Puerto Rico tire dealers struggle to recover

When Hurricane Maria hit Puerto Rico last Sept. 20, it knocked out power and devastated the island of 3.4 million residents. But several tire dealerships were prepared and enjoyed a surge in business in the ensuing months of chaos and recovery.

With the help of generators, several tire dealers who spoke to Tire Business said they were very busy in the aftermath repairing and replacing tires on vehicles trying to navigate damaged roads covered with nails from stripped roofs.

Before the hurricane, the economy was very bad, according to Josue Correa, president of Correa Tire Distributors. But during the recovery efforts, the construction business on the island has surged.

"Everyone who had equipment, like backhoes, loaders and those equipment used in construction, had a lot of work. There's no more (spare) equipment for all the demand for construction and paving. And that all needs tires," Mr. Correa said.

"Almost all that equipment was stuck at the companies without any work, so all those machineries were out of work (before the hurricane)…. There is still a lot of work coming. That's good for the tire business, too."

However, the boon in business has been offset by frustrations over delayed product deliveries, unreliable electric service and stalled scrap tire disposal.

High winds and rains damaged buildings and equipment, forcing some small tire shops to shutter permanently. Others are operating but still waiting for insurance money to make repairs, while thousands of residents have packed up and moved off the island.

"It's a different Puerto Rico," said Primo J. Delgado, owner and president of World Wide Tires Inc., a tire retailer and wholesaler.

"We lost long-time shops, mom-and-pop tire shops. They closed down, never to open again.

"There are a lot of small businesses down on the island that just went away and some of them they just closed because they didn't have any power and they moved to the states....

"In the tire business, there are less players. For the ones that stayed, it's a little bit better. But we do have the problem of scrap tires, and most of us have not collected the insurance checks yet. And we still have problems getting merchandise from the U.S.," Mr. Delgado said.

"It was like a war…. The first week I got in line to get diesel in a couple of 55-gallon drums. I did a line of 11 hours," he said.

"It was a hard time but we managed. We survived.... You have to think outside the box to survive. We're doing that in terms of my business. Not everybody is going to survive."

World Wide Tires

World Wide Tires — dba Sabana Tire in Guaynabo and Bayamon Tire Distributors in Bayamon — is still waiting for insurance reimbursement on the damage to its facilities, Mr. Delgado said.

The main warehouse in Bayamon lost 60 percent of its roof, and the company lost one delivery truck when the storm blew it off a cliff.

Mr. Delgado, who has been in business for 23 years, said he remembers when Hurricane Georges, a Category 3 hurricane, devastated the island in September 1998.

"I did learn from the '98 experience from Georges, and I know we are going to sell a lot of tires because the roads are not in good shape. There are thousands and thousands of nails in the streets because a lot of people lost their roofs," he said.

"I remember what happened (in 1998). This (Hurricane Maria) was like five times worse. We still have 200,000 people without power," he said.

The Bayamon store went without power and operated with emergency generators for five months. It had lost power Sept. 5 when Hurricane Irma hit and didn't get electricity service back until Feb. 1, he said.

"We have emergency generators in each store. We have gasoline air compressors just in case.… For the last year to year-and-a-half, we've been using battery impact tools. So we manage. With a lot of difficulties, we manage.

"At the beginning there was no communications, so we had to be creative. Cell phones towers were scarce because the island was blacked out completely for a week. Everybody was running on generators."

He said he was able to connect to a Wifi hotspot, build a small network and connect wireless phones.

Some employees took a week to get back to work; some of them lost everything, including their houses and vehicles, he said. Every employee was affected in some way.

"September was a complete disaster in terms of sales. But those of us who kept their stores running, sales have jumped about 40 percent," Mr. Delgado said.

"It was good for the tire business. It was really good for the tire business, if you have inventory because remember we're an island, and everything comes by air or boat. If you have inventory here, you will sell everything that you have."

