Modern Tire Dealer - January 2012

Raw material costs added to the extreme volatility in the consumer tire market. – Ludwig

THE INDUSTRY’S LEADING PUBLICATION

46TH ANNUAL

January 2012 | Vol. 93, No. 1 | $30 | A Bobit Publication | www.moderntiredealer.com

MTD_Jan2012_bellyband.indd 1

1/23/12 1:11 PM

MTD_Jan2012_bellyband.indd 2

1/23/12 1:11 PM

Raw material costs added to the extreme volatility in the consumer tire market. – Ludwig

THE INDUSTRY’S LEADING PUBLICATION

46TH ANNUAL

FACTS ISSUE: 2012

January 2012 | Vol. 93, No. 1 | $30 | A Bobit Publication | www.moderntiredealer.com

MTD_COV1-COV4.indd COV1

1/17/12 9:40 AM

Quik-Link: 800-687-1557 ext. 11101

MTD_COV1-COV4.indd COV2

1/17/12 9:40 AM

Feature 16 Extra sensory perception

Analyst Saul Ludwig not only looks back at the roller coaster year that was 2011, but also looks ahead to a (seemingly) bright future

46th annual Facts Section 24 Shipments

It was one heck of a roller coaster ride! — In 2011, shipments ebbed and flowed, while prices only went one way: up

28 Market share

Major brands continue to gain market share: They account for nearly 180 million in passenger and light truck tire shipments

34 Sales and pricing $82 billion in tires for just the top 3 tire makers!

36 Tire dealer profile

Independent tire dealers dominate: They own 61% of the retail market and even more when they wholesale

40 Plant capacity

Capacity falls 3.2%, but help is on the way

The Industry’s Leading Publication January 2012, Volume 93, Number 1

Departments 4 Editorial 3 things to ignore in 2012

6 Online Traffic report — Here’s what’s popular on MTD’s website

8 News/views Promotions pay off for Toyo: UFC sponsorship, Ultimate Ride Sweepstakes are showcased

22 Ludwig Report Economic signs are pointing to better sales for retail tire dealers

48 Business insight Selling your business: Advance planning is needed to get your best deal

56 Counter intelligence Stop, look and listen: It’s time to examine your business to discover areas where a complete revamp would create new opportunities’

59 Business insight Online appointment scheduling: Catering to customers who prefer to use the Internet

60 Focus on industry ‘Let’s Go’ brand building: Kumho promises dealers better fill rates, more targeted ads

62 Focus on industry AAPEX 2011: Target buyers hit the mark — Attendance was up 17% from 2010, say officials

64 TPMS

42 Commercial

Everyone scrambles for usable truck tires: More than 32 million new and retreaded truck tires weren’t enough

46 Index

46th annual MTD Facts Section Index

Jeep Liberty: Proper positioning protects TPMS sensors

73 Your turn Banding together will tip the world of tires back toward level

66 Products 68 Quik-Link 70 Classified

Modern Tire Dealer is a proud member of:

www.moderntiredealer.com MTD_3-9.indd 3

3 1/16/12 3:23 PM

Editorial

3 things to ignore in 2012

E

very year, industry experts try to predict what will become the hottest items on the market, or what the latest advancements will be. I think the proper word is “futurecasting.”

No industry is immune.

Toys, fashion, stocks — you name it, and the pundits will come out in full force at the beginning of the year. Here’s

By Bob Ulrich one I’ve already heard: Retailers will be able to target smartphones with consumer-specific advertising as potential customers walk by their stores!

That probably doesn’t affect stand-alone tire outlets because consumers don’t have much opportunity to casually walk by them. But what if one day, you can send tailor-made ads to car owners as they drive by your store?

“Hey, Bob, your 2010 Ford Focus will need tires soon, and we happen to have plenty of size P195/60TR15 tires in stock! Swing back around and buy them now, or set up an appointment! And say ‘hi’ to your wife, Tris, for us!”

I’m going to do a little futurecasting myself, but not in the usual way. Here are three things that, as tire dealers, you will not have to pay much attention to in 2012. Maybe one day they will become hot items or trends, but not this year.

2. Electric vehicles. The best-selling electric vehicle in the U.S. last year was the Nissan Leaf. Nissan dealers sold 9,600 Leafs, compared to 7,600 for the next-best selling electric vehicle, the Chevy Volt. (The Volt may have sold a few more vehicles if not for the bad publicity surrounding alleged post-crash battery fires.)

That’s not a lot of vehicles, and they are still under warranty. According to R.L. Polk & Co., electric and the more popular hybrid vehicles combined represent less than 1% of the domestic vehicles in operation.

A friend of mine at a local General Motors dealership told me the technicians have to tie themselves to a pole when working on electric vehicles in case they are shocked and thrown from the electrical source.

Even with federal tax credits, electric vehicle prices fall into the $28,000 to $32,000 range, not inexpensive, but not cost prohibitive if you want 100% zero emissions.

If you want a 220-volt instead of a 110-volt charger, however, you will have to pay more.

Nissan North America Inc., in collaboration with Sumitomo Corp., is bringing a low-cost DC quick charger for electric cars to the U.S. market early this year. The starting price of the DC quick charger is $9,900.

Accenture Inc. forecasts 1.5 million electric vehicles will be in operation by the end of 2014.

The new Ford Focus Electric will add to the numbers, but let’s face it, few EVs will be coming into your service bays in 2012.

That doesn’t mean you shouldn’t be prepared to service one if it comes in. Just have that pole ready.

3. Sept. 26, 2012. That is the date the three-year-old tariffs added to passenger and light truck tire imports from China back in 2009 are scheduled to end. I’m not saying you should ignore the tariffs, which are at 29%. I’m saying you should ignore the cutoff date, because I think they will be continued at that rate for another year.

It is my understanding that President Barack Obama has the right to extend the tariffs for one year. With the presidential election less than six weeks after the tariffs are set to expire, and the United Steelworkers expected to ask for the extension, he will want to show his “support” for such a rabid group of voters.

At the very least, thanks to wholesale distributors you don’t have to stock run-flats.

1. Run-flat tires. You might think their time has finally arrived, with talk of vehicle manufacturers wanting to get rid of spare tires, but you would be wrong.

Run-flats have not made much of a dent in the aftermarket because they tend to ride rougher and are more expensive than standard tires.

New run-flat technology is targeting ride comfort (don’t tell that to BMW owners with their original equipment run-flats). At a “Drive and Learn” event last year, Bridgestone Americas Tire Operations LLC let me drive on the new Potenza RE960AS Pole Position RFT with the left front tire at 0 psi, right after the non-run-flat 960AS. Both rode comfortably at low speeds.

Expense remains a big issue. Safety, on the other hand, is not as much of a factor. The durability of a standard tire and the popularity of in-vehicle safety, security and communications services such as OnStar make run-flats less necessary.

At the very least, thanks to wholesale distributors you don’t have to stock run-flats, even if you promote yourself as a BMW repair expert.

4 MTD_3-9.indd 4

There you have it, three things to ignore in 2012. If you do, I believe it will help you focus on what you can’t ignore: customer satisfaction. ■ If you have questions or comments, please e-mail me at bob.ulrich@bobit.com.

MTD January 2012 1/16/12 3:23 PM

Quik-Link: 800-687-1557 ext. 11102

MTD_3-9.indd 5

1/16/12 3:23 PM

Online

Traffic report Here’s what’s popular on MTD’s website

Y

our competitors, tire price hikes and Cooper Tire & Rubber Co. vs. the United Steelworkers were popular topics on our website during December 2011. Here were our most popular posts:

3515 Massillon Road, Suite 350 Uniontown, Ohio 44685 (330) 899-2200, fax (330) 899-2209 Web site http://www.moderntiredealer.com Editor: ROBERT J. ULRICH Bob.Ulrich@bobit.com Managing Editor: LORI L. MAVRIGIAN Lori.Mavrigian@bobit.com Senior Editor: BOB BISSLER Bob.Bissler@bobit.com Contributors: Auto Service/Technical: MIKE MAVRIGIAN Training/Tire Service: KEVIN ROHLWING Industry Analyst: SAUL LUDWIG

1. “Will 14 of Sears Auto Centers close?” This item from December 29 was a lead-in to Editor Bob Ulrich’s blog, “Sears Auto Centers may be in a state of flux.” He put the news of Sears Holdings Corp.’s announced closing of more than 100 Kmart and Sears full-line stores in context with a look at how the closings might affect the company’s 788 auto centers.

2. “Are tire prices too high? L et us know!” Many people read this December 20 item and clicked through to Ulrich’s editorial from our December issue. And they also left their own opinions on the subject!

3. On December 5 we posted “Lockout News from industry analyst Saul Ludwig (here being in- will have little effect in terviewed by MTD Editor Bob Ulrich), is always popular. 4Q, says Ludwig.” We quoted industry analyst Saul Ludwig, a managing director at Northcoast Research Holdings LLC, concerning how Cooper Tire and United Steelworkers (USW) Local 207L were unable to reach an agreement, leading to a lockout at the company’s Findlay, Ohio, plant. We wanted to know how the lockout will affect Cooper’s financial outlook.

4. Also popular was our post on December 19 on the same subject, titled “Stalemate between Cooper and USW continues.” For the convenience of our Web readers, we included links to additional information on both Cooper’s and the USW’s side of the issue.

5. “Acquisitions improve Pep Boys’ financial results,” we wrote on December 6. The company’s financial report was bolstered by the addition of six Service & Tire Centers in the third quarter, increasing its total to 159 outlets.

Art Director: NEAL WEINGART Neal.Weingart@bobit.com Production Manager: KAREN RUNION Karen.Runion@bobit.com

View these news items, readers’ comments and handy links for additional information on www.moderntiredealer.com. And be sure to add your own your comments!

Modern Tire Dealer is a Bobit Publication Executive offices: 3520 Challenger St. Torrance, CA 90503 Chairman: Edward J. Bobit CEO & President: Ty F. Bobit Chief Financial Officer: Richard E. Johnson

Total access — totally free www.moderntiredealer.com

Publisher: GREG SMITH Greg.Smith@bobit.com South and Texas: GREG SMITH Greg.Smith@bobit.com (330) 899-2200, fax (330) 899-2209 Midwest: MICHELE VARGO Michele.Vargo@bobit.com (330) 899-2200, fax (330) 899-2209 West Coast: JOHN DYAL The Dyal Company John.Dyal@bobit.com (760) 451-5026, fax (760) 451-5039 West Coast: MARIANNE DYAL The Dyal Company Marianne.Dyal@bobit.com (760) 451-9216, fax (760) 451-9292 Automotive Aftermarket: DAN THORNTON djtinc@gmail.com (734) 676-9135, mobile (313) 410-0945 fax (734) 675-6744 Classified Sales: DONNA STEWART Donna_Stewart@cox.net (405) 513-6794, fax (360) 406-7576 Reprint Sales: KAREN RUNION Karen.Runion@bobit.com (330) 899-2200, fax (330) 899-2209 Customer/Subscription Service: (888) 239-2455, fax (888) 274-4580

MODERN TIRE DEALER (ISSN 00268496) (CDN IPM #40013413) (USPS #369-170) is published monthly by Bobit Business Media, 3520 Challenger St., Torrance, California 90503-1640. Periodicals postage paid at Torrance, CA 90503-9998 and additional mailing offices. POSTMASTER: Send address changes to MODERN TIRE DEALER, P.O. Box 1068, Skokie, IL 60076-8068. Please allow 6 to 8 weeks for address changes to take effect. Subscriptions in the U.S. and its possessions, $65; Canadian, $99; Int’l surface mail, $99; Int’l airmail, $198. Single copies, $10, except the January Facts Issue, $30. Address all subscription correspondence to MODERN TIRE DEALER, P.O. Box 1068, Skokie, IL 60076-8068. Please allow 6 to 8 weeks to receive your first issue. Please address Editorial and Advertising correspondence to MODERN TIRE DEALER, 3515 Massillon Road, Suite 350, Uniontown, OH 44685-6217. The contents of this publication may not be reproduced either in whole or in part without consent of Bobit Business Media. All statements made, although based on information believed to be reliable and accurate, cannot be guaranteed and no fault or liability can be accepted for error or omission. For your information: We sometimes make our subscriber information (i.e. fax, e-mail or mailing address) available to carefully screened organizations whose products and services may be of interest to you. If you prefer not to have your information made available, please write MODERN TIRE DEALER, P.O. Box 1068, Skokie, IL 60076-8068.

6 MTD_3-9.indd 6

MTD January 2012 1/16/12 3:23 PM

Quik-Link: 800-687-1557 ext. 11103

MTD_3-9.indd 7

1/16/12 3:23 PM

News/views

Promotions pay off for Toyo UFC sponsorship, Ultimate Ride Sweepstakes are showcased

By Bob Bissler

The booth also served as a showcase for the company’s biggest promotion ever, the Toyo Tires Ultimate Ride ports marketing has been gaining momentum among Sweepstakes with the grand prize of a custom Dodge tire companies in recent years. Toyo Tire U.S.A. Durango. The 2011 Mineral Gray Metallic Dodge Durango Corp. is a perfect example.

Heat Edition 4x4 has custom features including a set of In 2011, Toyo sponsored the Pacific 10 (Pac-10) Track Toyo Proxes ST II high performance tires and a T-REX & Field Championships, Pac-10 basketball and football, four-piece flat black mesh grill fitted with the UFC logo. and also the Pac-10 Scholar-Athlete of the Year.

While the promotion ran from Sept. 6, But the company’s big sports marketing news 2011, through Jan. 2, 2012, the Ultimate in 2011 was that Toyo Tires returned as a sponRide Sweepstakes awarded a set of sor and official tire of the Ultimate Fighting Toyo tires to one winner each week.

Championship (UFC). UFC programming Soon Toyo will announce the Grand reaches 354 million homes worldwide in 19 Prize winner who will drive away different languages. with the Dodge Durango.

