Commercial tire, retreading sectors on solid footing

AKRON — By most industry metrics, the commercial trucking industry — and by direct association, the commercial tire and retreading sector — is on track for a solid year as the North American economy recovers from the pandemic-induced slump throughout most of 2020.

Economists who track the trucking industry are predicting growth overall in trucking activity, although it's a bit inconsistent varying by region and sector.

Those fleets that deal in consumer goods, especially those with last-mile delivery, fared well throughout the pandemic, but others — such as tanker fleets — suffered.

The U.S. Tire Manufacturers Association (USTMA) forecasts that replacement market demand for medium/heavy truck tires should rise 2.9% this year to 19.7 million units, after booking a 1.2% increase last year, based on strong second-half business activity.

Original equipment shipments of truck tires are expected to bounce back resoundingly, up 20% to 5.7 million units.

That contrasts with a 27.6% implosion of shipments last year as the North American commercial vehicle industry throttled back production markedly amid the pandemic.

Both figures, however, are still shy of the shipment levels recorded in 2019, indicating there's still room for additional improvement.

On the light truck tire side, the USTMA sees aftermarket shipments slipping slightly (0.4%) to 32.8 million units, but this follows 1.2% growth during 2020 as the industry kept busy supplying the boom in last-mile deliveries as consumers tapped into the home-delivery business.

OE shipments of light truck tires are expected to rise 3.6% in 2021 to 5.6 million units, offsetting to a degree an 8.7% drop in shipments to vehicle makers last year.

Much, if not all, the extra demand for light and medium truck tires was filled by imports, according to Tire Business' analysis of the USTMA shipment and production data and the U.S. Department of Commerce import/export trade data.

Domestic production in both categories sank by double digits last year, according to USTMA data. Imports of light truck tires grew by 4.5%, but imports of medium/heavy truck tires fell 11.2%. However, with domestic production of nearly 22%, this still helped fill demand.

Retreading also filled in some of the gaps, according to David Stevens, managing director of the Tire Retread & Repair Information Bureau (TRIB).

Because of the tight supply of new truck tires, retreaders had opportunities to shore up their business with existing accounts and seek out new ones. TRIB is working with some members to help educate fleets on the benefits of retreads, he noted.

While trucking activity and tire demand are expected to be more robust this year, there are pricing and supply headwinds to consider as well.

So far in 2021, several major tire makers have instituted or announced price increases on commercial truck/bus tires, including a handful that have raised prices multiple times in the past six months.

A quick summary of announced increases shows:

• Bridgestone Americas Inc. — Firestone-brand truck and bus tires in the U.S. and Canada by up to 8% on May 1; by more than 5-8% on Nov. 1, 2020; Bridgestone-brand truck and bus radial tires and Bandag retreads in the U.S. and Canada by up to 8% on April 1;
• Hankook Tire America Corp.— commercial truck tire prices in the U.S. to rise by 5%, effective May 1, on top of a 5% increase instituted in December 2020.
• Michelin North America Inc. — increased prices in the U.S. and Canada on several commercial products March 1 that varied "across specific products and services based on the highly dynamic market conditions in the supported customer industries."
• Toyo Tire U.S.A. Corp. — raising prices on most commercial tires in the U.S. by up to 6% on May 1; and
• Yokohama Tire Corp. — medium truck tire prices due to rise by an undisclosed amount on May 1; prices on "select" commercial truck/bus tires rose up to 6% on Dec. 1, 2020. Yokohama's Off-Highway Tire business unit instituted increases on Jan. 1 on Alliance-, Galaxy- and Primex-brand products in the U.S., Canada and Latin America

Despite the economic uncertainties of the past year, most commercial dealerships that responded to Tire Business' survey for this special focus indicated their revenue increased last year over 2019.

In more than a handful of cases, the increase was in the double-digits, although some of the growth can be attributed to acquisitions and the additional first-time revenue from those acquired assets.

Southern Tire Mart solidified its position as the largest commercial dealership on the continent with sales of $1.75 billion — 22.8% greater than in 2019. Southern Tire has expanded over the past few years to 140 servicing locations in 10 states. It's also the No. 2 retreader in North America, trailing only Goodyear's Commercial Tire Systems business unit.

There's a logjam of sorts behind STM for the runner-up position.

