AKRON (Dec. 22, 2009) — The nation's financial meltdown and the rollercoaster of fuel prices overshadowed most other big headlines this year, although the direct impact of the financial crisis on North American tire dealers is just beginning to take hold.
Even as the economy started slowing over the summer in the face of record oil and gas prices, few were prepared for the deep and substantial impact of the financial crisis that gripped Wall Street and the nation's capital in late October.
The full extent of the financial crisis has yet to unfold, but one tangible aspect is tire shipments, which will be down 20 million units this year from 2007 and continue to drop next year, according to the Rubber Manufacturers Association (RMA).
Replacement market shipments fared better than those for original equipment customers, the RMA said, with passenger tires down “only” 2.7 percent vs. the industry's overall decline of 6 percent.
The RMA said it expects no growth in this segment next year—the most optimistic of the six categories tracked—due to the soft economic conditions.
In response, most of the nation's tire makers trimmed output during the second half of the year, scaling back production and furloughing employees for weeks at a time in an attempt to balance inventories with demand.
Other top stories included:
* The industry again was plagued by the recall of a Chinese-made product, this time involving tire valves.
In June, Johnstown, Ohio-based Tech International Inc. began a voluntary recall of 6 million TR413 snap-in tire valve stems made by Chinese firm Shanghai Baolong Industries Co. Ltd. between July and November 2006.
The rubber portion of the valve stems, Tech International said, may crack and allow air loss, leading to tire failure. The company promised to replace not only all recalled valve stems free of charge but all tires that showed damage from having run underinflated due to the valve stem cracking.
More recently, in early December, Dill Air Controls Products initiated a voluntary recall of “Dill ACP” brand automobile tire stem valves sold in the U.S. between November 2006 and July 2007 (See story on page 3).
The snap-in rubber valve stems, manufactured by Topseal (Shanghai) Auto-Parts Co. Ltd., a subsidiary of Shanghai Baolong, and imported and distributed by Dill, may lack the required additive to protect the rubber against deterioration from ozone exposure, Dill said.
* The U.S. Commerce Department made a final ruling in August to confirm import duties on certain Chinese OTR tires. The import dumping case was initiated by a petition from Titan International Inc., backed by the United Steelworkers (USW) union.
The duties range from 4 percent to 210 percent. The category of tires targeted—which excludes tires for aircraft, all-terrain vehicles, lawn-and-garden-type vehicles or tires greater than 39 inches in rim diameter for mining and construction equip¬ment—represented imports of nearly 15 million units in 2006, valued at almost $340 million.
Importers of the affected tires predicted consumers would end up paying more for their tires—if they could even find the types and sizes covered by the ruling.
* On the manufacturers' side of the ledger, Continental A.G.'s acquisition by fellow German auto parts supplier Schaeffler Group topped the list of news items.
That deal, parts of which are still unfolding, will create a vehicle supply behemoth with about $44 billion in annual sales. To appease opposition from Conti shareholders, Schaeffler agreed to remain a minority owner for up to four years.
Conti subsequently grouped together its consumer and commercial tire units with its ContiTech engineered rubber products business into a Rubber Group that some speculated was a prelude to its being spun off eventually.
* South Korea's Kumho Tire Co. Ltd. grabbed headlines in February by selecting Macon, Ga., as the site for its $165 million U.S. tire plant. Ground was broken in May, but recently the company acknowledged it has slowed work on the project in light of falling demand in North America.
* Titan International invested $30 million to add capacity for 57- and 63-inch radial OTR tires at the Bryan, Ohio, plant it bought from Continental Tire North America Inc. in 2006.
* Cooper Tire & Rubber Co., faced with falling North American demand and lower market share, will close its non-union Albany, Ga., tire plant next year and has renegotiated labor contracts at its plants in Texarkana, Ark., and Findlay, Ohio.
Concurrently, Cooper committed more than $30 million to establish a joint venture with Mexican tire maker CorporaciÃ³n de Occidente, with which it also has an off-take manufacturing agreement.
Among tire dealerships, there was a handful of major deals, including:
* Mavis Tire Supply's recent purchase of Cole Muffler Inc. and its 47 auto service locations in New York and Pennsylvania;
* Tire Guys Inc./Tire-Rama's acquisition in September of Alton's Tire, creating a network of 45 retail stores throughout Idaho, Montana, Washington and Wyoming;
* The creation of Tredroc Tire—with 21 commercial outlets and six retread plants in four Great Lakes states—out of the merger of Antioch Tire Inc. and Chicago Bandag Tire; and
* Bob and Juanita Purcell's re-acquiring Purcell Tire & Rubber Co. from their employees and adding D&D Tire Inc.—a Fernley, Nev.-based dealership with 10 service centers throughout Nevada and southern Idaho—to its growing network of service outlets.
* In Canada the bankruptcy and subsequent dismantling of Tirecraft Group topped the 2008 headlines. Tirecraft founder David Cosco and a cadre of ex-Tirecraft execs banded together and formed Integra Tire to try and recapture the spirit of Tirecraft. As of late November they had signed nearly 50 former Tirecraft store owners to the new group.
* On the wholesale front, Combined Locks, Wis.-based U.S. Oil Co. Inc. combined its U.S. Tire & Exhaust (USTE) tires and automotive parts distributorship with three acquisitions to create U.S. AutoForce, a wholesale distribution entity serving car dealers and independent auto servicers in 14 states stretching from Lake Michigan to the Rocky Mountains.
The new division combined the assets of USTE with those of PAM Oil Inc. of Sioux Falls, S.D., the wholesale assets of Team Schierl Cos. in Stevens Point, Wis., and T-K Distributors of Salt Lake City. Sales this year for the division were expected to approach $300 million.