Toyo was the official tire of the UFC Last year was also a good time from 2006 to 2008. And then in 2011, for Toyo to return to the SEMA Toyo’s name once again adorned the sides Show, as the company plans to grow of “The Octagon” during six live UFC quite a bit over the next five years.

Pay-Per-View events.

“We’ve got a new factory that is But it was the UFC name that adorned being built in Malaysia,” says John Toyo’s booth at the Specialty Equipment Hagan, senior director of sales, Toyo Market Association (SEMA) Show, Nov. 1-4, Tire U.S.A. Corp. “We purchased 2011, in Las Vegas, Nev. And while 2011 was another factory that’s fully Toyo-owned the year that Toyo returned as a UFC sponsor, and controlled so Toyo quality is coming it was also the year Toyo was back exhibiting at out of it. It’s coming on line and we’re Toyo showcased its latest the SEMA Show. beginning to get supply. We purchased at SEMA, the Proxes T1 “Our big news at SEMA is we’re back,” says tire another factory in China and we’ll be Sport UHP summer tire.

Amy Coleman, senior director of marketing, getting some product supply from that Toyo Tire U.S.A. Corp. “We’ve been gone for two years factory as well. So those things give me a lot of confidence and now we’re back in that we’ll be able to support the growth.” a big way. We have our Hagan says Toyo still views the United States as a major UFC fighters here to growth area for the company. Many tire company execudraw more attention. tives say the biggest area of growth for the tire industry is Our sponsorship with Asia. Hagan says for Toyo it is Asia and North America. them has been very efToyo’s latest tire, the Proxes T1 Sport UHP summer fective for us.” tire, was launched in the U.S. market in August. It offers Toyo had several fight- optimum cornering performance due to a new high stiffers signing autographs at ness compound. The tire is available in 42 sizes. its booth during SEMA, The Proxes T1 Sport isn’t the only product news at Toyo. including UFC light “We also have a couple of product launches in 2012 heavyweight Brandon that we’re excited about,” Hagan reveals.

“The Truth” Vera, StrikeHagan says the biggest reason Toyo is back is because force women’s welter- the economy has improved. The company is also back as weight champion Miesha far as supply, which was disrupted by the March 11, 2011, “Take-Down” Tate, UFC earthquake and tsunami in Japan. featherweight Chad “Supply issues have been industry-wide and we had a “Money” Mendes, UFC tougher time than most,” Hagan explains. “The disaster in lightweight Anthony Japan made it even more difficult. We’re through that and SEMA Show attendee Mingo Rivero, “Showtime” Pettis and the Sendai plant in Miyagi Prefecture has been running at owner of Mingo Motorworks in UFC light heavyweight 100% since May. But there’s still that recovery period for Crestview, Fla., meets UFC fighter champion Quinton the lost production, as well as lost tires in the warehouse Quinton “Rampage” Jackson at in Sendai. But we’re back, and we’re back strong.” ■ Toyo’s booth during the SEMA Show. “Rampage” Jackson.

S

8 MTD_3-9.indd 8

MTD January 2012 1/16/12 3:23 PM

Quik-Link: 800-687-1557 ext. 11104 MTD_3-9.indd 9

1/16/12 3:23 PM

News/views Michelin debuts long-life Defender passenger tire Michelin North America Inc. introduced its Defender all-season passenger tire.

It will be available on April 1 and will cover 93% of standard passenger car vehicles in the marketplace with 38 sizes ranging from 175/70R13 to 225/50R18.

“The Michelin Defender will replace two existing lines: the Michelin HydroEdge and the Michelin Harmony lines,” says Pete Selleck, Michelin’s new North American chairman and presi- Michelin is backing its dent. “In so doing, the dealer should Defender all-season be able to cover the breadth of all passenger tire with a needs. In the past he needed about 90,000-mile warranty.

117 SKUs to do that. With this new launch, he should be able to do it with only 57 SKUs.” Selleck says the Defender meets the demands of customers who are looking for safe, fuel-efficient tires with long tread life and good value for the money. It has earned the Michelin Green X designation and has 17% less rolling resistance than the previous generation Michelin product.

The Defender also incorporates Michelin’s IntelliSipe technology that combines 3D active sipes and variable thickness sipes to provide additional grip for braking. Further adding to its safety features, the Defender maintains the same wet handling as the previous generation Michelin HydroEdge tire while achieving 15% increased snow traction.

The Defender is backed by the Michelin Promise Plan, a comprehensive tire service package, and a 90,000-mile warranty.

MTD helps sponsor TIA ATS training The Tire Industry Association (TIA) has announced sponsors for the upcoming 2012 Certified Automotive Tire Service (ATS) Instructor Training Tour.

The Certified ATS Program is designed to create a network of certified instructors who can then train and certify technicians in the field. By holding 28 classes in 28 different cities around the country, the association says this valuable program will be more accessible for retailers of any size.

The sponsors for the 2012 ATS Instructor Tour are: 1800EveryRim, AME International, American Tire Distributors, ATEQ Inc., BADA Hennessy Industries, Bartec USA LLC, Continental Automotive Systems US Inc., Dill Air Controls, Group 31, Ingersoll-Rand, Mighty Auto Parts, Modern Tire Dealer, Mohawk Rubber Sales, Myers Tire Supply, NAPA Tire Hardware, Patch Rubber, Plombco Inc., REMA Tip Top, Tech International, Tiremetrix and Tuff y Manufacturing.

“The response from the supplier community for the upcoming ATS Instructor Tour has been incredible,” says Kevin Rohlwing, TIA senior vice president of training.

For more information on TIA’s 2012 Certified ATS Instructor Tour, visit www.tireindustry.org or contact TIA Director of Training Chris Marnett at (800) 876-8372, ext. 106, or cmarnett@tireindustry.org.

10 MTD_10-15.indd 10

Quik-Link: 800-687-1557 ext. 11105

MTD January 2012 1/13/12 10:33 AM

Quik-Link: 800-687-1557 ext. 11106

MTD_10-15.indd 11

1/13/12 10:33 AM

News/views

bites

ATD awards Harley motorcycle Jimmy Hosay of McKay’s Service Center in Pulaski, Tenn., was the grand prize winner in the American Tire Distributors Inc. (ATD) 2011 “Harley Davidson Giveaway” promotion. Hosay, the dealership’s owner, won a new Harley Davidson motorcycle valued at $16,000. ATD dealers earned entries based on purchases of Bada wheel weights.

Dempster Tire earns award Continental Tire the Americas LLC recently presented Dempster Tire, Middletown, Ohio, with an award for 70 years of commitment to the General brand. Dempster Tire, a family-owned company, has been serving its community since 1941 when Russell Dempster started the business. In 1972 Russel’s son Dick purchased the business. In early 2009, Richie Dempster took over for his father Dick and now runs the company.

Johnson’s Tire: 5 stores in 2012 By the end of 2012, the owners of Johnson’s Tire Service expect to have five outlets in Alaska. The Anchorage-based dealership will break ground on a new store in South Anchorage in the spring of 2012. Then it will relocate operations at its Anchorage store.

Johnson’s also has stores in Eagle River, Wasilla and Soldotna. The new South Anchorage store is scheduled to open in August 2012.

Hogan Tire opens new store Hogan Tire Co. recently opened its seventh store in Massachusetts.

The new 5,500-square-foot Hogan Tire & Auto Service Centers outlet is located in Hudson, Mass. The dealership features six full-service repair bays. Woburn-based Hogan Tire operates stores throughout central and eastern Massachusetts.

It also is a Tire Pros dealer.

Used truck volumes slide Reported volumes of used Classes 3-8 truck sales continued their slide into negative territory in November 2011, according to ACT Research.Volumes were mixed on a channel-by-channel basis, with auction dealers able to obtain and sell more equipment. This offset some of the softness in the retail and wholesale markets.

12 MTD_10-15.indd 12

Cooper honors late colleague Winkle receives award for ‘making a difference’ Cooper Tire & Rubber Co.’s Rodney Winkle, 54, of Findlay, Ohio, died Sept. 17, 2011, from injuries sustained in a motorcycle accident.

To honor his memory and his many accomplishments, the company recently chose him as its latest “Cooper Iron Man,” a prestigious award for employees who far exceed expectations in all levels of performance. It is among the highest forms of recognition that any Cooper employee can achieve.

To qualify for this award, the high level of performance is not based on one year but represents sustained years of excellence and extraordinary impact to Cooper’s business, customers and community.

“Rod Winkle’s impact to our organization has left an indelible mark on everybody who had the pleasure to work with him,” says Winkle received the Cooper Iron Man Award posthumously.

Phil Caris, Cooper’s vice president of sales.

“He represented all of the best qualities that we, as Cooper people, hope to achieve. Rod was the epitome of the ‘Iron Man,’ and we will always remember him for his passion for making a difference in each of our lives.”

Winkle was a 1979 graduate of Bowling Green State University (BGSU) with a Bachelor of Science in Education degree. He also received his Masters of Education in 1984 and a Masters of Organization Development in 1991 from BGSU. He was employed at Cooper 25 years; most recently, he was the director of organizational development and training.

“Rod had an amazing way of connecting with everyone in the room, not just business owners,” says Bob Murphy, business development manager for Cooper’s western division, who Winkle hired in 1993.

“Rod treated everyone with respect, which Cooper Tire’s Phil Caris (center) honored the late Rod Winkle on Dec. 8, 2011, at the Cooper National Sales fostered a training envi- Meeting. Pictured left to right are Chad Moore, Missy ronment that allowed for Winkle Moore, Joann Winkle, Caris, Joan Winkle, an open environment to Angie Winkle and Joel Waldman. exchange ideas.”

Winkle was deeply involved in his community and was active with the Blanchard Valley Regional Health Center Board, board of directors of Virtual Technologies Group, University of Findlay-College of Business Advisory Board, United Way, Fraternal Order of the Eagles, Moose Lodge, Hancock Leadership, Habitat for Humanity, Liberty Benton School and Noon Rotary. He was also a Red Cross blood donor.

He is survived by his mother Joann (Zeisloft) Winkle; his wife of 29 years, Joan; and daughters, Melissa (Chad) Moore and Angela Winkle. “He was a true-blue Cooper Tire employee,” Joan says. “He loved his job, loved what he did. He (also) had a great desire for community service.”

MTD January 2012 1/13/12 10:33 AM

Quik-Link: 800-687-1557 ext. 11107

MTD_10-15.indd 13

1/13/12 10:33 AM

News/views

bites

Hankook Hungary: 25 million!

Hankook Tire Europe announced that the 25 millionth tire rolled off the production line in November 2011 at its plant in Hungary.

Hankook Tire invested 550 million euros to build the Hungary facility.

The company says it recently reached full capacity at the plant, and now it produces up to 12 million tires per year and employs 2,000 workers.

SAG orients dealers At Strategic Alliance Group Inc.’s (SAG) orientation meeting Dec. 5-6, 2011, prospective and signed members learned all about the SAG concept. The first meeting of the newly formed Commercial Tire Dealer Twenty (20) Group has been scheduled for March 19-21, 2012, in Tulare, Calif. To attend, visit www.sagtwentygroup.com and fill out an application on the “Membership” tab.

Bridgestone: 2,200 stores Bridgestone Retail Operations LLC opened its 49th Firestone Complete Auto Care store in Riverview, Fla., on Dec. 16, 2011, giving the company nearly 2,200 companyowned retail stores across the country. More openings are planned for 2012, says Bridgestone. At the store’s grand opening, racing legend Mario Andretti was on hand to sign autographs.

Nitto has a million fans According to Nitto Tire U.S.A. Inc., the company has reached a social media milestone, becoming the first tire company to reach one million fans on its Facebook fan page. The achievement comes on the heels of Nitto being named one of the top 10 fastest growing Facebook pages in the month of November by InsideFacebook.com.

Titan promotes two Titan International Inc. has promoted William Campbell to chairman of Titan Tire Corp. and executive vice president of the parent company. Campbell has been Titan Tire’s president for the last 12 years. He will work with Maurice Taylor, chairman and CEO of Titan International, on acquisitions. Steve Briggs, who has been executive vice president of Titan Tire, will take over as president.

14 MTD_10-15.indd 14

Bridgestone develops airless tire Bridgestone Corp. unveiled a non-pneumatic (airless) concept tire at the Tokyo Motor Show held late last year. The company says the tire could prove to be a viable and more environmentally friendly alternative to conventional tires in the future.

It outlines the company’s goal to help contribute to a more sustainable society, with particular emphasis on three areas — ecological conservation, resource conservation and reduction of carbon emissions.

Bridgestone says non-pneumatic tires have a lesser impact on the environment than today’s conventional tires, but previously such concept tires have been impractical to produce for the mass market.

A unique structure of spokes stretching along the inner sides of the puncture-proof tire supports vehicle weight. The spoke structure is made from reusable thermoplastic resin.

In support of Bridgestone’s Environmental Mission Statement, the company has developed a non-pneumatic (airless) tire.

Bjorklund named Car Care Council’s Aftermarket Woman of the Year

Deborah Bjorklund was named Car Care Council Women’s Board Aftermarket Woman of the Year.

The Car Care Council Women’s Board (WB) has named Deborah Bjorklund as its Aftermarket Woman of the Year.

The eighth annual award, which recognizes exceptional women in the aftermarket with an emphasis on dedicated service, was presented at the WB award reception during the 2011 Automotive Aftermarket Products Expo.

Bjorklund is president of The Main Resource (TMR), a manufacturer and distributor of aftermarket parts to repair shops. Since she purchased the company in 2005, it has doubled in size.

Winterton, Kane receive major promotions at Goodyear Goodyear Tire & Rubber Co. has announced several key leadership succession moves in the company’s North American Tire business, effective immediately.

John “Jack” Winterton has been appointed president of the company’s North American Tire consumer business unit. He succeeds Steve McClellan, who was promoted to president of Goodyear North American Tire in August 2011.

Phillip Kane has been appointed vice president of Goodyear’s North American Tire commercial tire business. Kane succeeds Joe Copeland, who has left the company.

“As one of the architects of our North American consumer business strategy, (Winterton) will drive execution within our brand-focused, market-back approach and map our plan for the future,” says McClellan.