His company had about 40,000 new and used tires when the hurricane hit. He claimed his business is one of the main used tire distributors on the island; the two service shops both sell more than a 1,000 units a month.

The company averages about $5 million a year in sales, he said.

"We had to change what we usually did because we didn't have the volume we used to have, like for example, six years ago. The (low-priced) Chinese tires have affected us. The way the market behaves, the Puerto Rico market is up and very, very price-driven, and we have a lot of weird brands that you've never heard of here."

He also said new "players" are coming into the Puerto Rican tire market, thanks in part to the Internet where Chinese tire suppliers are soliciting dealerships with inexpensive tires.

"We've been dealing with it for several years now," he said.

Post-hurricane business got back to normal around February, with sales starting to go down, he added.

Correa Tire

Correa Tire has three retail tire stores, in Dorado, Frente al Aeropuerto and San Juan, and a Bandag truck tire retreading shop in Dorado. It has been in business for 38 years.

The tire shops suffered wind and water damage to their roofs and interior offices totaling about $2 million, according to Mr. Correa.

The company still is in the process of getting approval for an insurance claim, he said. In the meantime, the dealership hasn't done repairs because employees are too busy servicing customers, he said.

With all the road damage, the dealership has been busy servicing consumers with flat repairs.

Correa Tire operated without electric service for three months, relying on its generators, which also required steady maintenance to avoid generator failures, he said.

With the office computers and shop compressors dependent on the generators, "if my generators don't work, then I have a big problem," he said.

"You always have to be careful, always have a plan B, plan C for everything that you're going to do."

Mr. Correa said the dealership was blessed to have Internet access within 10 days after the hurricane so it could process credit card transactions for customers.

"So we made a lot of business because we had that," he said, noting that many customers did not have ready access to large amounts of cash due to long lines at the banks and ATM problems.

"If you have to require cash from a customer, then your business will be down because not everybody will have those dollars in their pockets to spend on the tires, because there are other things more important, like water, like food, like gasoline to fill their cars and the generators.

"We have the tires, we can accept credit cards, so we made a lot, a lot of business for about six months after the hurricane," he said.

Now the business and the island are settling into a sort of new normal, he said, noting that some small shops were damaged and lost electricity and never reopened. Some couldn't afford generators or the diesel to keep them running, and often didn't have a steady supply of products.

"If you don't have what customers are asking, then you can't do business," Mr. Correa said, adding that some small shops that had generators could only afford enough diesel to operate their businesses for a few hours every day.

Atlantic Tire

Tomas Sanfeliz, general manager of Atlantic Tire in Bayamon, said the dealership suffered only minor structural damage and the loss of some machinery — some of which was blown out into the parking lot during the high winds.

The single-location retail/wholesale dealership, which distributes Michelin, Goodrich, Uniroyal and Kumho brand passenger and truck tires, operated without electric service for about three months, relying on its generators instead.

The hurricane had two affects, he said: "Unfortunately for Puerto Rico, which was destroyed completely, but fortunately for our business because it has been really good."

He said the dealership has been very busy since the hurricane, especially since the damaged roads have created a surge in tire repairs and replacements.

"Even though we have been on an increasing (sales) trend for a few years, after Maria the jump was pretty drastic," Mr. Sanfeliz said.

He said the dealership distributes tires throughout the island three times a week, but initially in the hurricane aftermath, some locations were hard to reach.

"There were roads that were wiped out completely. There were towns here that the only way you could get to them was by helicopter. It was bad. It was really bad. We're not out of the woods yet," he said.

Supply headaches

The tire dealers said that in the first few months after the hurricane hit, as the federal government and the Federal Emergency Management Agency (FEMA) oversaw the import and distribution of emergency supplies, other imported products, including tires, were waylaid on the docks.

"That is one of the worst things that happened when you are in a place where damage like this happens on an island — supply and logistics gets very, very difficult," Mr. Correa said.

