Ag, construction mkt. trends challenge tire industry
ORLANDO, Fla. (Oct. 2, 2014) — As the farm and construction markets continue to grow and expand grudgingly after some difficult economic years, industry observers wonder what's next.
During a farm/construction tire panel at the recent 2014 International Tire Exhibition & Conference (ITEC) — Tire Dealers/Auto Service event in Orlando, experts touched on a number of pressing issues the tire industry faces.
Farm tire sizes on rise
One trend to note is that the size of farms continues to grow, necessitating equipment to carry bigger loads but still finish work in the same amount of time, according to Tom Rodgers, director of sales and marketing, Firestone Agricultural Tires.
Over the last 50 years, farming in North America has entered the modern era to a high level of precision — such as where and how seeds are placed and how the footprint of tractors impact crops.
As farmers continue to look to generate more productivity, they're relying more on equipment, tires and technology.
“(It) all plays into that future of agriculture,” Mr. Rodgers said, noting that farmers want to be able to carry bigger loads to help drive their bottom line and improve yields.
However, as farm size grows, “that window of opportunity to plant or to apply chemicals on the harvest to really optimize the yield does not change,” he said.
It still requires only a few weeks of planting in the spring and a couple of weeks to harvest in the fall.
“You miss that window, you're impacting your bottom line,” he told ITEC attendees.
“The increase of evolution is how we are getting there today.”
With increased efficiency comes larger tires. In 1975, the typical base tire size was 18.4-38, he said. While that size is still actively used in the market, farm tires in sizes up to 480/95R50 are growing in popularity, he said, though it can take a couple of people all day to change four of them on a tractor's rear axle.
Whereas in 1975 it took about five hours to execute a tire swap on the tractor, he said, in 1990 that went up to about eight hours as the sizes continued to grow. Now it can take up to 14 hours just to get a set of tires changed and mounted on one machine.
“We're behind the eight ball in terms of trying to keep up with the industry,” Mr. Rodgers said.
The challenge is how the tire industry can manage the continual size increases and help tire dealers sell to farmers.
IF and VF tires
While farm equipment is indeed getting bigger, there also are new technologies emerging in the agriculture tire segment, such as improved flexion (IF) and very high flexion (VF) tires that can help reduce soil compaction and improve fuel economy, according to the farm tire panelists.
IF tires are based on a technology that has been around for about 10 years, said James Crouch, Michelin North America Inc.'s North American segment-marketing manager. These tires allow farmers to carry roughly about 20-percent more per load while VF tires are able to handle about 40-percent more.
The general architecture of machines has not changed much throughout the years, except they are a little taller, Mr. Crouch said. Equipment manufacturers are coming to Michelin, asking for the ability to give farmers equipment that allows them to do more and be more productive in less time.
That's what IF and VF tires really allow users to do, he said.
“They allow you to increase the capacity and productivity of a piece of equipment, without forcing the manufacturer to make a dramatic change of the architecture of the machine.”
Looking over the past 100 years, IF and VF technologies are really the next step of the evolution of radial farm tires, Mr. Crouch added.
“It's not only for the European market anymore. It's for the U.S market; the Canadian market.”
Farm equipment manufacturers are asking increasingly for just IF or just VF tires, he said.
Something to keep in mind with IF and VF, Mr. Crouch explained, is that the tires have a large sidewall area that is able to flex—something to be aware of in terms of repairing them.
The size does not necessarily matter, he added, but the technology continues to change.
Low sidewall technology
The IF and VF technology is not the only emerging trend coming out in the agriculture market, said Scott Sloan, product engineering manager for Titan International Inc., which continues to work on its low sidewall (LSW) technology for agriculture and construction tires.
Mr. Sloan said Titan commissioned a study a couple of years ago to get a feel for what growers were looking for in regards to tires. Both smaller and larger groups were surveyed because each can be concerned about different issues. For instance, smaller farm operations tend to hold on to equipment longer than larger farm businesses that typically will run machines for a year and pay them off.
Both smaller and larger groups alike said power hop and road flow are big issues, Mr. Sloan said.
He noted that especially with larger farms, the farmers are “roading” equipment for about 60 miles at a time, “so comfort is a big deal.”
Rubber tracks also continue to make inroads on the traditional rubber-tire fitments, Mr. Sloan said. “There's a reason why people are pushing toward tracks,” he said: The comfort of the ride, along with the stability of the ride.
Another important factor to farmers is improved flotation.
“These guys are getting out earlier and earlier (in the season) and there's a very limited window they can work in,” Mr. Sloan said.
The flotation of rubber tracks — because of the large surface area — is an advantage to them. On the flip side, there are reasons why tracks might not be as beneficial to them, including a higher initial cost along with maintenance expenses.
However, the comfort of the ride and the improved floatation of tracks often outweigh these costs, Mr. Sloan said. This, he continued, is ultimately why Titan created its LSW technology.
“Since we make the wheels, we're able to make them any size we want,” he said.
Titan went to a 46-inch wheel from a 38-inch wheel but kept the outside diameter of the tire the same. This helps with the stability and dampens “road lope,” according to the company. Additionally, Mr. Sloan said the LSW technology helps with power hop because the reduced-height sidewall does not buckle but offers enhanced traction. This creates more efficient performance in the field, he added.
These are IF tires, Mr. Sloan said, so if a farmer is switching from a conventional tire to the LSW, “it's practically a wash” in terms of pricing.
Stubble problems continue
Panelists acknowledged that a continued agricultural problem for farmers is stubble, and tire dealers and manufacturers continue to face liability on stubble damage warranties.
As time progressed, there was a “substantially-higher planting of GMO crops,” said Neil Rayson, senior vice president sales and marketing at Mitas Tires N.A. Inc.