Since 2002, Winterton has helped develop and execute the strategic direction for Goodyear’s North American Tire consumer business. For the last year, Kane has been president of Wingfoot Commercial Tire Systems.

Paul Wanstreet has been named to replace Kane as president of Wingfoot. Wanstreet was vice president of operations John “Jack” Winterton for Goodyear’s consumer retail business, a position that remains open at this time.

Copeland had held his position as vice president of Goodyear’s Commercial Tire Systems since 2008. He joined the company in 2000.

McClellan expressed thanks to Copeland for his leadership during his tenure in North American Tire. “Joe made important contributions to several businesses at Goodyear, providing leadership in the face of some significant challenges. We thank him for his contributions and wish him success in the future.” ■ MTD January 2012 1/13/12 10:33 AM

Quik-Link: 800-687-1557 ext. 11108 MTD_10-15.indd 15

1/13/12 10:34 AM

Ludwig interview

Extra sensory perception Analyst Saul Ludwig not only looks back at the roller coaster year that was 2011, but also looks ahead to a (seemingly) bright future

By Bob Ulrich

S

aul Ludwig has a sixth sense of sorts, which comes in handy when you are the pre-eminent analyst in the tire industry. He can see not only what is happening inside and outside the marketplace, but also how that affects the future.

In essence, he combines an acute attention to detail with the ability to see the “big picture.”

He knows, for example, that because raw material prices rose dramatically this year, Cooper Tire & Rubber Co.’s profits were negatively affected because it follows the LIFO (last in, first out) accounting method. Goodyear Tire & Rubber Co., however, reaped benefits from managing its inventory using the FIFO (first in, first out) method.

That doesn’t mean he is always right. As he likes to say, an analyst “is often wrong, but never in doubt!”

Ludwig focuses on the tire and chemical industries as a managing director at Northcoast Research Holdings LLC. This is the 40th consecutive Facts Issue that has featured Ludwig’s in-depth analysis of the tire industry.

MTD: How do you explain the roller coaster — some might say schizophrenic — year we’ve had with consumer tire shipments quarter to quarter?

Ludwig: The year began with dealer consumer tire inventories very low, so they bought heavily in the first quarter of 2011.

16 MTD_16-21.indd 16

And because fill rates were a problem, they double-ordered tires. So shipments increased by 9% in the quarter compared to the first quarter of 2010.

In April, however, gasoline jumped to over $4 a gallon, and purchases fell. Dealers purchased 7% fewer tires in the second quarter than they did the previous year.

Shipments were flat at best during the summer through September, when publicity about a weakening economy and an increasing unemployment rate did nothing to jump-start tire sales. By the fourth quarter, as raw material costs began to subside, dealers pulled in purchases believing that tire prices would go down. They didn’t want inventory that was potentially devalued. That added to extreme volatility in the consumer tire business throughout the year. As a result, consumer tire shipments were down a couple of percentage points in the last

MTD January 2012 1/16/12 4:59 PM

three months. In contrast, demand for truck tires remained firm most of the year, but tailed off a bit in the fourth quarter.

MTD: We are in the third year of the tariffs enacted on Sept. 26, 2009. How much of an effect do Chinese consumer tire imports to the U.S. have on the marketplace at this time?

Ludwig: I don’t think the tariffs had much effect on the market. Through September, Chinese passenger tire imports fell 14%, but imports from elsewhere rose 11%. Overall, total imports actually increased 3%. Because domestic tire shipments were flat, imports gained a little market share.

As far as tire prices are concerned, the tariff alone possibly accounted for a small percentage of the increase, but the main influence on prices was the 26% increase in raw material costs.

The tariffs had no effect on jobs, in my opinion, as other imports more than made up for a fall off in Chinese imports.

MTD: What do you think will happen on Sept. 26, 2012, when the 25% tariff is removed? Will the government try to keep some sort of tariff in place?

Ludwig: I do not expect the government to extend the tariff. It has bigger battles to fight than this one. What will happen then? Chinese tire manufacturers will resume shipping to the U.S., and imports from other countries will likely decline. Prices might come down a bit — assuming no change in raw material costs — but it won’t be dramatic. Chinese labor costs continue to rise, as does shipping costs, and the Chinese government will stop giving Chinese tire manufacturers subsidies. Overall, imports will probably continue to gain share versus domestically produced tires. I think having free trade without the tariff is appropriate.

MTD: Will there be any more plant closings in North America in the next few years?

Ludwig: I do not expect any more plants to be closed in the U.S. in 2012. But longer term, there are still some older, less efficient plants that may be closed. Multi-million dollar expansions in the U.S. by Continental, Bridgestone and Mitas, plus Titan’s purchase of a closed Goodyear plant, are a welcome reversal of what was a long-term decline in U.S. tire manufacturing. The Kumho plant is still on the back burner.

4 on the floor in 2012 Ludwig says pay attention to these critical issues When asked, “What are your top matters of concern or interest to watch out for in 2012?” tire industry analyst Saul Ludwig, a managing director at Northcoast Research Holdings LLC, answered as follows.

1. Price decreases. “With raw material costs having subsided, will there be much price give back by the tire manufacturers?”

2. Too much capacity? “There are currently 30 new consumer tire plants and 10 medium truck tire plants being constructed someplace in the world. About 45% of that new capacity will be in China, but expansions are actually underway in 15 countries, and this new capacity will come on stream beginning in 2012 and continue through 2017.

“Dealer inventories are close to normal right now. While I believe that new supply will closely match new demand, the possibility of having too much new capacity before it is needed is always a concern. I will be monitoring these developments very closely.”

3. Elimination of tariffs on Chinese imports. “Will my post tariff expectations play out as expected? Might the Chinese government give local manufacturers who export tires to the U.S. some early, but temporary, incentives so as to get the plants operating sooner than would otherwise be the case? And if so, might we see a surge of low priced tires enter our country soon?”

4. Campaign promises. “With the economy being the most important aspect of the coming election in 2012, comments and promises of the candidates could impact business decisions during the year. This is an uncertainty that could impact both business and consumer decisions on spending.

I cannot predict how this will unfold, but it certainly bears close watching as we move through the year.”

MTD: What were the defining moments in the industry in 2011?

Ludwig: I can think of three.

1. Goodyear’s much improved profitability. In 2010, Goodyear’s segment operating income, that is, income from its dayto-day operations before subtracting interest, taxes, corporate items and special expenses, was $917 million. In 2011, it could be close to $1.5 billion — a rather dramatic improvement.

2. Surging raw material costs were met with multiple increases in tire selling prices.

3. The major capacity expansions in the U.S. noted above were unexpected when 2011 began.

MTD: What were the U.S. replacement shipment highlights in 2011 vs. 2010 for passenger, light truck and medium truck tires?

Ludwig: In 2011, passenger tire shipments were flat, while light truck tire shipments were up about 3%, to 29.6

www.moderntiredealer.com MTD_16-21.indd 17

Continental Tire the Americas LLC is investing $224 million to expand its Mount Vernon, Ill., facility by four million passenger and light truck tires per year. It also is building a new truck tire plant in Sumter, S.C.

17 1/16/12 4:59 PM

Ludwig interview million units. Consumer shipments this year were less than I expected at the beginning of the year, although not by much, and that was because of high gasoline prices. I predict modest increases in 2012.

Medium truck tire shipments actually finished lower than I predicted, although at 16.5 million units, they were still more than 4% higher than in 2010. Truck tire shipments will be comparatively flat in 2012.

tire industry, and some of the capacity expansions recently announced could be at risk. The inability of Congress to work together and thus, leaving uncertainty about future taxes and legislation, is viewed negatively by most observers.

While it’s hard to make the connection definitively, manufac-

‘I think the tariffs had zero effect on jobs because imports actually rose.’

MTD: In the original equipment tire segment, how did the consumer and commercial numbers shake out in 2011?

Ludwig: I would say my 2011 OE predictions made last year were pretty close. Passenger tire shipments came in at 35 million, just as I estimated. Light truck and medium truck tire shipments finished a little higher: 4.1 million and 3.9 million units, respectively. Vehicle manufacturing will continue to rebound from 2009 levels, and OE shipments in all three categories will follow suit.

MTD: How will political uncertainty in Washington, D.C., entering an election year affect our industry?

Ludwig: One key will be whether or not the tariffs are allowed to expire and as stated herein I expect that they will. I would view an extension of the tariffs detrimental to the U.S.

18 MTD_16-21.indd 18

turers have been reluctant to recall previously laid-off workers, and the unemployment rate has remained high. Agencies who place temp workers have boomed as manufacturers have gone that direction versus rehiring permanent staff. On one hand, the auto industry has seen a surprising resurgence, yet consumer replacement tire sales have not recovered, even though as a general rule, if the OE segment is strong, that bodes positively for replacement shipments. Despite historically low interest rates, housing is still limping along. Certainly a more cooperative political climate would be a big plus.

MTD: How did raw material costs in 2011 compare to

Quik-Link: 800-687-1557 ext. 11109

MTD January 2012 1/16/12 4:59 PM

Quik-Link: 800-687-1557 ext. 11110

MTD_16-21.indd 19

1/16/12 4:59 PM

Ludwig interview 2010? How will raw material costs in 2012 compare to 2011?

Ludwig: Tire raw material costs increased an average of 26.6% in 2011 compared to 2010. That’s on top of an average 25% increase in 2010 vs. 2009. In particular, butadiene and natural rubber pricing skyrocketed. However, we’re ending the

year with prices lower than the average for the year — 12% lower. Will they remain at the year-end level? I don’t know.

MTD: Tire wholesalers seem to be jockeying for position.

In addition to American Tire Distributors (ATD), Terry’s Tire Town has made major moves. And Michelin’s TCi wholesale division is adding distribution centers. How has this affected our industry?

Do you think this regional/national trend will continue?

Ludwig: Yes, there was a major consolidation and expansion of wholesalers in 2011. ATD is the most aggressive in opening several new distribution centers, but Carroll Tire (owned by TBC Corp.), TCi (owned by Michelin North America Inc.), and TDW (owned by Hercules Tire & Rubber Co.) also have grown. Terry’s Tire Town acquired two competitors. Regional wholesalers such a Capital Tire in Toledo, Ohio, Sullivan Tire in Boston, Albert Tire in New Jersey and Kauffman Tire in Atlanta, just to name a few, also have expanded.

The proliferation of tire brands, names and sizes has made it impossible for the average retail dealer to carry every tire a customer might need. Many years ago when retailers were consolidating at a rapid pace, some wholesalers “It was inevitable that Conti would enter truck retreading in a serious sold their businesses fearing that tire dealers way,” says Saul Ludwig (left, pictured with MTD Editor Bob Ulrich).

20 MTD_16-21.indd 20

Quik-Link: 800-687-1557 ext. 11111

MTD January 2012 1/16/12 4:59 PM

would buy more of their tires directly from the manufacturer.

But the opposite has occurred and even the largest tire retailers in the country have to buy some tires from wholesalers because of the variety of products that have been introduced by the OE auto companies.

Wholesalers had to grow. The trend toward wholesalers’ gaining share of tire distribution is likely to continue, so manufacturers must be diligent with whom they align as this trend proliferates.

MTD: What are your thoughts on Pep Boys – Manny, Moe & Jack and its movement in the aftermarket?

Ludwig: Under the leadership of CEO Mike Odell, Pep Boys has made very good progress reshaping a company that was under-managed for several years. He inherited a mess. Turning around a large organization like Pep Boys takes time; it had some stores where they had no competitive advantage and other stores

that were too large relative to the business being done.

They have made good progress turning the company around, yet more work remains to be done. Management and its board feels now is the time to leverage its business base. Pep Boys acquired about 100 stores in 2011 to augment its Dec. 2010 store count of 700, and opened about 20 new stores on its own. And more acquisitions are being aggressively pursued — Mike Odell told me that he is in negotiations with 10 retailers. All acquired stores will be renamed Pep Boys to leverage advertising and the broad consumer awareness of its name. Pep Boys also introduced major brand tires in addition to its historical private brand offerings of Futura, Cornell and Definity tires that are produced by Cooper and Hankook.

It is too soon to claim victory, but it does appear that progress is being made.

MTD: As always, thanks for the insight, Saul! ■

Domestic tire shipments, 2010-2012 (in millions of units) Replacement Passenger Light truck Truck Total

2010 200.6 28.7 15.8 245.1

Original equipment Passenger 33.1 Light truck 3.6 Truck 3.2 Total 39.9

2011 200.0 29.6 16.5 246.1

% change 2012 (est.)

-0.3% 202.0 3.1% 30.0 4.4% 16.5 0.4% 248.5

35.0 4.1 3.9 43.0

5.7% 13.9% 21.9% 7.8%

37.0 4.3 4.3 45.6

Source: Northcoast Research Holdings LLC

Raw material cost changes, year-to-year (in U.S. dollars per pound) Raw material Natural rubber Styrene Butadiene Carbon black Zinc oxide Steel belt

2010 avg.

