major U.S. tire categories in 2008, based on increased vehicle registrations and a rebound in industrial activity.
Replacement passenger tire shipments are expected to grow 2.5 percent or about 5 million units, light truck tire shipments should rise 2.9 percent, or 1 million units, while those for medium truck tires also should experience a rebound in 2008, the RMA said.
Still, tire dealers will have their share of challenges this year. Those will include dealing with poor fill rates as tire manufacturers and distributors struggle with SKU proliferation and tire shortages due to reduced domestic production capability and the shifting of supply to other parts of the world as a result of the shrinking value of the U.S. dollar.
For some tire makers, fill rates have dipped to as low as 50 percent, making it challenging for tire dealers and distributors to serve their customers effectively.
Dealers also likely will find many customers having less money to spend as a result of the credit crunch and rising fuel prices.
But even oil at more than $100 a barrel may have a silver lining.
High gas prices provide a great example to motorists about the value of maintaining their vehicles, said Kathleen Schmatz, president of the Automotive Aftermarket Industry Association. But they also may cause vehicle owners to drive less, reducing demand for new tires and service, she noted.
At a recent meeting in California, TBC Corp. wholesale division executive Gary Paulson urged tire dealers and distributors to ``tune out'' all the negatives concerning 2008.
``Recession or no recession, $3 per gallon gas, or $4 per gallon gas, credit crunch or no credit crunch, Americans are going to continue to get up each morning and drive their car or light truck to work, to the grocery store, to the doctor's office and to those weekend soccer games,'' he said.
That's a positive way to look at what could be a tough year for the economy but hopefully a profitable one for independent dealers.