Uncertainty in OTR market: Dealers hope for an uptick as economy rolls along

This is the year of the rat in China and a year of varying views when it comes to the off-the-road (OTR) tire market in the U.S.

Only time will tell as to how 2020 ultimately will unfold, but Tire Business asked a handful of industry insiders to gaze into the crystal ball to provide some insight for the upcoming year.

Vernon Skinner, who has spent a lifetime around tires, expects 2020 to be just about the same as 2019.

And while he expects similar market demand for these types of tires, he hopes for a bit of improvement in the coming year.

Skinner Firestone Inc. dates to 1961, when Mr. Skinner's father started the business in Beverly, Ohio. Vernon Skinner came into the business in the early 1970s and made a life for himself and his family by serving the tire needs of local folks in southeastern Ohio.

Skinner Firestone sells all types of tires, whatever the community needs, and OTR is just one aspect of his business. It's now a three-generation family business.

When it comes to OTR business for Skinner, that essentially means tires used on the farm. And there's been plenty of questions about the viability of farming in recent years as farmers look to cut costs in various areas of operations — including tires.

OTR tires, Mr. Skinner said, "was average" in 2019. "You get more calls with people wanting lower-end stuff just to get by."

Farmers also have been looking to make their tires last as long as possible instead of replacing them as they face the economic realities of their business these days. "People repaired more stuff than normal."

Mr. Skinner, who has been working in the family business for 47 years, expects more of the same in 2020 for his corner of the world in southeast Ohio. "It might be a little better, but it might be the same," he said.

Over at Lewis General Tires Inc. in north-central New York, President Craig Lewis said he believes the future is a bit cloudy.

"I would say there's a lot of uncertainty in the market," he said.

The Henrietta, N.Y.-based company sells OTR tires mostly to the construction market, including equipment such as loaders, backhoes and skid steers.

"The retail end was a very strong year," Mr. Lewis said about 2019. "And commercial, I would say is mild growth. Actually, we had a pretty good year for off-the-road."

Much of last year's success in that category was seasonal in nature, the business owners said.

"A lot of it happened getting ready for snow removal," he said. "That was probably the biggest part of the off-the-road growth."

Uncertainty about 2020 has his company focusing on employees and watching spending on capital improvements.

The tire business, like many other sectors, can have trouble attracting and retaining employees in a tight labor market.

"We are being cautious with cap-ex (capital expenditures) as we see how this year unfolds, whereas we've been quite aggressive in the last several years," Mr. Lewis said.

"We're just proceeding with caution. Probably our biggest focus — and I'm sure you will probably hear this from anyone you talk to about what they are focused on — is the labor marketplace. We are making sure we are taking care of the people who are working for us now and actively recruiting more technicians," Mr. Lewis said.

Working in the tire shop floor is not for the faint of heart.

"It's a tough business for tough people. It's not easy to find labor," said the 34-year-old owner who has spent more than half of his life working in the family business.

Lewis Tire dates back 101 years, to 1919, and founder Leon Lewis Sr., Craig Lewis' great-great-grandfather.

"I've probably been one of those people who have been on the bearish side. We're in the longest economic expansion in the history of the United States. That means we are that much closer to the end of this current economic expansion," he said.

"I would say there is a lot of uncertainty in the market," Mr. Lewis said.

At Wilkes-Barre, Pa.-based McCarthy Tire Service, Ty Smith is vice president of OTR sales and operations. And he sees another strong year for earthmover tires in 2020. "I'm still optimistically thinking it's going to be a good year in our market."

McCarthy Tire has operations along the Eastern Seaboard down through the Mid-Atlantic that's been driven, in part, by new home construction as well as infrastructure work, he said.

"We've experienced really good growth over the last few years," Mr. Smith said. "We expect it to be a good year, basically the same growth rate as in 2019."

"I think housing is driving it all, multi-unit housing and also single-family," he said, along with infrastructure projects like road work that is requiring construction products and quarry products to provide raw materials.

"Our business in earthmoving is very cyclical. You are going to have up and down years. For the most part, we've had significant growth," Mr. Smith said, in recent years.

Jim McCurdy, CEO and founder of Maine Commercial Tire in Lewiston, Maine, has been in the tire business for more than 50 years, and expects to see a continuation of strong demand for OTR tires in 2020 in his neck of the woods.

"The economy has been so good for so long, especially in New England," he said, resulting in plenty of construction projects that need equipment such as dump trucks. "These site work projects are still going on. They are still calling for tires."

A mild winter in New England also has contractors continuing their work during a time when they usually must shut operations down due to the weather.

Mr. McCurdy usually jokes that once you unplug the Christmas tree, you can also expect to see OTR business fall off in his area — but not this year. "We haven't had any winter to speak of in Maine," he said during a phone interview from his truck sitting in his driveway.

As he looked around, there were only about four inches of crunchy snow on the ground with only one "real snowstorm" during the season, he said.

Maine Commercial Tire, Mr. McCurdy said, does "business with people who pay their bills" and leaves the others for its competitors. Well, these days, everyone is paying their bills on time and busy using their OTR tires supplied by his company. "It's basically a constant business."

A reason Mr. McCurdy expects demand to remain strong in 2020 is that long-term jobs started during the past year or two will continue into the new year.

"I see it happening right through the rest of the year. I'm not pessimistic at all," he said. "When you get down to it, it's the cost of money, borrowing money."

People, Mr. McCurdy said, have a desire to build and create. And as long as interest rates remain low, entrepreneurs will do just that.

"As long as people have a spirit, they want to do things. They want to create," he said.