1.62 0.55 0.85 0.40 1.00 1.25

2011 avg. % change 2.20 35.8% 0.65 18.2% 1.35 58.8% 0.46 15.0% 0.90 -10.0% 1.25 0.0%

Dec. 2011 1.50 0.60 1.15 0.52 0.75 1.25

Source: Northcoast Research Holdings LLC

www.moderntiredealer.com MTD_16-21.indd 21

Quik-Link: 800-687-1557 ext. 11112

21

1/16/12 4:59 PM

Ludwig Report

Economic signs are pointing to better sales for retail tire dealers

F

or sure, the retail consumer The gap widens between major and private brand prices tire business was rather lackIn comparing the month of November 2011 with October luster in 2011 as the combina2011, average costs for size 215/60R16 major brand tires were tion of high gasoline prices (that led up 1% while selling prices were up 2%. The average cost for to a decline in miles driven), high a 215/60R16 private brand tire was up less than 1% while unemployment and low consumer selling prices were down roughly 2%. The gap continues to confidence led to tire buying deferwiden between major and private brand tire prices. ral. But quite surprisingly, why didn’t those same pressures thwart sales of Truck pricing again seen as very firm new cars which increased about 10% In November 2011, 40% of passenger tire dealers saw priceven as the earthquake and tsunami ing as normal while 40% saw it as aggressive. The remaining in Japan limited availability of cars By Saul Ludwig dealers (20%) saw pricing as normal. On the other hand, and supplies? The U.S. auto industry 58% of truck tire dealers saw pricing as very firm as dealer made great strides in exciting consumers with innovative inventories of truck tires remain fairly low and manufacturers products and low cost financing and most forecasters expect are able to pass along higher prices. Twenty-five percent of new car sales to increase again in 2012 — possibly by 6% or the surveyed truck tire dealers saw pricing as aggressive while more. Contrary to one’s intuition, replacement tire sales are the remaining 17% saw pricing as normal. usually stronger in years when new car sales are strong (and conversely, are weaker when new car sales are down). For 2012, I am projecting Dealers JUL AUG SEP OCT(R) NOV(P) NOV(10) that replacement consumer tire sales may increase 1% to 2%, but if the projection for Passenger tire new car sales turns out to be correct, I could Will improve 23% 36% 50% 43% 33% 17% be too conservative in my thinking.

Will worsen 54% 18% 8% 0% 14% 50%

How dealers view their near-term business

Monthly survey

A number of independent tire dealers were surveyed concerning current business trends.

Except for tire prices and costs, the results of the November 2011 survey are compared with those of November 2010.

Will stay level

23%

46%

42%

57%

53%

33%

Truck tire Will improve Will worsen Will stay level

50% 10% 40%

36% 9% 55%

45% 9% 46%

38% 0% 62%

25% 8% 67%

0% 33% 67%

R-Revised

P-Preliminary

Dealer outlooks remained optimistic, but less so

Roughly 33% of passenger tire dealers believe business will improve over the next six months while 53% believe it will stay about the same. Fourteen percent believe it will worsen.

As for truck tire dealers surveyed, 67% see business staying level while 25% see business improving. Eight percent see business getting worse. Manufacturer raw material costs will begin to come down in the not too distant future. However, for now, volumes and margins are being pressured.

Passenger volumes were positive , truck volumes flat

According to dealer reports, on average, retail sales of new replacement passenger tires were up 1% when compared with November 2010. Although this seems positive, most dealers indicated that volumes were weak with a few outlets growing unit sales by over 20% and bumping up the overall average. Truck tire sales continued to show signs of slowing as volumes were flat, but maybe more important is that 67% of truck tire dealers surveyed had negative year-over-year growth.

Retreaded tire sales were strong, growing 5%.

22 MTD_22-23.indd 22

Inventories levels were just about right

The survey indicated that 60% of passenger tire dealers believed inventories were in line with current business levels, with the remaining dealers equally split between viewing inventories as too high and too low for current demand. Roughly 50% of truck tire dealers we surveyed indicated inventories were in line with current business levels, while 42% felt inventories were too low. The remaining dealers (8%) felt inventories were too high. Dealers continue to manage inventories well.

Service business stayed strong in otherwise slow market

Dealers who provide automotive service reported that 38% of revenues, on average, were generated by service during November. Dealers indicated that service business grew by 7% in November 2011 vs. November 2010. The diversity of service revenue is aiding dealers in an otherwise slow growth market. ■ Analyst Saul Ludwig is a managing director with Northcoast Research Holdings LLC based in Cleveland, Ohio. He concentrates on the tire and chemical industries. He has been writing for Modern Tire Dealer since April 1975.

MTD January 2012 1/13/12 10:39 AM

Quik-Link: 800-687-1557 ext. 11113 MTD_22-23.indd 23

1/13/12 10:39 AM

Facts section: Shipments

It was one heck of a roller coaster ride!

In 2011, shipments ebbed and flowed, while prices only went one way: up

By Bob Ulrich

T

ire shipments were up. Tire shipments were down. Tire shipments leveled off. Dealer inventories — full of winter tires at year’s end — followed the same pattern.

There was an earthquake, then a tsunami in Japan that not only slowed tire production but also led to a vehicle parts shortage. Massive flooding in Thailand in October also limited imports, although the country still increased its consumer tire exports to the U.S. by more than 23% (see Chart 5 on page 26).

Say “goodbye” to 2011, a year when the flickering economy combined with Mother Nature to give retailers one heck of a roller coaster ride. Still, many of the 30,000 independent tire dealers adapted and fared well where it counted: their bottom lines.

Modern Tire Dealer’s exclusive “Stateof-the-Industry Survey” is conducted on a quarterly basis. After the first quarter, 45% of the independent tire retailers and 61.2% of the independent tire wholesalers said unit sales were up.

After the first half, those numbers dropped to 40.2% and 52%, respectively, as demand plummeted. However, thanks to price hikes, many more dealers were up in dollar sales year over year. And with drivers holding on to their vehicles longer, necessary automotive service work helped the bottom line profitability of many retail dealers.

Nine months into the year, inventories were full, demand had leveled off and wholesaler distributors in particular were suffering. Dealers seemed split between optimism and pessimism.

When asked, “How do you project your full-year tire sales in units to be?”

only 48.1% of the wholesalers believed their sales would be up. The percentage among retail respondents was slightly less.

When the 2011 ride was over, replacement consumer tire shipments were flat.

However, they totaled a record $30.1 billion in sales, up more than 15% from the previous year (see Chart 1).

A 2.1% increase in light truck tire shipments and a 13% increase in truck tire shipments helped increase sales (see Chart 2; for Canadian shipments, which trended similarly, see Chart 3 on page 26). But skyrocketing prices were the key.

Passenger tire prices were up an average of 15% last year, while light truck tire prices were up 16%. Medium truck tire pricing rose 24%.

According to tire and chemical industries analyst Saul Ludwig, they had to go up because the estimated raw material cost per tire increased an average of 26.6%!

And the final total doesn’t include retreading; truck tire retreading alone accounted for $3.8 billion in 2011.

What about shipments in 2012?

Ludwig, a managing director at Northcoast Research Holdings LLC, predicts growth in consumer tire shipments in 2012 (Ludwig’s shipment numbers for 2011 and estimates for 2012 appear on page 21). There will be slight growth in replacement passenger and light truck tire shipments, 1% and 1.4%, respectively.

Growth in original equipment shipments will be more significant. He projects OE passenger tire shipments will increase 5.7%, to 37 million units, while LT shipments will grow 4.9%, to 4.1 million units.

After a 4.4% increase in 2011, according to Ludwig, medium truck tire shipments will remain at 16.5 million units this year.

At OE, they will grow by 10.3%.

Chart 1 2011 U.S. REPLACEMENT TIRE SALES (a $38.4 billion industry) Passenger $ 25.0 billion tires: Light truck $ 5.1 billion tires: Truck tires: $ 7.2 billion Farm tires: $593 million OTR tires $553 million In 2010, U.S. replacement tire sales totaled $32.1 billion.

Chart 2 U.S. UNITS SHIPPED 2007-2011 (in millions) PASSENGER TIRES Year

Replacement

OE

2011

198.0

36.0

2010

198.7

34.6

2009

184.0

25.0

2008

195.0

39.0

2007

205.0

48.0

LIGHT TRUCK TIRES 2011

28.6

4.1

2010

28.0

3.5

2009

26.0

2.6

2008

30.0

3.0

2007

35.7

4.9

MEDIUM/HEAVY TRUCK TIRES 2011

17.3

4.7

2010

15.3

3.0

2009

12.7

2.1

2008

15.5

4.3

2007

16.7

5.0

All figures in the 13-page Facts Section are Modern Tire Dealer figures unless otherwise noted. For all market share charts: Because numbers are rounded to the nearest one-half percent, the total may not equal 100%.

24 MTD_24-46.indd 24

MTD January 2012 1/16/12 4:30 PM

Quik-Link: 800-687-1557 ext. 11114 MTD_24-46.indd 25

1/16/12 4:30 PM

Facts section: Shipments The Rubber Manufacturers Association (RMA) is guardedly optimistic about its predictions for 2012 because U.S. economic growth is anticipated to remain slow. Overall tire shipments are forecasted to increase by more than 2%, reaching a total of more than 290 million units.

“Persistently high fuel costs, a decrease in miles driven by consumers plus moderating growth in the commercial replacement tire sector have led to a restrained outlook,” says the RMA’s Tire Market Analysis Committee.

Here are the RMA’s domestic tire shipment predictions, in millions of units, for 2012.

In contrast, OE LT tire shipments are projected to decrease by 7%, from 4.2 million units to 3.9 million units. The drop “is a consequence of a trend towards light trucks built on car-based platforms instead of truck-based platforms, owing to increased vehicle fuel mileage standards and consumer demand.”

Original equipment truck tires are forecast to increase 10% in 2012 to nearly 5 million units.

Chinese imports and tariffs

In 2008, prior to the implementation of a 35% tariff , 46.5 million consumer tires were exported from China to the U.S. The addition of the tariff, which Replacement 2012 2011 % change increased duties on passenger and light Passenger 196.0 197.0 0.5% truck tires from 4% to 39% in the first Light truck 28.1 28.1 0.0% year, has reduced imports from China by Truck 17.7 16.9 4.7% 41% (see Chart 4). On Sept. 26, 2011, the tariff fell to 29%, but shipments still The RMA forecast for OE passenger reached their lowest total since 2006. tire shipments is nearly 40 million units, Overall consumer tire imports to the up approximately 13% from 2011.

U.S., however, have increased by 3.5% over the same period.

Chart 4 The top 10 exporting U.S. CONSUMER TIRE IMPORTS FROM CHINA countries, including (in millions) China, accounted for Year Units Yr./yr. change more than 90% of the total consumer tire 2011 27.3 -11.9% imports.

2010 31.0 -27.9% Seven of the top 10 countries were up in 2009 43.0 -7.5% 2008

46.5

+14.8%

2007

40.5

+50.0%

Sources: U.S. government, MTD figures

consumer tire exports to the U.S. last year (see Chart 5).

Truck tire imports from China increased from 4.2 million to 5.5 million units (see Chart 6). ■ Chart 3 CANADIAN TIRE UNITS SHIPPED 2007-2011 (in millions) PASSENGER TIRE Year Replacement OE 2011 16.0 7.9 2010 16.5 8.0 2009 20.0 6.0 2008 19.0 8.1 2007 17.4 10.7 LIGHT TRUCK TIRE 2011 3.0 .10 2010 2.7 .02 2009 2.8 .01 2008 2.6 .04 2007 2.7 .75 MEDIUM/HEAVY TRUCK TIRE 2011 1.8 .19 2010 1.4 .15 2009 1.4 .13 2008 1.3 .30 2007 1.4 .38 Sources: Rubber Association of Canada; MTD estimates

Chart 6 2011 U.S. TRUCK TIRE IMPORTS FROM CHINA

Chart 5 U.S. CONSUMER TIRE IMPORTS BY COUNTRY 2011 Rank/ country

2010 rank

% change vs.

2010

1. China

1

-11.9%

2. S. Korea

3

+4.6%

3. Canada

2

+1.5%

4. Japan

4

-9.2%

5. Indonesia

5

+15.1%

6. Mexico

7

+35.3%

7. Thailand

6

+23.3%

8. Taiwan

9

+8.7%

9. Brazil

8

-26.0%

10. Germany

10

+28.0%

The top 10 countries account for 90.6% of all consumer tire imports in the U.S.

26 MTD_24-46.indd 26

Sources: U.S. government, MTD figures

MTD January 2012 1/16/12 4:30 PM

Quik-Link: 800-687-1557 ext. 11115 MTD_24-46.indd 27

1/16/12 4:30 PM

Facts section: Market share

Major brands continue to gain market share They account for nearly 180 million in passenger and light truck tire shipments

M

ajor brands gained consumer tire market share in the U.S. at the expense of both private and associate brands in 2011 vs.

2010. Major brands jumped from 78.2% to 79.4%, while private brands fell from 11.9% to 10.8%. Associate brands dropped one-tenth of a percentage point (see Chart 7).

A number of factors contributed to the increase, despite the loss of overall market share by the Big Three manufacturers (see Chart 8). They included: • the removal of low-cost tire production in the U.S. over the last 10 years. Labor costs made it hard for domestic tire makers to profitably manufacture low-cost radials here. So they farmed that segment out to countries with less expensive labor costs, and emphasized their flagship brands.

Chart 7 2011 U.S. CONSUMER TIRE BRAND SHARE (by type; based on 226.6 million units)

Chart 8 2011 U.S. CONSUMER TIRE MARKET SHARE (by company, three top brands; based on 226.6 million units)

28 MTD_24-46.indd 28

Chart 9 2011 U.S. REPLACEMENT CONSUMER TIRE BRAND SHARES PASSENGER TIRES (based on 198.0 million units) Brand Goodyear

% of total 14.0%

LIGHT TRUCK TIRES (based on 28.6 million) Brand Goodyear

% of total 11.5%

Michelin

8.5%

BFGoodrich

9.0%

Bridgestone

8.0%

Bridgestone

8.0%

Firestone

7.0%

Michelin

7.0%

BFGoodrich

5.0%

Firestone

6.5%

Cooper

5.0%

Cooper

6.0%

Hankook

5.0%

Multi-Mile

4.5%

General

3.5%

General

4.0%

Yokohama

3.5%

Yokohama

4.0%

Falken

3.0%

Hankook

3.5%

Kumho

3.0%

Toyo

3.5%

Pirelli

2.5%

Falken

3.0%

Uniroyal

2.5%

Kumho

2.5%

Continental

2.0%

Uniroyal

2.5%

Dayton

2.0%

Cordovan

2.0%

Dunlop

2.0%

Kelly

2.0%

Hercules

2.0%

Mastercraft

2.0%

Kelly

2.0%

Nexen

2.0%

Multi-Mile

2.0%

Pirelli

2.0%

Nexen

2.0%

Continental

1.5%

Toyo

2.0%

Dayton

1.5%

Cordovan

1.5%

Dunlop

1.5%

Mastercraft

1.5%

Hercules

1.5%

Sigma

1.5%

Maxxis

1.5%

Big O

1.0%

Big O

1.0%

Delta

1.0%

Delta

1.0%

Fuzion

1.0%

Eldorado

1.0%

Nitto

1.0%

Pro Comp

1.0%

Sumitomo

1.0%

Sigma

1.0%

Others

6.5%

Others

4.5%

MTD January 2012 1/16/12 4:30 PM

Quik-Link: 800-687-1557 ext. 11116 MTD_24-46.indd 29

1/16/12 4:30 PM

Facts section: Market share • rising raw material costs, which led to double-digit price increases and made all tires much more expensive. How many people simply said, “Well, as long as I’m spending this kind of money, I might as well spring for (fill in major brand here) tires”?

