2014 a positive for trucking sector

The commercial truck sector finished 2014 on an upnote, with vehicles sold, tonnage shipped, etc, all on an upswing. Forecasting the industry's fortunes for the near or longterm, however, is becoming increasingly intertwined with Congress's inability to agree on how to fund the nation's growing need for infrastructure investment. (See story on page 3) That uncertainty is reflected in a recent appeal to Congress by a broad-based coalition of industry trade groups and affected parties to pass a “robust, long-term highway bill” that secures the federal role in transportation. “As the nation's primary movers of interstate commerce, a uniform transportation system is of paramount importance,” ATA President and CEO Bill Graves wrote in the appeal, supported by the ATA and 37 other interested parties. “Congress should reject dangerous calls to abdicate its Constitutional responsibility to manage and fund the federal highway program and pass a strong, long-term highway bill this spring.” In a letter, the ATA and its allies told Congress they “strongly oppose 'devolution' proposals such as the 'Transportation Empowerment Act,' previously introduced and considered in the 113th Congress.” The ATA, which calls itself the voice of the U.S. trucking industry, has been campaigning for months if not years for action on a long-term solution to the nation's infrastructure investment problem. Citing U.S. Department of Transportation data, the ATA said the Interstate highway system requires at least $17 billion in annual investment to sustain current levels of maintenance, and more than $33 billion per year to improve system conditions. In a separate report, ATA figures show tonnage shipped in the U.S. in 2014 by truck was up 3.5 percent over 2013 to the highest level ever, despite a slowing in December. “Overall, 2014 was a good year for truck tonnage with significant gains throughout the year after falling 4.5 percent in January alone,” said ATA Chief Economist Bob Costello. “Economic data was mixed in December,” he said, “with retail sales down 0.9 percent and factory output up 0.3 percent, so tonnage was in-between those two readings, which are two large drivers of truck freight. “Freight volumes look good going into 2015,” Mr. Costello said. “Expect an acceleration in consumer spending and factory output to offset the weakness in hydraulic fracking this year.” It's against this backdrop that the commercial tire industry in North America recorded a positive year as well, with replacement and OE medium truck tire shipments up 10.8 and 12.5 percent, respectively, to 17.4 million and 5.7 million units. Industry growth came both from domestic production—up 8 percent to 14.9 million units—and imports, which jumped 30.1 percent to a record 13.2 million units. The import surge was led by a 34.2-percent increase in shipments from China, to 8.38 million units, or about half of aftermarket shipments. China's growth was buoyed in part by the return of Roadmaster-brand tires from Cooper Chengshan Tire Co. Ltd., which had suspended shipments of Roadmaster truck tires in mid-2013 in the throes of the protracted Cooper-Apollo Tyres Ltd. merger/takeover negotiations. The average price of an imported truck/bus tire fell 6.6 percent last year to $172.16; prices ranged from $128.38 for a tire from China (down 9 percent from 2013) to $310.23 for one from Spain, the data show. The collective sales revenue of the 50 largest commercial dealers in North America was up about 6 percent last year. Southern Tire Mart retained its position as the No. 1 independent commercial dealer in North America, with $800 million in sales, a 10-percent jump over 2013. Columbia, Miss.-based STM also is ranked No. 2 among retreaders, standing behind Good-year Commercial Tire Systems and slightly ahead of GCR Tires & Service. Kal Tire of Vernon, British Columbia, and Fountain Tire Ltd. of Edmonton, Alberta, ranked second and third among commercial dealerships with sales of $488 million and $481 million, respectively, ahead of Best One Tire & Service L.L.C. and Pomp's Tire Service Inc. By contrast, retread production collectively among the 50 largest truck tire dealers was down slightly. The 50 largest truck tire retreaders together operate 250 plants and use an estimated 306 million pounds of tread rubber. The average daily output for a plant operated by the Top 50 retreaders stood at 184, up about five units a day over 2013. Among the 50 largest retreaders, 23 use the Bandag system and collectively operate 155 plants, including 35 under the flag of Bridgestone Americas' GCR Tires unit; 11 are Michelin Retread Technologies licensees, operating 40 plants, 10 of which are run by Michelin North America Inc.'s TCi Tire Centers L.L.C. unit; five are Goodyear Certified Retreaders, with 41 plants, 28 of which are run by Goodyear Commercial Tire Centers. Other retread systems in use by the top 50 are: Marangoni RingTread System, seven retreaders and seven plants; Oliver Rubber Co. L.L.C., four retreaders, seven plants; Continental the Americas L.L.C.'s ContiLifeCycle, three retreaders with three plants. Overall Bridgestone's Bandag Retreading Systems is the dominant system in use in North America—264 plants operated by 107 dealerships. Goodyear's Authorized Retreading system is in use at 93 plants, operated by 49 companies. Michelin's MRT system is used by 45 operators at 78 plants, while the Oliver system is in use at 87 plants. Conti, the most recent player in the game, has attracted 10 converts to its ContiLifeCycle, with the system in use at 15 locations, while Sumerel Tire Service's AcuTread mold-cure system is being used at six plants. Sumerel Tire estimated, however, that its AcuTread system represents about a quarter of the annual mold-cure output in North America—second to Goodyear and ahead of Michelin. c c c Among individual dealerships, two deals involving multiple commercial locations in Ohio topped the list of mergers/acquisitions last year. Both Bob Sumerel Tire Co. and Best-One Tire & Service L.L.C. strengthened their presences in northern and eastern Ohio, respectively, during the year in deals with Kauffman Tire Inc. and Terry's Tire Town, respectively. Bob Sumerel's purchase of five commercial service locations in northeast Ohio from Atlanta-based Kauffman Tire are the Erlanger, Ky.