Best One Tire & Service L.L.C. laid claim to No. 2 this year with 20% growth over 2019 to $530 million, edging past Snider Fleet Solutions with estimated sales of $525 million and Pomp's Tire Service Inc. with $500 million.

Among companies that advanced up the rankings ladder was Bauer Built Inc., which moved into the Top 10 with sales last year of $272 million. Its growth was aided by its acquisition of Allied Oil in late 2019.

The commercial/retreading sector saw its fair share of merger/acquisition activity in the past year.

• Long-time Goodyear affiliate Purcell Tire & Rubber Co. acquired Quality Tire Co. of Salt Lake City, and joined the Michelin Commercial Service Network (MCSN) and is in the process of converting its retread plants in Phoenix and Potosi, Mo., to the Michelin Retread Technology network.

The deal, which closed in December, added Quality Tire's nine outlets in Colorado, Idaho, Montana and Utah to the Purcell Tire network of commercial outlets, expanding it to 65 in 15 states.

The combined company is expected to generate over $275 million in commercial-related revenue on an annualized basis,

The deal included three retread plants — a Michelin Retread Technologies plant in Hudson, Colo., and Oliver Rubber system plants in Billings, Mont., and Salt Lake City — which was a catalyst to Purcell's decision to convert its existing retread facilities in Potosi, Mo., and Phoenix to the MRTI system from the Goodyear system it had employed for decades and become part of the Michelin Commercial Service Network.

With 2020 sales of $210 million, Purcell is No. 11 on this year's ranking of North American commercial dealerships. It's also No. 10 among truck tire retreaders and the No. 1 OTR tire retreader.

With commercial-related sales of $68 million in 2019, Quality Tire was among the 30 largest commercial dealerships in North America.

• Border Tire of El Paso, Texas, bought Canyon Tire Sales, a 40-year-old Corona, Calif.-based dealership with five commercial outlets and a retread plant in southern California.

The deal doubled Border Tire's presence in California and represents up to $45 million in potential additional annual sales. Founded in 1990 by the Leinen family, Canyon Tire operated truck tire sales/service locations in Corona (two locations), Fontana, Southgate and San Diego

Like Border Tire, Canyon was part of the Michelin Commercial Service Network Dealer sales and MRT retreading networks.

The deal came two years after Border Tire's acquisition of five TCi Tire Centers commercial service locations and one MRT retread plant in California from Michelin North America Inc. The deal will make Border Tire the largest servicing MRT dealer in California.

"It has always been our goal to grow and make strategic acquisitions that expand our service footprint to our loyal customer base," Border Tire Vice President David Shipp said at the time. El Paso-based Border Tire is a division of Border International, a new and pre-owned truck dealer with bases in Las Cruces and EL Paso.

Based on the firm's 2020 sales of $84.5 million, Border Tire is the 24th largest independent commercial tire dealership in North America, based on Tire Business calculations. The addition of Canyon Tire's revenue should push Border Tire potentially into the top 15.

• Service Tire Truck Centers (STTC) acquired the commercial assets of Highlands' Tire & Service, encompassing sales/service locations in Allentown, Everett and York, Pa., and a Michelin Retread Technologies (MRT) retread plant in Carlisle, Pa.

Adding these three locations "aligns with our growth strategy and gives us the opportunity to bring our industry-leading services to more fleet customers," STTC President and CEO Walt Dealtrey said at the time.

Bethlehem, Pa.-based STTC's network expanded to 53 commercial service/mechanical locations and five retread plants (four MRT and one Oliver system) throughout eight Mid-Atlantic and Northeast states, stretching from Virginia to Massachusetts.

While it doesn't fit into the mergers/acquisition niche, Commercial Tire Service, a commercial dealership and retreader with eight outlets in the Chicago metro area, aligned itself more closely with Goodyear last year to help expand Goodyear's presence in the Midwest.

The alignment allowed Goodyear to expand its Goodyear Commercial Tire Service network in a large, rapidly growing urban market, "where fleets are feeling particular pressure to stay on the road and deliver needed products," Dave Beasley, vice president, North America Commercial, said at the time.

The CTS locations complement seven Goodyear Commercial Tire Service outlets already in the Chicago area. CTS's are primarily north and west of Chicago, while Goodyear's are more to the south and east.