• tire tariffs, which significantly reduced consumer tire imports from China. A 35% tariff on passenger and light truck tire prices was added to the existing 4% duty on Sept. 26, 2009. The additional tariff has since dropped to 25%, and is scheduled to disappear on Sept. 26, 2012.

Since the tariff was implemented, Chinese passenger and light truck tire shipments to the U.S. have dropped 36.5%.

It took awhile for other countries to pick up the slack (not all the Chinese imports were low-cost radials), but consumer tire imports to the U.S. reached a record 144 million units last year, up 2% from the previous year.

China had the tariffs to blame for its decrease in imports. Japan had a natural disaster, the Great East Japan Earthquake, and a strong yen versus the U.S. dollar with which to deal. The result was a 9.2% decrease in consumer tire imports from the Land of the Rising Sun. Yokohama Tire Corp. was able to increase market share anyway, thanks to added capacity at its Salem, Va., plant.

The Bridgestone brand gained share as Bridgestone Americas Inc. grabbed from Peter (Firestone) to pay Paul (Bridgestone). Toyo Tire U.S.A. Corp. struggled with supply (see Chart 9 on page 28 for U.S. market share by brand).

Survival of the fittest

Private brands are defined as tires marketed and owned by a company or organization other than the one that manufacturers them. (A gray area exists where a tire manufacturer and private brand marketer market the same generic tire. This is more prevalent with less popular sizes or smaller market segments because it is cost-effective to the private brand company that wants to fill out its line.)

In 2011, they had a 10.8% replacement consumer tire market share in the U.S., broken out as follows: 10.5% passenger, 13% light truck.

In 1991, private brands accounted for 27.5% of the passenger tire market.

30 MTD_24-46.indd 30

Chart 10 2011 U.S./CANADIAN OE CONSUMER TIRE BRAND SHARE (excluding imported vehicles; based on 48.1 million units) Brand

2011

2010

Goodyear

27.5%

28.8%

Michelin

22.9%

22.2%

Bridgestone

14.5%

14.3%

Continental

9.9%

9.8%

BFGoodrich

5.5%

5.8%

Firestone

5.0%

4.9%

Hankook

4.3%

3.9%

Pirelli

3.4%

3.4%

General

2.5%

3.0%

Kumho

2.0%

1.5%

Dunlop

1.2%

1.2%

Others*

1.3%

1.2%

* “Others” includes Yokohama (Chrysler, Mercedes-Benz), Uniroyal (General Motors), Nexen (Kia) and Toyo (Toyota).

The largest private brand was Sears, with 5.5%, and that was down from 11% in 1978. Last year, Sears private brand tires held less than a 1% share of the market.

As major brands have increased in strength — 11% since 2007 — private brands has suffered. Here is the combined passenger and light truck tire market share differential over the last four years.

Major vs. private: U.S. market share Brands 2008 2009 2010 2011 Major 72.6% 73.8% 78.2% 79.4% Private 14.4% 13.8% 11.9% 10.8% The four largest domestic private brand marketers have increased their brand share since 1991. They are TBC Corp.

(Multi-Mile, Cordovan, Sigma, Big O), Treadways Corp. (Eldorado, Jetzon, Telstar), Hercules Tire & Rubber Co. (Hercules, Ironman) and Del-Nat Tire Corp. (Delta, National). TBC and Treadways, although run as separate units, are owned by Sumitomo Corp. of America, the largest wholly-owned subsidiary of Sumitomo Corp.

OE market share

Just to keep up with market share at the original equipment level, an OE supplier had to increase its shipments in the U.S. and Canada by 4.3% last year. In the U.S. alone, it was 5.2%.

The major OE brand share gainers in 2011 were Michelin, Bridgestone, Continental, Firestone, Hankook and Kumho (see Chart 10).

As part of its Industrial Plan and Vision to 2015, Pirelli & Cie SpA has changed its approach to supplying OEMs in North America. The new strategy is to slightly increase brand share by taking a selective approach to European OEM transplants while reducing sales to mass market vehicles.

Our “2011 Retail Tire Customer Survey” addressed the original equipment loyalty issue brand by brand for both the first and second replacement sets.

Michelin is number one in customer loyalty. Vehicle owners replace Michelin OE tires with the same brand 32.3% of the time for the first replacement. No other OE brand in our study received loyalty ratings close to that percentage.

Goodyear is second at 24.3%, meaning nearly one-quarter of domestic vehicle owners replace their Goodyear OE tires with the same brand the first time around.

Bridgestone is third at nearly 23%, followed by Firestone (19%), BFGoodrich (17.6%), Yokohama (13.2%), Continental (12.7%) and Toyo (11.8%).

Rounding out the OE brands are Hankook (11.1%), Dunlop (11%), Pirelli (10.2%), Kumho (10.2%) and General (9.1%).

When customers replace their tires for the second time, all the OE brand loyalty percentages are lower — except for Hankook (11.7%) and General (9.3%).

Light vehicle sales

Light vehicle sales in the U.S. totaled close to 12.7 million units in 2011, up 10% from the year before. LMC Automotive, part of LMC International Ltd., projects sales to reach 13.8 million in 2012.

Tim Rogers, president of the Polk business unit of R.L. Polk & Co., told 2011 SEMA (Specialty Equipment Market Association) Show attendees that light vehicle sales will grow to nearly 16 million units by 2015.

“We believe the relatively new CUV segment — the crossover SUVs like

MTD January 2012 1/16/12 4:30 PM

Quik-Link: 800-687-1557 ext. 11117 MTD_24-46.indd 31

1/16/12 4:30 PM

Facts section: Market share the Chevy Equinox or the Ford Edge, Canadian shipments: down Walmart Canada Corp. has approxiwill be a main part of what drives new After a 5.5% increase in 2009 com- mately 300 outlets that sell tires, including vehicle sales over the next several years. pared to 2008, Canadian replacement 156 Super Centres with Tire & Lube Not only do these vehicles meet the size consumer tire shipments decreased 15.8% Express Auto Centres. Walmart Canada requirements of the typical family, but in 2010 and 1% in 2011. Passenger tire promotes six brands: Nexen, Firestone, technology changes in four-cylinder shipments fell 3% last year, with winter Goodyear, Dunlop, Bridgestone and engines gives the owner the desired fuel tires accounting for about 35% of the 16 Rovelo, a winter tire from Dynamic efficiency while not sacrificing much in million units shipped. Light truck tire Tire Corp. the way of power.” shipments rose 11.1% Costco Wholesale Canada Ltd. has Despite the increase in new vehicle Motomaster, a private brand produced 82 outlets in Canada. It became the sales, Rogers said the aftermarket stands for Canadian Tire Corp., is the most popu- only warehouse membership club in the to gain more than $3 billion in do-it- lar replacement brand in Canada (see Chart country when Walmart closed its six Sam’s for-me business over the next three to 11). It owns 13% of the passenger and Club warehouses in 2009. Costco offers four years, in part because vehicles are 10% of the light truck tire market share. three brands: Michelin, BFGoodrich and outlasting their warranties.

Canadian Tire is one of two mass Bridgestone.

“Even as new vehicle The largest indepenChart 11 sales come back, there are dent dealer in Canada is 2011 CANADIAN REPLACEMENT simply fewer cars and light Kal Tire Inc., with more CONSUMER TIRE BRAND SHARES trucks on the road likely than 230 locations. Kal PASSENGER TIRE LIGHT TRUCK TIRE to be repaired in the OEM Tire offers 13 passen(based on 16.0 million units) (based on 3.0 million units) channel.” ger and light truck tire Brand % of total Brand % of total According to the Nabrands: BFGoodrich, tional Automobile DealBridgestone, Falken, Motomaster 13.0% Goodyear 16.0% ers Association, General Firestone, Goodride, MiMichelin 12.0% Michelin 12.0% Motors Corp. was the sales chelin, Multi-Mile, Nitto, Goodyear 10.0% Motomaster 10.0% leader with 19.7% of the Nokian, Pirelli, Sonny, Bridgestone 8.0% BFGoodrich 9.0% market.

Uniroyal and Yokohama.

BFGoodrich 6.0% Bridgestone 8.5% Ford Motor Co. was It also sells Bridgestone, second at 15.9%, although Continental, Double Hankook 6.0% Firestone 5.5% the Ford F-Series pickup Coin, Firestone, Kumho, General 4.0% Yokohama 5.5% once again was the bestMichelin and Yokohama Firestone 3.5% Hankook 5.0% selling light truck with truck tires.

Nexen 3.5% General 4.5% sales of nearly 585,000 The largest indepenToyo 3.5% Toyo 4.0% vehicles. Toyota Motor dent tire dealer group in Yokohama 3.5% Kumho 3.0% North America Inc. was Canada is OK Tire Stores third, with the Camry the Inc., with more than 270 Cooper 3.0% Uniroyal 3.0% best-selling car in 2011. outlets. Each store is inKumho 3.0% Dayton 2.0% Here are some other dividually owned and Uniroyal 3.0% Hercules 2.0% fast-facts from NADA: operated. OK Tire sells Continental 2.5% Kelly 2.0% 13 brands: Bridgestone, Dayton 2.0% Pirelli 2.0% • The CUV segment was Continental, Dayton, the largest segment in D u r u n , Fi re s to n e, Dunlop 2.0% Dunlop 1.5% the industry at 24.6% Fuzion, General, HanFalken 2.0% Continental 1.0% on sales of 3.1 million. kook, Kumho, Pirelli, Hercules 2.0% Multi-Mile 1.0% Volume increased 10.3% Primewell, Winterquest Kelly 1.5% Others 4.0% for the year.

(TBC) and Toyo.

Nokian 1.5% Motomaster is the largest pri• The SUV segment exThe next largest invate brand tire in Canada, with perienced the largest dependent tire dealer Delta 1.0% 13.4% of the replacement convolume increase: 24.6% groups are Alliance Pirelli 1.0% sumer tire market. It is sold by on sales of 998,000 units Tire Professionals, a Canadian Tire Corp.

Others 4.0% (led by the new Ford Canadian network of Explorer and the Jeep certified Michelin locally Grand Cherokee). merchandisers in Canada that sell tires. owned independent dealers (more than • BMW for the first time claimed the Each of its 485 stores is operated by an 160 stores; Michelin, BFGoodrich and title as the largest luxury brand with independent business owner. In addition Uniroyal brands) and Fountain Tire Ltd. sales of 247,907, edging out Mercedes to Motomaster, Canadian Tire offers 10 (148 stores, including three in Ontario; by just more than 2,000 units. Lexus brands: Goodyear, Michelin, Continental, Goodyear, Dunlop and Kelly brands). had been the top-selling brand for the Pirelli, BFGoodrich, Dunlop, General, Goodyear Canada Inc. has a minority last 11 years.

Uniroyal, Hankook and Fierce. interest in Fountain Tire. ■

32 MTD_24-46.indd 32

MTD January 2012 1/16/12 4:31 PM

Quik-Link: 800-687-1557 ext. 11118 MTD_24-46.indd 33

1/16/12 4:31 PM

Facts section: Sales and pricing

$82 billion in tires!

That’s just the top 3 tire makers

T

here are more than 150 consumer tire brands sold in the U.S. aftermarket. That number increases when adding in dedicated truck tire brands.

But when ranking the tire companies that manufacture those brands, three stand out because of their size. That is why Bridgestone Corp., Groupe Michelin and Goodyear Tire & Rubber Co. are often referred to as the Big Three.

Together, they account for nearly $82 billion tires sold, more than the next nine manufacturers, at $53 billion, combined (see Chart 12). They also are the Big Three in North America, especially in the U.S. and Canada.

Perhaps notably missing from the list of top 12 manufacturers is Hangzhou Zhongce Rubber Co. Ltd. Based in Hangzhou, China, the company produces the Goodride

and Westlake brands. MTD was unable to verify the company’s global tire sales for 2011 at presstime.

On its website, the company forecast it would have total sales revenue of $4 billion in 2011. If so, Hangzhou Zhongce Rubber may have reached number 11 on the list.

Tire pricing: no more ‘4 for $99’

Skyrocketing tire prices were a big reason all the global players’ signifcantly increased sales in 2011.

Here were the average tire prices (see sidebar) in 2011: Passenger: $126.16.

Light truck: $179.15.

Truck: $416.18.

The good, better, best advertised tire prices for size P225/60R16 in 2010 were $65.99, $94.65 and $136.36, respectively. ■

‘$155 a tire? I wish!’

Pricing hurts deep in the heart of Texas Average tire prices in 2011 took into account both the amount of the increases and the time they became effective.

For example, Michelin implemented its first consumer tire price increase of 2011 on Feb 1. It was up to 8%. A second increase up to 8.5% went into effect on May 1.

On October 3, a third increase raised prices up to 9%. At their most liberal, the price increases totaled 25.5%. So a Michelin passenger or light truck tire may have cost 25.5% more at the end of the year than it did at the beginning of the year.

The average pricing for the year, however, would have been much less, even if all the price increases stuck completely.

It’s also a nationwide average. When I wrote in an editorial last year that the average price of a replacement LT tire was $155 in 2010, a dealer from Texas was amused.