"It is insane.… We don't get enough containers from the U.S. because the containers are used as storage (of emergency suppliers). So they don't return those containers to the ports, so those containers will not get back to the U.S. So when you put orders to the U.S., then they don't have enough containers to send product to the island."

He also claimed FEMA contracted most of the truck chassis on the island to deliver emergency supplies, so there were not enough chassis for loading the shipping containers of tires and delivering to the dealerships.

"So you can have two, three weeks of containers waiting for chassis to move the containers from the port to our business."

In addition to not getting delivery of the tires from the ports, Mr. Correa complained that he had to pay a daily fee for the containers to sit at the ports.

"This made the product more expensive to me and, in the end, for the customer," he said, adding, "For those months, we were able to ask more money for the product because there was not much product on the island. But now, in the last two months,…Puerto Rico is flooded with so much tire inventory that now the price is getting down."

Mr. Sanfeliz also complained of the struggle to get tires from the ports, noting how the ports "paralyzed the distribution of merchandise and gave priority to FEMA. We had merchandise in Puerto Rico but we couldn't pick it up from the pier because they had given priority to emergency supplies — and tires weren't one of them at that moment."

Fortunately, the hold up on product deliveries coincided with a brief slowdown in business immediately after the storm, he said.

"At the time, things were slow as everyone was trying to reconstruct their homes. That helped as we didn't have the large demand so we didn't have to have the products here.

"But after everything started normalizing, and we could pick up, then people started back on the road again."

Now activities have become more normalized, he said.

"Our main problem is that we weren't getting bookings for containers to arrive to Puerto Rico from the U.S.," Mr. Delgado said. "From China, from Europe we're getting merchandise but from the U.S., there was a big backlog. A lot of people lost volume because of that."

He said he is still having problems getting container-loads of tires on time, but he has not had a problem getting auto parts.

"The ratio of cars to people is quite high in Puerto Rico. And there are a lot of used cars, so there are a lot of players in the parts industry. But we do have problems getting tires from the U.S."

Scrap tires piling up

Mr. Correa also complained that amid the chaos, scrap tires are piling up at tire shops around the island, noting that people are discarding tires on beaches, rivers, roads and in the mountains.

"We have a flood of scrap tires, and the government is not doing anything," he claimed.

Mr. Correa said he has been talking to local media about the need for scrap tires to be recycled or exported from the island. He said he has an estimated 10,000 to 15,000 scrap tires piled on his property.

"I don't have any way to help so that is why we are getting into the news so people can understand that it's not my fault," he said.

"We do have a problem with scrap tires," Mr. Delgado agreed. "It's a big, big problem because the only people that do some kind of recycling on the island, they are no longer doing that. We mainly export (scrap tires)....

"A lot of tire shops on the island have excess accumulation of scrap tires. If you come to the island and drive around, you will see the mountains of tires next to the tire shops."

The solution is complex and political, he noted.

Population drain

According to the Center for Puerto Rican Studies at Hunter College, City University of New York, more than 135,000 Puerto Ricans have relocated to the U. S. mainland from the island since the hurricane.

From 2006-16, the island lost 525,769 net migrants, equivalent to 14 percent of the total population. From 2017-19, Puerto Rico may lose up to 470,335 residents, or another 14 percent of the population, according to the college.

"There is so much people that went out from Puerto Rico to the U.S., especially to Florida and Texas, that you try to hire people for mechanics or to be a truck driver and every kind of service in the shops, and you can't find them," Mr. Correa said.

"The news says that we have a lot of unemployment, but we try to get people (to hire), and we don't get people to work."

Another issue is the demand for elevated wages.

Mr. Correa said the federal government hired contract employees to help with the recovery and paid higher than normal wages for the island, about $24 or more per hour.

"Now people don't want to work unless you pay them a lot of money…," he said. "They will try to ask for a lot of money that our company can't pay. That makes a headache for us."

To add to that frustration, and the anxiety of intermittent blackouts, reconstruction, supply shortages and establishing a new normal: Hurricane season starts up again in June.