In New England, Pete's Tire Barns is building a 12,000-sq.-ft. structure in South Windsor, Conn., for a Bandag system retread plant that owner Peter Gerry said he hopes to have operational by this coming fall.

The new plant will be the third for Pete's Tire Barns, which stands at No. 46 among the largest truck tire retreaders in North America with two plants that turned out roughly 300 units a day last year.

The new plant will be a four-chamber layout, Mr. Gerry said, equal to 200 tires a day at full capacity. The opening has been delayed to a degree because of delays in getting equipment, a situation related to the pandemic and its effect on manufacturing in general.

A number of key commercial dealers took advantage last year of the federal government's Payroll Protection Program (PPP) funding to help keep their workforce employed during and after the business plunge that took place at the start of the pandemic.

According to information compiled by the Small Business Administration, 193 companies that classified themselves as "retreaders" received PPP loans, along with 575 companies that self-identified as "tire dealers,:

In the "retreaders" category, the companies received between $142 million and $246 million, making each loan worth between $738,000 and $1.3 million.

In the dealer category, the amount was between $599 million and slightly more than $1 billion, yielding an average for each business was between $103,850 and $186,643.

Southern Tire Mart received the maximum loan of between $5 million and $10 million. Two others are shown in the $2 million to $5 million category: Custom Bandag Inc. of Linden, N.J.; and Border Recapping L.L.C. of El Paso, Texas.

Among those receiving loans in the range of $5 million to $10 million were Earl W. Colvard Inc. (Boulevard Tire) of Deland, Fla.; Commercial Tire Inc. of Meridien, Idaho; and T&W Tire L.L.C. of Oklahoma City.

McCarthy Tire Service Inc. of Wilkes-Barre, Pa., is shown as having received five separate loans totaling at least $8 million and as much as $19 million.

On a broader perspective, the nation's leading truck stop operators continue to expand their networks, including new locations with tire- and tire-rated maintenance services on site.

Love's Travel Stops & Country Stores is on track to open as many as 50 travel stops in 2021, including at least 30 with Love's Truck Care or Speedco preventive maintenance and tire services on site.

The expansion plan builds on a "challenging" 2020, when the Oklahoma City-based company opened 38 truck-servicing plazas with over 3,000 parking spaces and donated several million dollars to fight COVID-19, injustice and poverty and to help sick and injured children.

Love's also brought on stream last year its sixth retread plant, in Milan, Tenn.

Love's network of Travel Stops numbers more than 540 locations in 41 states, including over 400 with Speedco or Love's Truck Care services on site through over 1,500 service bays. The company changed the name of its truck maintenance network in late 2020 to Love's Truck Care from Love's Truck Tire Care to reflect the evolution of the preventive maintenance service portfolio available at its Travel Stops.

TravelCenters of America Inc., which operates 265 truck stops in 44 states, is turning increasingly to franchising to expand its brand and network across the country.

The company, which sells new tires, retreads and related maintenance services at 244 locations, sees "significant opportunities for continued growth through franchising." The company has signed 18 franchise agreements since early 2019, is negotiating 19 additional agreements and has identified 80 more potential franchisees.

The franchised locations, however, tend to be smaller than the corporate outlets and don't have the full breadth of the tire and/or maintenance services.

Boss Truck Shops Inc., which operates 47 Bosselman Boss Shops locations in 23 states, has begun stocking Continental-brand truck tires and is participating in Conti's TrukFix roadside-assistance network.

Michelin North America noted that the addition of Purcell Tire to the Michelin Commercial Service Network extends the firm's homogeneous fleet service to more than 400 locations nationwide.

MCSN affiliates offer fleets a comprehensive service package, including online reporting, Michelin ONCall emergency road service, Michelin Tire Care tire-monitoring service, Michelin Mechanical Care trailer repair and readiness program, and access to skilled technicians backed by rigorous certification and audit standards.

Bridgestone's GCR Tire network has stabilized, after several years of divesting locations, at 74 outlets in the U.S. and Canada. In the U.S. the GCR network is concentrated in states throughout the Rocky Mountains and Pacific Coast, while in Canada they're predominantly in the Atlantic Provinces.

Goodyear's corporate-run Commercial Tire Service network stands at 228 locations after the acquisition in late 2019 of Raben Tire. Goodyear CTS also operates 33 retread plants and is considered the largest retreader in North America.