“Please tell me where light truck tires retail for an average of $155,” Todd Schindler, owner of Texas Tire & Accessory LLP in Hallettsville, Texas, wrote back. “I need to find out who their distributors are. In Texas, that is our average cost!” Perhaps he’s happier this year. — Bob Ulrich

34 MTD_24-46.indd 34

Chart 12 WORLD LEADERS IN NEW TIRE SALES (fiscal year 2011; in billions of U.S. dollars) Company 2011 2010 1. Bridgestone $31.2 $27.0 Corp.

2. Groupe $28.3 $22.2 Michelin 3. Goodyear Tire $22.3 $18.4 & Rubber Co. 4. Continental AG $11.9 $9.3 5. Pirelli & C. SpA $7.8 $6.3 6. Sumitomo Rub$7.3 $5.8 ber Industries Ltd. 7. Hankook Tire Co. $5.9 $4.7 8. Yokohama $5.7 $4.5 Rubber Co.1 9. Cooper Tire & $4.0 $3.4 Rubber Co. 10. Cheng Shin $3.9 $3.1 Rubber Ind. Co. Ltd.2 11. Kumho Tire Co. $3.4 $3.0 Inc. 12. Toyo Tire & $3.0 $2.4 Rubber Co. Ltd.3 U.S./CANADIAN LEADERS IN NEW TIRE SALES (fiscal year 2011; in billions of U.S. dollars) Company 2011 2010 1. Bridgestone $11.1 $9.6 Firestone 2. Goodyear $9.3 $7.7 3. Michelin North $8.5 $6.7 America 4. Cooper Tire $2.7 $2.3 5. Continental Tire $2.6 $2.0 the Americas 6. Yokohama Tire $1.5 $1.1 Corp.1 7. Sumitomo $1.3 $1.1 Rubber Industries4 8. HankookTire $1.2 $1.0 America Corp.

9. ToyoTire Holdings $1.0 $.84 of Americas Inc.3 10. Kumho Tire $.81 $.73 U.S.A. Inc. 11. Pirelli Tire North $.61 $.49 America 1

Yokohama’s fiscal 2011 was nine months long so it could change to a January-December fiscal year in 2012. Totals include January-March 2011 sales.

2 Doing business as Maxxis International.

3 Fiscal year ending March 31, 2011.

4 Sumitomo Corp. of America is run independently of Sumitomo Rubber Industries.

MTD January 2012 1/16/12 4:31 PM

Quik-Link: 800-687-1557 ext. 11119

MTD_24-46.indd 35

1/16/12 4:31 PM

Facts section: Tire dealer profile

Independent tire dealers dominate They own 61% of the retail market and even more when they wholesale

T

he replacement consumer tire market is worth $30.1 billion.

A breakdown of the distribution channels through which those tires were sold shows signficant movement in 2011 compared to 2010.

Independent tire dealers, tire companyowned stores and auto dealerships gained market share at the expense of mass merchandisers, warehouse clubs and service stations (see Chart 13). Tire dealers command 61% of the passenger tire market, up from 54% 20 years ago. That’s more than $18.3 billion in replacement sales.

Single-store owners make up 68% of the 30,000 independent retail, wholesale and commercial tire dealer locations in the U.S. In 2011, more than ever, the midsize dealers, both retail and wholesale, felt profitability pressure brought on by the combination of a struggling economy and the aggression of the larger retailers targeting them.

Auto dealerships again gained market share last year, continuing a trend that began in 1999. Since then, their market share has more than quadrupled, despite a corresponding 21% drop in franchised dealerships, according to the National Automobile Dealers Association (NADA).

Ford Motor Co. has been particularly active courting the tire-buying public,

not only at its dealerships, but also at its more than 600 Quick Lane Tire & Auto Centers.

Through October, NADA data shows service and parts sales at the average car dealership are up 7.8%. Saul Ludwig, a managing director at Northcoast Research Holdings LLC, says car dealers have been particularly aggressive in selling tires.

“Because cars have improved and need less service work, auto dealers are trying to get more revenue from their service departments. They have intensified their efforts to sell tires and other related products and services.”

When you take wholesaling into account, independent tire dealers have an even greater share: 77% (see Chart 14).

That is because they are the main suppliers to car dealer franchisees (think Dealer Tire LLC), muffler shops and service stations.

Wholesale distributors represent 13% of the 30,000 dealers.

Independent tire dealers help the tirebuying customer choose the brand 79% of the time, according to MTD’s most recent “Retail Tire Customer Survey.”

As you might expect, the percentage of customers requesting and sticking with the original equipment brand is higher for the first replacement set of tires than it is for subsequent sets.

Chart 13 U.S. CONSUMER TIRE RETAIL MARKET SHARE (based on retail sales) Distribution channel

Oil changes average $20.55

According to DesRosiers Automotive Consultants Inc., oil changes drive the aftermarket, particularly tire sales.

“If the (car dealer) or independent does the oil change, they get the tire work, and it doesn’t matter what age of vehicle they service,” says President Dennis DesRosiers.

Some 80% of independent tire dealers offer oil and lube service. They average 133 jobs a month.

The advertised cost of a standard oil (synthetic blend), lube and filter was $20.55, up 2% from last year ($20.16) and 21% from five years ago.

Service 2011 2009 2007 Oil change $20.55 $19.83 $16.98 Tire dealers in the U.S. perform more than $20 million a year in automotive services (mounting and balancing is the most popular service). They employ almost 150,000 technicians, more than 50% of whom are ASE-certified. They also average six bays per store, which means they control 180,000 service bays.

Independent retailers average between $1.9 million and $2 million per outlet.

Auto service accounts for 47% of their sales and 44% of their profits.

Chart 14 CONSUMER TIRE DISTRIBUTION CHANNEL MARKET SHARE

2011

2010

Independent tire dealers

61.0%

60.0%

Mass merchandisers

14.0%

14.5%

Warehouse clubs

8.5%

9.5%

Tire company stores

Tire company-owned stores

7.5%

7.0%

Miscellaneous*

Auto dealerships

6.5%

6.0%

Miscellaneous outlets

2.5%

3.0%

36 MTD_24-46.indd 36

Initial channel

2011

2009

Independent tire dealers

77.0%

75.0% 74.0% 74.0%

8.0%

8.5%

15.0% 16.5%

2007

8.5%

2005

8.0%

17.5% 18.0%

* “Miscellaneous” includes mass merchandisers, warehouse clubs, car dealers, auto parts chains and oil companies/service stations.

MTD January 2012 1/16/12 4:31 PM

Quik-Link: 800-687-1557 ext. 11120

MTD_24-46.indd 37

1/16/12 4:31 PM

Facts section: Tire dealer profile Tires and tire sizes

A typical tire dealer handles 11.4 different brands, which is in line with what dealers on the Modern Tire Dealer 100 list offer (see Chart 15). He or she sells an average of 15 to 16 tires a day per outlet.

Successful retail tire dealers turn their tire inventories at least seven times a year, according to Norm Gaither, president of Dealer Strategic Planning Inc. The best way to determine tire inventory turns “is to take the annual cost of sales and divide them by the average inventory,” he says.

Average inventory is determined by adding the inventory at the beginning of the year to the inventory at the end of the year and dividing by two.

Probably the biggest single issue for dealers is SKU count. Although earch dealer purchases tires from an average of five wholesale distributors, knowing the most popular sizes remains crucial.

The top 10 P-metric original equipment tire sizes in 2010 accounted for 36% of total sizes, according to the RMA. That is down from 41.2% in 2009. In contrast, Chart 15 BRANDS LISTED AS BEING OFFERED BY MTD 100 (Total outlets: 5,296) Rank by number of dealers

the top 10 OE LT sizes represented 86.8% of the total, down from 90.7% in 2009.

The most popular OE P-metric and LT sizes for 2010 and 2009 are listed in Chart 16 to give tire dealers a better idea of what to look for and stock in 2012.

For example, dealers will continue to see vehicles with size P215/60R16 roll into their dealerships over the next few years.

That size has been the most popular P-metric OE size since 2004. It also nearly doubled its growth at the replacement level in 2011, and is the second most popular replacement size, next to P225/60R16 (see Chart 17).

Chart 16 MOST POPULAR DOMESTIC OE PASSENGER AND LT TIRE SIZES 2010 OE P-Metric/metric Size

% of total

P215/60R16

7.0%

P265/70R17

5.8%

P215/55R17

4.1%

P235/70R16

3.5%

P275/55R20

3.1%

2009 OE P-Metric/metric Size

% of total

# dealers 2011 (2010)

P215/60R16

9.0%

1. Michelin

85 (83)

P265/70R17

5.5%

2. Goodyear

77 (71)

P235/70R16

4.5%

3. BFGoodrich

72 (70)

P215/55R17

4.2%

4. Bridgestone

66 (62)

P225/50R17

3.4%

5. Continental

56 (55)

2010 OE Light truck (LT)

“The 215/60R16 has been around awhile,” says Rick Brennan, vice president of marketing for Kumho Tire U.S.A. Inc. “In the early to late ’90’s, it was used on large American sedans like the Buick LeSabre and Park Avenue, Pontiac Bonneville, Grand Prix and Olds Ninety-Eight.

“In 2002 it began life on the Camry and still is the base (i.e., stripped down) Camry OE tire size. It is also used on the Nissan Altima base model and the Chevy Cruze in 2011.

“Expect this size to hang around for a while until the base model cars move to the 17-inch option size: 215/55R17!”

There wasn’t much movement in the P-metric OE sizes in 2011 except for P225/50R17, which jumped from seventh to third. Also, P245/70R17 entered the top 10. In the replacement segment, P195/65R15, made a little noise, moving into the top five.

Size LT245/75R16 was the top OE LT size for 18 consecutive years entering 2011. However, size LT245/75R17 had been trending upward for years, and was a close second in 2010. Now the 17-inch size is number one (see Chart 18).

The top t wo replacement LT sizes remained LT245/75R16 and LT265/75R16.

The top OE and replacement medium truck tire size was 295/75R22.5, followed by 11R22.5 and 11R24.5. ■ Chart 17 TOP U.S. PASSENGER TIRE SIZES, 2011 Replacement

OE 1. P215/60R16

6. Firestone

55 (44)

Size

% of total

1. P225/60R16

7. Dunlop

52 (52)

LT245/75R16

19.5%

2. P215/60R16

1. P265/70R17 3. P225/50R17

52 (47)

LT245/75R17

18.4%

3. P265/70R17

7. Yokohama

52 (46)

LT225/75R16

11.7%

4. P235/75R15

4. P215/55R17

10. General

46 (48)

LT275/65R18

8.2%

5. P195/65R15

5. P235/70R16

11. Cooper

44 (40)

LT265/70R17

7.9%

11. Kelly

44 (36)

13. Pirelli

40 (34)

Size

% of total

14. Hankook

36 (32)

LT245/75R16

23.4%

15. Toyo

34 (35)

LT245/75R17

13.8%

16. Falken

29 (20)

LT225/75R16

11.6%

16. Kumho

29 (18)

LT265/70R17

10.5%

18. Fuzion

16 (13)

LT275/70R18

9.2%

7. Uniroyal

Source: Modern Tire Dealer 100, 2010-2011

38 MTD_24-46.indd 38

2009 OE Light truck (LT)

Source: Rubber Manufacturers Association

Chart 18 TOP U.S. LIGHT TRUCK TIRE SIZES, 2011 Replacement

OE

1. LT245/75R16

1. LT245/75R17

2. LT265/75R16

1. LT245/75R16

3. LT265/70R17

3. LT265/70R17

4. LT235/85R16

4. LT225/75R16

5. LT225/75R16

5. LT265/70R18

MTD January 2012 1/16/12 4:31 PM

Quik-Link: 800-687-1557 ext. 11121

MTD_24-46.indd 39

1/16/12 4:32 PM

Facts section: Plant capacity Chart 19 NORTH AMERICAN TIRE PLANT CAPACITIES as of January 1, 2012 (in thousands of units)

Plant location/ Year constructed

Capacity falls 3.2% But help is on the way

T

ire capacity, not production, in North America totaled 307.5 million tires at 51 plants as of Jan. 1, 2012.

That’s down 3.2% compared to 12 months ago. (The total does not include race or aviation tires.)

U.S. capacity is 246.7 million tires, a 4.5% decrease over last year and 80.2% of total North American capacity. The majority of the decrease can be attributed to the closing of Goodyear’s Union City, Tenn., plant last July. (Titan International Inc. purchased the facility last November, and plans to utilize it as a mixing plant for farm and OTR tire production.)

There are 36 tire manufacturing facilities in the U.S., down from 48 plants in 2001. Less than half of them are unionized (see Chart 19).

Canadian tire plant capacity is 27.7 million tires, a slight year-toyear decrease. In contrast, Mexican plant capacity entered 2012 at 33 million tires, 4.6% higher than it was a year ago. The opening of Pirelli Tire North America Inc.’s plant in Guanajuato, Mexico, added 4,000 tires a day to the country’s capacity.

Premium consumer, truck and OTR tire capacity in North America is expected to increase significantly in the near future.