-based dealership's first in northern Ohio Financial terms of the May deal were not disclosed, but Bob Sumerel said it expects the acquired outlets to generate approximately $25 million in revenue in the first full year. The deal also provided Bob Sumerel a platform from which to expand its retreading business. After the deal closed Sumerel added Bandag system retreading capacity at the outlet it acquired in Wooster, Ohio. That unit, the dealership's sixth plant, is rated at 150 units per day. The dealership operates 15 outlets in three states—11 in Ohio, two in Pennsylvania and two in Kentucky—six of which also do some retail business. Bob Sumerel Tire's sales last year of $90 million earned it the No. 20 spot on Tire Business' largest North American commercial dealerships. Best-One Tire's purchase of four Terry's Tire Town commercial tire outlets and a Bandag retread plant were from American Tire Distributors Holdings Inc., which had acquired the assets in its April purchase of Terry's Tire. The tire service locations in Canton, Girard, Twinsburg and Alliance, Ohio, plus the retread plant in Alliance are now operating under the Great Lakes Best-One Tire & Service banner, according to Indianapolis-based Best-One Tire, considered the fourth largest commercial dealership in the U.S. with sales last year of $380 million. Other deals of note: McCarthy Tire Service acquired Terry-Haggerty Tire of Albany, N.Y., to shore up its market coverage in upstate New York. The acquisition expanded Wyoming Valley, Pa.-based McCarthy Tire's operation to 44 service centers, seven Bandag retread shops and one OTR retread facility in seven states, including eight in New York. McCarthy Tire President John McCarthy Jr. said the acquisition “falls in perfectly with our long-term strategic plan” of strengthening the dealership's presence in New York and the Northeast. The Terry-Haggerty acquisition follows McCarthy's purchase in December 2012 of Main Tire Exchange in a Dansville, N.Y., with additional locations in Buffalo and Rochester. McCarthy ranked eighth last year among North America's largest commercial dealerships with commercial-related sales of $250 million. Piedmont Truck Tires converted its Graham, N.C., retread plant to the ContiLifeCycle processes and made Continental and General its featured brands. Piedmont had been a Goodyear-certified retreader for four years prior to the conversion last summer. The affiliation between Piedmont and Continental Tire the Americas began in late 2010 when Piedmont started selling new Conti-brand truck tires, Continental said. Sumerel Tire Service in Newport, Ky., added a third plant to its operations, a Marangoni Ringtread system-based unit in Lebanon, Tenn., that does business as Wilson County Tire & Retreading. The investment was not disclosed. Commercial and wholesale tire dealer East Bay Tire Co. opened a retread plant in Oahu, Hawaii, under the name EBT Eco, to support the commercial business on Hawaii it gained through its April 2014 acquisition of Oahu-based Rainbow Tire. East Bay elected to employ the Oliver Rubber retreading system at the 7,500-sq.-ft. plant, which is rated at about 10,000 units a year. Light truck/SUV tire retreader TreadWright Inc. moved last April to a 50,000-sq.-ft. facility in Houston from Hot Springs, S.D., where it had operated for the previous 15 years. The move followed a change in ownership in 2011, when Denver-based Pine Street Growth Partners, a private equity group, bought the firm from the founding Hawkins family. Purcell Tire Co. added commercial service centers in Tucson, Ariz., and Kansas City, Mo., the latter of which is Purcell's first in the Kansas City area, which the dealership described as a “vibrant and active” commercial market. The combination commercial/retail center in Tucson is its second in Tucson and 17th in Arizona. The Kansas City outlet is Purcell's ninth in Missouri, but first in the Kansas City area. In manufacturer-related news: Bridgestone Americas Tire Operations L.L.C. rebranded its 200-plus outlet commercial tire service network in North America as GCR Tires & Service in an effort to standardize the unit's service offerings, hours, etc. The rebranding affected the company's 173 GCR Tires and 39 TDS Tire Distribution Systems outlets in the U.S. and 39 GCR Tire Centres in eastern Canada. GCR's retread business—comprising 35 Bandag system plants—rates as the third largest truck tire retreader in North America, turning out about 3,550 tires a day. Marangoni Tread North America Inc.'s plant in Madison, Tenn., produced its 4 millionth tread earlier this year, 11 years after opening. The 4 millionth tread line was a Ringtread XP RDG200 drive tread, the company said. Dunlop Aircraft Tyres Ltd. has selected a site in Mocksville, N.C., as the preferred base for the retreading plant it is planning to open to serve customers throughout the Americas. Final approval of the site, however, depends on the company's gaining state funding for the modernization of a vacant industrial building at the location in Davie County, N.C., Dunlop Air-craft Tyres said. If the project goes ahead as foreseen, the plant could be in operation by early 2016, Dunlop Aircraft Tyres Chairman Ian Edmondson said.