The durometer reading of a genetically modified organism (GMO) crop is higher than any tire compound companies make, he said.
“And if we try to make a compound to actually handle it, the heat buildup and the cracking would occur because the current compound just couldn't handle the hardness of the GMO crop.”
While farmers must deal with the stubble problem, tire dealers and equipment manufacturers face the liability — and what Mr. Rayson called the “fine print” — on stubble damage warranties.
“The average age of a farmer today is 60 years old,” he said. That means the farmer worked for 20 years without GMO crops and for the last 20 years with them.
When a tire maker offers warranties, it posts the criteria on its website, prints it out for dealers, etc., Mr. Rayson said, and expects everyone to read it cover to cover.
The dealer in turn, does not always read the material, he continued, but sells the warranty to a farmer, who demands coverage when damage occurs.
Everyone in the industry has to take some responsibility, Mr. Rayson said — especially since the process is perpetual. Sometimes a tire maker will make exceptions, he added, but sometimes it expects tire users to adhere to a warranty policy — but they don't make any friends that way.
“If we carry on doing this, it's never going to get solved,” Mr. Rayson said.
Fixing the industrywide problem would require action be taken across the board at one time, he said, because it cannot be done by only one tire company.
“I think that if manufacturers, as an industry, had one clear thought for stubble damage and we all signed up for it, it would be better for us, the dealers and the farmers,” Mr. Rayson said.
The solution also would entail providing information and education for the end consumer — the farmer, he added.
Trends in construction
Panelists also addressed the construction segment during the ITEC session.
Bruce Besancon, vice president of marketing for Alliance Tire Americas, told attendees: “You have to have a little bit of mud on your boots to know what's happening out there.”
Knowing what's going on in the global economy will help to understand ongoing trends in the construction business, he said.
Looking at the state of the market overall, there is a huge Asian market in growth mode.
“So what happens in growth mode? They need to use a lot more equipment,” he said.
Referencing truck tire usage, Mr. Besancon said usage in Asia is over three times greater than what is used in North America. “That's a huge impact” on the tire industry, he added.
In the earthmover segment, even though North America typically has one of the highest dollar volumes for construction markets in the world, there currently are not many big projects under way — just the opposite of Asia, where construction is booming, he said. Meanwhile, there is a slight decline in Europe but optimism is growing in South America.
While the past few years have trended negative, Mr. Besancon said GDP is trending upward at about 3 percent for the second half of 2014. Short-term interest rates remain low, which links into business spending and the housing market. If these rates remain low, he said it can trickle down into other segments.
“The housing sales drive a lot of the construction market,” Mr. Besancon said.
Not only construction, but all the infrastructure that goes around it is affected by housing, he said.
Although housing starts are up from what they were during the “Great Recession,” he said, they're not yet at the “magic mark” of 1 million new single-family homes per year—a statistic that hasn't been hit since 2006. The market is at about 850,000 starts now, he added, and has increased at a 20-percent pace from last year.
Another trend to look at is unemployment, Mr. Besancon noted, which has been “very sporadic” but is down to 6.1 percent from 10 percent.
A lot of this was driven by construction employment, he said.
Other trends to watch are consolidation in the construction industry, as well as the “green revolution” and compliance to safety requirements.
Solid tires vs. pneumatics
As the only wholesaler on the ITEC panel, Jimmie Hutto, commercial sales manager at K&M Tire Inc., presented a different perspective. He deals directly with customers who use tire products destined for the construction segment — and because of its growth, K&M has become more active in this market.
One of the debates in the segment is the difference in solid tires vs. pneumatics for the construction industry. “The big difference between solids and pneumatics is going to be application,” he said.
While K&M has never sold solids, it does do quite a bit of business in pneumatics. Carrying capacity is a factor in any decision about which tire is better for a particular application. Pneumatics are going to be rated for a higher carrying capacity, he said, but price also is going to be a big factor.
“You can have the greatest product that there is, but if we can't sell it consistently in our warehouses, it doesn't do us any good,” he said.
Aperture tires — which are a solid tire design with a cushion between the tread and the base — may be a potential solution.
Signs of hope
Ron Tatlock, manager of engineering and training for BKT Tires USA Inc., wrapped up the ITEC session by speaking about navigating the construction tire landscape.
“We're coming out of a very depressed market; we see some signs of growth,” which brings opportunities for everyone, he said.
The key to navigating the construction tire market, he emphasized, is to get to know customers and be prepared to service their needs while being safety conscious.
When speaking with customers, get to know their plans for the future as they grow, Mr. Tatlock said, such as knowing whether they plan to rent equipment or buy new machinery.
“Make sure you are looking at that with them and be proactive,” he advised. “Be ready to take advantage of those opportunities.”
“Navigators” do not spend a lot of time looking back in the mirror, Mr. Tatlock said, so work at moving forward, which could call for recalculating plans to make things better or more efficient. This applies to all parts of a business — from customer service to billing to service calls, he said.
“Value always trumps price, but in the market we just came through, price has reared its ugly head,” Mr. Tatlock said.
This has been the case even for customers who may not have considered price in the past. Mr. Tatlock suggested working with them on the choices available to help get them back on track.
“Think of it like you are a football team and your goal is the Super Bowl,” he said. Be the coach for your customer and explain that you are going to the Super Bowl together, he added, noting this “go-to” attitude should extend to all members of a company's team.
He also said there should be a focus on safety because this is an important selling point to customers.
Mr. Tatlock concluded by asking, “Are you prepared to respond at 2 a.m. the same way you respond at 2 p.m.?...because your competitor probably is ready.”
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