40 MTD_24-46.indd 40

La Vergne, Tenn., 1972 Warren County, Tenn., 1990 Bloomington, Ill., 1965 Des Moines, Iowa, 1945 Wilson City, N.C., 1974 Aiken County, S.C., 1999 Joliette, Quebec, 1966 Monterrey, Mexico, 2007 Cuernavaca, Mexico, 1980 Total:

PassenNonger union ISO1 QS2 per day: Bridgestone Americas Inc. x x x x x x x

x x x x x x x

Light truck per day:

7.1 2.3 0.0 0.0 0.0 0.0 0.0 0.0 x 33.1 0.0 x 17.3 7.7 9.3 7.2 x 7.0 0.0 x x 11.0 4.4 84.8 21.6 Carlisle Tire & Wheel Co. Jackson, Tenn., 2009 x 0.0 0.0 Clinton, Tenn. (Dico), 1974 x x 0.0 0.0 Total: 0.0 0.0 Continental Tire the Americas LLC Mount Vernon, Ill., 1973 x x x 28.0 3.0 Total: 28.0 3.0 Cooper Tire & Rubber Co. Findlay, Ohio, 1917 x 7.0 16.0 Texarkana, Ark., 1964 x 24.0 8.0 Tupelo, Miss., 1984/1960 x x 42.0 0.0 Total: 73.0 24.0 Goodyear Tire & Rubber Co. Buffalo, N.Y., 1923 x 4.3 5.4 Danville, Va., 1966 x x 0.0 0.0 Fayetteville, N.C., 1969 x x 30.5 10.5 Gadsden, Ala., 1928 x x 15.0 12.0 Lawton, Okla., 1978 x x x 70.0 0.0 Topeka, Kan., 1945 x x 0.0 1.0 Medicine Hat, Alberta, 1960 x x 14.0 0.0 Napanee, Ontario, 1990 x x x 19.0 0.0 Total: 152.8 28.9 GTY (General/Yokohama) Mount Vernon, Ill., 1988 x x x 0.0 0.0 Total: 0.0 0.0 Michelin North America Inc. Ardmore, Okla., 1969 x x x 40.5 3.5 Dothan, Ala., 1979 x x 1.0 4.0 Fort Wayne, Ind., 1961 21.0 9.5 Greenville, S.C., 1975 x x 28.0 0.0 Greenville, S.C. (C3M), 1997 x x x 7.0 0.0 Lexington, S.C., 1981 x x 19.0 0.0 Lexington, S.C., 1998 x x 0.0 0.0 Spartanburg, S.C., 1978 x x 0.0 0.0 Tuscaloosa, Ala., 1945 x 23.0 7.0

Truck Others per per day: day:

Total

6.2 8.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 14.2

0.0 0.0 0.26 4.5 0.0 0.0 0.0 0.0 0.0 4.76

15.6 8.0 0.26 4.5 33.1 25.0 16.5 7.0 15.4 125.36

0.0 0.0 0.0

26.0 15.0 41.0

26.0 15.0 41.0

5.0 5.0

0.0 0.0

36.0 36.0

0.0 0.0 0.0 0.0

0.0 0.0 0.0 0.0

23.0 32.0 42.0 97.0

1.75 10.0 0.0 0.0 0.0 5.5 0.0 0.0 17.25

4.55 0.0 0.0 0.0 0.0 1.6 0.0 0.0 6.15

16.0 10.0 41.0 27.0 70.0 8.1 14.0 19.0 205.1

3.9 3.9

0.0 0.0

3.9 3.9

0.0 0.0 0.0 0.0 0.0 0.0 0.0 7.0 0.0

0.0 0.0 0.0 0.0 0.0 0.0 0.09 0.0 0.0

44.0 5.0 30.5 28.0 7.0 19.0 0.09 7.0 30.0

MTD January 2012 1/16/12 4:32 PM

Plant location/ Year constructed Bridgewater, Nova Scotia, Canada, 1973 New Glasgow, Nova Scotia, Canada, 1971 Waterville, Nova Scotia, Canada, 1982 Queretaro, Mexico Total:

Nonunion ISO1 QS2

Passenger per day:

Light truck per day:

Truck Others per per day: day:

Total

x

x

11.0

3.0

0.0

0.0

14.0

x

x

7.0

1.0

0.0

0.0

8.0

x x

x

0.0 0.0 7.0

4.5 0.0 4.59

4.5 6.0 203.09

0.0 0.0 0.0

0.0 0.0 0.0

1.7 4.0 5.7

0.0 0.0 0.0

4.6 1.6 6.2

5.0 1.6 6.6

0.0 0.0 0.0 0.0

0.33 11.25 8.1 19.68

0.33 11.25 8.1 19.68

0.0 0.0

0.0 0.0

14.2 14.2

0.0 0.0

0.0 0.0

26.8 26.8

0.0 0.0

0.0 0.00

20.0 20.0

1.5 0.5 0.0 2.0

0.64 0.4 0.0 1.04

3.64 9.4 5.0 18.04

2.8 2.8

0.0 0.00

20.0 20.0

0.0 0.0 6.0 0.0 163.5 28.0 Pirelli Tire North America Inc. Rome, Ga., (MIRS), 2002 x x 1.2 0.5 Guanajuato, Mexico, 2011 x 2.8 1.2 Total: 4.0 1.7 Specialty Tires of America Inc. Indiana, Pa., 1915 x 0.0 0.4 Unicoi, Tenn., 1997 x 0.0 0.0 Total: 0.0 0.4 Titan Tire Corp.

Bryan, Ohio, 1967 x x 0.0 0.0 Des Moines, Iowa, 1943 x 0.0 0.0 Freeport, Ill., 1964 x x 0.0 0.0 Total: 0.0 0.0 Toyo Tire North America Manufacturing Inc. White, Ga., 2005 x x 12.2 2.0 Total: 12.2 2.0 Yokohama Tire Corp.

Salem, Va., 1968 25.7 1.1 Total: 25.7 1.1 Grupo Carso/Euzkadi (Continental AG) San Luis Potosi, Mexico 15.0 5.0 Total: 15.0 5.0 JK Tyre & Industries (formerly CIA Hulera Tornel) Mexico City, Mexico 0.5 1.0 Tultitlan, Mexico 7.0 1.5 Tacuba, Mexico 2.5 2.5 Total: 10.0 5.0 Corporacion de Occidente SA de CV (Cooper Tire) Guadalajara, Mexico, 2005 x x x 10.0 7.2 Total: 10.0 7.2 U.S. Totals Canadian Totals Mexican Totals TOTAL:

456.9 60.3 61.8 579.0

93.9 11.2 22.8 127.9

47.35 0.0 4.8 52.15

77.88 4.5 1.04 83.42

676.03 76.0 90.44 842.47

2011 vs. 2012 2010 vs. 2011

-3% +0.6%

-6.7% -0.7% +2.4% 0.0%

0% -1.2%

-3.2% +0.8%

Footnotes: 1 Plants that are ISO (International Organization for Standardization) 9001:2000 certified (www. iso.org).

2 QS (Quality System) 9000 certification, required by suppliers to Ford Motor Co., General Motors Corp. and Chrysler LLC (www.qscertification.com).

www.moderntiredealer.com MTD_24-46.indd 41

Bridgestone will invest $1.2 billion in U.S. tire production in South Carolina over the next four years.

That includes a new OTR tire facility near its existing consumer tire plant in Aiken County, S.C. The first OTR tire will roll off the assembly line in the first quarter of 2014. The plant tentatively will be completed by 2016.

Plant expansions at the Aiken County plant will increase capacity by more than 50%, from 25,000 passenger and light truck tires per day to 37,750 tires a day in 2015.

Bridgestone is investing an additional $36.6 million in its Warren County, Tenn., truck tire plant. The expansion will expand capacity by more than 11%, or 900 truck tires per day.

Mitas Tires North America Inc., a subsidiary of Mitas a.s., soon will begin producing radial agricultural tires at its new plant in Charles City, Iowa. When the facility reaches full capacity late in 2013, it will be able to produce close to 500 ag tires a day, according to MTD estimates. “The reason for building the new tire factory in Iowa is the proximity to original equipment manufacturers such as Case IH,” says Project Director Vladimir Dusanek.

Pirelli says its new consumer tire factory in Mexico will have a production capacity of five million high and ultra-high performance tires a year for light vehicles by 2016.

Continental expects to begin construction of its $500 million consumer tire plant in Sumter, S.C., in mid-2012 and complete the facility in 2013. Continental also is investing $224 million to expand its Mount Vernon, Ill., facility by four million passenger and light truck tires per year in three years.

Michelin is investing $200 million in its Lexington, S.C., consumer tire plant. All the new equipment will be installed by the second half of 2013.

Construction of Kumho Tire U.S.A. Inc.’s plant in Macon, Ga., which began in 2008, remains on hold, says the company. ■

41 1/16/12 4:32 PM

Facts section: Commercial

Everyone scrambles for usable truck tires More than 32 million new and retreaded truck tires weren’t enough

N

ew vs. retreaded truck tires was not so much a competition in 2011 as a cry for supply. There was a shortage of new truck tires in the U.S. because demand dictated it. Original equipment shipments alone were up more than 56%!

More truck tires were imported compared to 2010 — 22% more. In addition, domestic production was stretched to the limit. Continental, for one, increased its truck tire capacity at its Mount Vernon, Ill., plants, including its GTY (“G” for General, “T” for Toyo and “Y” for Yokohama) joint venture facility.

(As of the end of the year, Toyo is no longer part of the joint venture.

That gives Continental and Yokohama another 280,000 tires to split between themselves.)

The result was a 13% year-to-year increase in replacement truck tire shipments in the U.S., from 15.3 million to 17.3 million.

Down the road, the increase in Class 8 commercial vehicles (ACT Research Co. estimates 252,000 were produced

last year, up 63%) and replacement truck tire shipments bode well for casing availability.

Retreaded truck tires: up 7%

However, casings were in short supply last year, particularly out of Japan. Still, 15.3 million truck tires worth $3.8 billion were retreaded in 2011, up from 14.3 million in 2010.

The average price of a retreaded truck tire, including the cost of the casing, was $247.55, compared to $416.18 for a new truck tire.

Until 2003, more retreaded truck tires were produced annually than new truck tires. At that point, their trend lines crossed. Since then, new truck tires have outnumbered retreads six of the last eight years. (In 2003, nearly 16.5 million retreaded truck tires were produced.)

The retreaders on Modern Tire Dealer’s “Top 100 Retreaders in the U.S.” list, which appeared in our April 2011 issue, represent 304 of the estimated 680 retreading plants in the U.S. In 2010, they accounted for 89% of

Chart 20 2011 U.S. MARKET SHARE, RETREADED TRUCK TIRES (based on 15.3 million units)

42 MTD_24-46.indd 42

the total truck tire retreads produced.

The top 25 retreaders accounted for more than half (59.2%)of the industry’s output.

Bridgetone Commercial Solutions Group, which oversees Bandag retreading, owns 42% of the domestic truck tire retreading market share, down from 45% in 2005 (see Chart 20). Bandag retreads are sold through 1,600 outlets throughout North America.

Goodyear is the second largest Chart 21 2011 U.S. REPLACEMENT MEDIUM/HEAVY TRUCK TIRE BRAND SHARES (Based on 17.3 million units) Brand

2010

Michelin

18.0%

Bridgestone

17.0%

Goodyear

14.0%

Yokohama

9.0%

Firestone

7.5%

Continental

5.5%

General

4.0%

Double Coin

3.5%

Hankook

3.0%

Dunlop

2.5%

BFGoodrich

2.0%

Dynatrac

2.0%

Hercules

2.0%

Kelly

2.0%

Roadmaster

2.0%

Toyo

2.0%

Gladiator

1.0%

Kumho

1.0%

Sumitomo

1.0%

Others

3.0%

MTD January 2012 1/16/12 4:32 PM

Quik-Link: 800-687-1557 ext. 11122 MTD_24-46.indd 43

1/16/12 4:32 PM

Facts section: Commercial Chart 22 2011 U.S. REPLACEMENT FARM TIRE MARKET SHARES REAR RADIAL (293,000 units) Goodyear 29.0% Firestone 27.0% BKT 19.5% Michelin 10.5% Titan 7.0% Alliance 3.0% Trelleborg 2.5% Others 1.5% REAR BIAS (480,000 units) BKT 31.0% Firestone 26.0% Goodyear 18.0% Titan 13.0% Harvest King 2.5% Alliance 2.0% American Farmer 2.0% Trelleborg 2.0% Akuret 1.5% Others 2.0%

44 MTD_24-46.indd 44

SMALL FARM (1.37 million units) Firestone 28.5% Goodyear 19.0% BKT 15.5% Titan 15.5% Am. Farmer 6.0% Harvest King 4.5% Alliance 3.0% Carlisle 3.0% Trelleborg 2.0% Akuret 1.0% Others 2.0%

retreader with a 28% market share, followed by Michelin (which includes the Oliver brand) at 23%. Marangoni Tread N.A. Inc. is fourth with 4% of the market.

Continental, which introduced its ContiTread retread products in 2009, signed its first licensee in the U.S. last September: King Tire Service Inc. in Bluefield, W.Va. The tire manufacturer is looking to expand its ContiTread

Quik-Link: 800-687-1557 ext. 11123

Chart 23 2011 U.S. OE REAR FARM TIRE MARKET SHARE (653,000 radial and bias units) Firestone

41.1%

Goodyear

36.3%

Titan

13.9%

Others

8.7%

distribution network, according to Clif Armstrong, director of marketing for Continental commercial vehicle tires.

With the addition of a major player in the retread market and the demand for retreads increasing, will there be a new retread event in the U.S.? According to TRIB Managing Director David Stevens, the possibility exists.

At the TRIB (Tire Retread & Repair Information Bureau) fall membership meeting in Las Vegas, Nev., on Oct. 31, 2011, Stevens said a recent membership survey revealed that 65% of the respondents favored a retread conference tied to another trade show. “We just need to find the right venue.” ■

MTD January 2012 1/16/12 4:32 PM

Quik-Link: 800-687-1557 ext. 11124 MTD_24-46.indd 45

1/16/12 4:32 PM

Facts section: Index

46th annual MTD Facts Section Index Everything you wanted to know about 2011, from A to Z In order to make our 46th annual Facts Section more user-friendly, we have created a corresponding index of all the information, from

A Associate brands... 28 Automotive service stats... 36

B Brands, number of... 34

C Canada... 26, 32, 40-41 Chinese imports... 26, 30

D Distribution, Canada... 32 Distribution, U.S.... 36

F Farm tires, OE market share... 44 Farm tires, replacement market share... 44

G Global tire sales... 34

I Imports, consumer tires... 26 Imports, truck tires... 26, 42 Inventory... 38

M Major brand market share... 28, 30 Market share, Canada... 32 Market share, by company... 28 Market share, OE... 30 Market share, retail distribution... 36 Market share, retreading... 42

46 MTD_24-46.indd 46

Market share, U.S. farm... 44 Market share, U.S. consumer... 28 Market share, U.S. truck... 42 Market share, wholesale distribution... 36 Mexico... 40-41

the charts to the text! And it is alphabetical, to boot! Check out the beginning of our 12-page section on page 24.

