Are manufacturers' pricing policies harmful?By Paul Hyatt
Are tire manufacturers' pricing policies hurting the U.S. economy?
During the 2012 presidential campaign, candidates Mitt Romney and Barack Obama both declared in their speeches that they would put America back to work and increase manufacturing jobs in the U.S.
How will that be possible? With the practice of “country” or area pricing, retailers are buying elsewhere at more competitive pricing.
Asia and India are only too eager to offer their products at prices based upon purchased units rather than locations, and take advantage of these short-sighted policies.
Consider the following manufacturers' corporate policies. Notwithstanding duties, a container of tires coming from Japan or Atlanta is priced differently in New Brunswick or Ontario—higher by 15 to 25 percent than in the U.S., and different again whether it lands in far away Vancouver or New York—and the Canadian dollar—in late December—was at a higher value than the U.S. dollar.
Consider the fact that tires made in the U.S. are priced differently for the same unit quantity in areas of similar population within the States—even with shipping costs removed from the equation.
Consider the fact that tires made in Canada, then shipped to points in the States, can be purchased by Canadian dealers from a U.S. dealer at a lesser cost than they can in Canada.
The manufacturers attempted to suppress the gray market activity with voiding out-of-country warranty claims and registering and checking serial numbers at point of delivery. In trying to defend this “country pricing” policy with these tactics, they not only helped the downward slide of their North American workforce but turned their backs on the very entrepreneurship that made America great.
Fortunately, Canadian and American tire dealers faced this challenge, as they usually do with government and manufacturers' detrimental policies, by finding other methods of survival, often taking advantage of loopholes and finding friendlier and more reasonable sources of supply.
Not too many years ago there were only a few major tire manufacturers. Today there are many spawned by the ineffectiveness of corporate management to respond to changing markets and their inadequacies of pricing policies.
I have been in the tire business for 58 years as a tire buster, retreader and an owner and have seen many changes over those years—some good, some bad. It still amazes me that manufacturers continue to ignore the dynamics of today's international marketplace and continue their policies of price disparity and country pricing.
Some of these international companies are indeed proposing new plants with robotic manufacturing in the U.S. to take advantage of the huge marketplace that is present in North America.
As we now approach the so-called “financial cliff” in the U.S., will manufacturers focus on ways to sell North American-made tire products within North America without their hurtful policies of country pricing?
As there is no disparity with shipping costs or handling between the two countries, with similar labor costs and notwithstanding duties if any, I wonder why country pricing continues to exist—hurting both the North American manufacturing plants and their diminishing workforce.
There is no area disparity when it comes to retail customers who price shop online—and purchase tires from other areas and countries where the price is better.
Will this practice of hurting the U.S. economy continue because they are oblivious to the harm they create?
Will tire manufacturers continue to foster the practice of encouraging gray market activities and expanding global shopping among successful dealers and consumers in the global marketplace?
Will price disparity continue because it fits their marketing scheme?
I guess President Obama has his work cut out for him!
Paul Hyatt is the former owner of Superior Tire & Auto Inc. in Scarborough, Ontario. After running the company for about 30 years, last year he sold the dealership/franchisor to two partners who were Superior's first franchisees. He also is a past president of the Tire Dealers Association of Canada, the Ontario Tire Dealers Association and the Tire Industry Association. Mr. Hyatt can be reached at email@example.com.
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