Shipments, consumer... 24, 26 Shipments, commercial... 24, 26, 42, 44 Survey, State of the Industry... 24 Survey, Retail Tire Customer... 30, 36 Survey, wholesalers... 24

T O OE tire shipments, Canada... 26, 30 OE tire shipments, U.S.... 24, 30 Oil changes... 36

P Plant capacities, North America... 40-41, 42 Plant certification... 41 Plant investment... 41 Pricing, consumer tires... 24, 34 Pricing, oil changes... 36 Pricing, retreading... 42 Pricing, truck tires... 34, 42 Private brands, Canada... 32 Private brands, U.S.... 28, 30

Tariffs, China... 26, 30 Technicians per store... 36 Tire brands, MTD 100... 38 Tire brands, U.S.... 34 Tire plants, North America... 40-41 Tire sales, global... 34 Tire pricing... 34 Tire sales, units... 24, 26 Tire sales, U.S./Canada... 34 Tire shipments, Canada... 26, 32 Tire shipments, U.S.... 24, 26 Tire sizes, replacement... 38 Tire sizes, OE... 38 Truck tires, imports... 26, 42 Truck tires, market share... 42 Truck tires, retreading... 24, 42 Truck tires, shipments... 24, 42

R Replacement tire sales... 24 Retread plants... 42 Retreading, market share... 42 Retreading, shipments... 24, 42 RMA forecasts... 26

S Sales, tires... 24 Service bays... 36 Shipments, 2012... 24, 26

U Unionized plants... 40-41

V Vehicle manufacturers... 30, 32, 36 Vehicle sales... 30, 32 Vehicle shipments, trucks... 42

W Wholesale distribution... 24, 36, 38

MTD January 2012 1/16/12 4:32 PM

Quik-Link: 800-687-1557 ext. 11125

MTD_47-55.indd 47

1/13/12 10:43 AM

Business insight

Selling your business Advance planning is needed to get your best deal

By Norm Gaither

Y

ou have had a hard day. Two employees did not show up for work. Customers demand the impossible and then argue about the price. Fill rates from your tire suppliers are poor and you have to call several sources to just get tires. Last year was the worst year in business and you lost $87,809. You are frustrated and tired of the hassle. Why not just sell the business and enjoy retirement?

Hold on, take a deep breath. Now would be the worst time for you to make this decision.

Selling any business takes a lot of preparation. This is not something you do on the spur of a moment. There are many legitimate reasons to sell your business: health problems, divorce, competition, financial losses and

economic downturn. These are all logical reasons to sell, but here is the big question: Is it the right time? As a business broker for more than 25 years, I’ve seen quite a few owners sell their business prematurely and they suffered the consequence of lower value. The biggest problem with selling too early is that you will not make the best deal and will, for sure, leave money on the table.

Plan in advance

Long before you decide to sell your business, you should start planning. My recommendation is at least three years in advance. You should also consult your accountant, attorney and a business broker. You need these key advisors to guide you through a very tough process. With the current economy, you may have had losses for the past several years and think it’s time to cash out. This would be the worst time for anyone to sell a business. Would you buy a company that is losing money? Sometimes it takes up to five years to get your company in order.

Your accountant can give you the financial results

48 MTD_47-55.indd 48

on your company for the past three years. Anyone interested in purchasing your company will need this information as well as the last three years’ tax returns.

How much is your business worth?

Many times business owners think of these factors to determine the price tag for their business: 1) they’ve been in business for 25 years, 2) they have annual sales of $1,000,000 or more; and 3) they have a large customer base.

Some, if not all, of these variables will help, but the real value of your company is your profitability.

Profits determine selling price

If your company is showing a loss for the last several years you will most likely not get the top dollar for your business. Put yourself in a buyer’s shoes. If you are looking to invest your money in something, wouldn’t you want the largest return on your investment? Buyers are not interested in how much you sell. They are only interested in how much you take to the bank. Now that you understand the reality, let’s have a look at an example of one company’s experience.

Example #1 income statement (see page 52). The company for the past three years has lost money but the seller wants to sell the business for $1,200,000. Most people arrive at their asking price based on how much they need to retire, not what the company is worth. Why does the seller think his business is worth this amount?

From his perspective: 1) he has assets of $750,000; 2) he has been in business for 25 years, and 3) he thinks he deserves $450,000 of goodwill.

Sadly, this is how many tire store owners price out their business. They think just because they have been around for 25 years they should get a lot of money for goodwill. The problem with this thinking is most buyers won’t pay this price. The buyer can buy these assets anywhere and the equipment and inventory would be in better shape. As for goodwill, if a business is losing money why would any buyer pay a premium? It all comes down to how much profit your company will make. If you spend the next three years getting your company in shape and making profits, then someone may pay your asking price.

First, fix the company

Let’s try to fix this company and see if we can make the kind of profits we need to get the sellers’ asking price. In the New Year One (example #1A, page 54), the owner makes a few changes to his sales and gross profit, and then decreases some of his expenses. Look at

MTD January 2012 1/13/12 10:43 AM

Quik-Link: 800-687-1557 ext. 11126

MTD_47-55.indd 49

1/13/12 10:43 AM

Business insight the difference in the bottom line! (To be fair, making changes to your business is not easy.)

When Dealer Strategic Planning 20 group members convene three times a year, they discuss the actual steps you can take to decrease expenses, increase sales and, thus, increase profitability.

It is much easier when you have peer support to make these changes. Several tire dealers join our groups just to make these improvements before they put their businesses up for sale.

We now get to New Year Two and continue to make improvements. By making these improvements, the profit increases exponentially and the business price tag increases. Finally, in New Year Three we have fixed the company. Now, let’s see what someone may be willing to pay for it.

Formula for sellers

Many buyers who have purchased tire stores in the past as well as any banker, accountant or broker will use a method to determine how much a business is worth called EBITDA or earnings before interest, taxes, depreciation and amortization.

This is simply the most accepted way to value a business. The only other consideration would be for owner’s adjustments or onetime expenses.

This is again why you should always have professionals help you when selling a business. Your advisors are very familiar with this term and know how it works to determine how much your business is worth.

Here’s another important point: value the business but not the real estate. You can decide to keep the real estate and lease it back to the buyer or if you want to sell the property and building separately, have a professional commercial real estate broker value your building so that you can get the maximum value for the property. Maybe your location is better suited for a restaurant and they might be willing to pay a premium for the real estate.

Now that we know what the process is to value the business only (no real estate), let’s apply it to the company starting with the Income Statement for Old Year #3 (example #1, page 52): Earnings Interest Depreciation Amortization Owner adjust: Salary Travel Vehicle EBITDA

$(87,809) $ 11,518 $ 8,555 $ -0$ 40,000 $ 9,845 $ 4,000 $(13,891)

Most people will pay a “multiple” of EBITDA for a business.

Four years ago many tire dealers were able to get five times EBITDA when selling their business if, of course, they made a profit. In the current climate, many buyers are only willing to pay three times EBITDA. Even if you make a profit, you may want to wait until the market changes for the better, maybe then you will be able to get five times EBITDA. If we apply three or five times to this business it won’t matter because it’s

50 MTD_47-55.indd 50

not worth much. This is why you must take three to five years getting your financial house in order.

Three years later

It has been three years for this tire dealer trying to fix his business. Maybe he joined a 20 group to take advantage of experienced store owners to help him identify and make changes. Look at the Income Statement for New Year #3 (example #1A). As you can see, he added sales incentives and his sales went up a little. He pushed his gross profit up only 1% each year. He had a store manager who was not doing the job so he let him go. The owner decided to get back into the business and run it himself. All of these changes would have been made by a new owner, so by making them the current owner has not only increased his profits, but he has increased the value of the sale of this business. The EBITDA value of the business on New Year #3 will be: Earnings Interest Depreciation Amortization Owner Adjust: Salary Travel Vehicle EBITDA

$147,323 $ 7,800 $ 8,555 $ -0$ 40,000 $ 9,845 $ 4,000 $217,523

WOW! Just by getting back into the business on a day-to-day basis and making small changes to his business, the owner has now made it attractive for purchase. If the market is right and he could sell this tire store at a five times EBITDA (not counting real estate or the building), he could make $1,087,615.

Liabilities stay with the seller

Now the next most important thing in selling a business is to remember that you are still responsible for the liabilities of the company. The new buyers will pay a price that they think is fair, but only for the assets of the company, not the liabilities.

Originally the seller wanted to sell his business three years ago for $1,200,000. Now, at best, he can get close to $1,100,000 before paying off the liabilities. Another surprise may be by selling the company for $1,100,000 there may be some tax liability from the sale. Always check with your accountant early so he/she can decide what, if any, taxes will be due from the sale of your company.

So let’s review. The first thing we do once we decide to sell is get our financial house in order. Be sure to contact your accountant, attorney and a business broker. This process will take at least three years or longer, if you are not making a profit.

If you own real estate, get a commercial realtor to value the building. Often a business broker can help sell the company and value the real estate. Once you have taken these steps you are ready to sell and enjoy the fruits of your labor. ■ Norm Gaither is president of Dealer Strategic Planning Inc. (DSP), a company that promotes “20 groups” in multiple industries.

He is a well-known consultant in the automotive aftermarket and has owned his own firm since 1984.

MTD January 2012 1/13/12 10:43 AM

Quik-Link: 800-687-1557 ext. 11127 MTD_47-55.indd 51

1/13/12 10:43 AM

Business insight EXAMPLE #1 YOUR COMPANY NAME INCOME STATEMENT FOR THE YEAR ENDING — 12/31/XX OLD YR. #1

OLD YR. #2

OLD YR. #3

SALES

$1,500,000

100.0%

$1,450,000

100.0%

$1,400,000

100.0%

COST OF SALES

825,000

55.0%

812,000

56.0%

798,000

57.0%

GROSS PROFIT

675,000

45.0%

638,000

44.0%

602,000

43.0%

SALARIES/STORE

200,000

13.3%

200,000

13.8%

200,000

14.3%

SALARIES/OFFICE

40,000

2.7%

40,000

2.8%

40,000

2.9%

SALARIES/OWNER

87,500

5.8%

87,500

6.0%

87,500

6.3%

PAYROLL TAXES

44,602

3.0%

44,602

3.1%

44,602

3.2%

BENEFITS

51,915

3.5%

51,915

3.6%

51,915

3.7%

RENT

57,000

3.8%

57,000

3.9%

57,000

4.1%

INSURANCE

26,715

1.8%

26,715

1.8%

26,715

1.9%

GENERAL TAXES

18,901

1.3%

18,901

1.3%

18,901

1.4%

LEGAL & ACCOUNTING

3,800

0.3%

3,800

0.3%

3,800

0.3%

SUPPLIES

15,745

1.0%

15,745

1.1%

15,745

1.1%

DEPRECIATION

8,555

0.6%

8,555

0.6%

8,555

0.6%

GAS, OIL & REPAIRS

38,519

2.6%

38,519

2.7%

38,519

2.8%

MAINTENANCE

4,619

0.3%

4,619

0.3%

4,619

0.3%

ADVERTISING

25,000

1.7%

25,000

1.7%

25,000

1.8%

UTILITIES

18,503

1.2%

18,503

1.3%

18,503

1.3%

TELEPHONE

8,805

0.6%

8,805

0.6%

8,805

0.6%

DATA PROCESSING

12,503

0.8%

12,503

0.9%

12,503

0.9%

INTEREST

11,518

0.8%

11,518

0.8%

11,518

0.8%

TRAVEL & ENTERTAINMENT

9,845

0.7%

9,845

0.7%

9,845

0.7%

MISCELLANEOUS

5,764

0.4%

5,764

0.4%

5,764

0.4%

TOTAL EXPENSES

689,809

46.0%

689,809

47.6%

689,809

49.3%

NET PROFIT BEFORE TAXES

(14,809)

-1.0%

(51,809)

-3.6%

(87,809)

-6.3%

EXPENSES:

52 MTD_47-55.indd 52

MTD January 2012 1/13/12 10:43 AM

Quik-Link: 800-687-1557 ext. 11128 MTD_47-55.indd 53

1/13/12 10:43 AM

Business insight EXAMPLE #1A YOUR COMPANY NAME INCOME STATEMENT FOR THE YEAR ENDING — 12/31/XX NEW YR. #1

NEW YR. #2

NEW YR. #3

SALES

$1,450,000

100.0%

$1,500,000

100.0%

$1,575,000

100.0%

COST OF SALES

797,500

55.0%

810,000

54.0%

834,750

53.0%

GROSS PROFIT

652,500

45.0%

690,000

46.0%

740,250

47.0%

SALARIES/STORE

170,000

11.7%

180,000

12.0%

180,000

11.4%

SALARIES/OFFICE

35,000

2.4%

35,000

2.3%

35,000

2.2%

SALARIES/OWNER

87,500

6.0%

87,500

5.8%

87,500

5.6%

PAYROLL TAXES

25,000

1.7%

25,000

1.7%

25,000

1.6%

BENEFITS

35,000

2.4%

35,000

2.3%

35,000

2.2%

RENT

63,000

4.3%

63,000

4.2%

63,000

4.0%

INSURANCE

22,000

1.5%

22,000

1.5%

22,000

1.4%

GENERAL TAXES

16,000

1.1%

16,000

1.1%

16,000

1.0%

LEGAL & ACCTOUNTING

3,800

0.3%

3,800

0.3%

3,800

0.2%

SUPPLIES

14,000

1.0%

14,000

0.9%

14,000

0.9%

DEPRECIATION

8,555

0.6%

8,555

0.6%

8,555

0.5%

GAS, OIL & REPAIRS

23,000

1.6%

23,000

1.5%

23,000

1.5%

MAINTENANCE

4,619

0.3%

4,619

0.3%

4,619

0.3%

ADVERTISING

19,000

1.3%

19,000

1.3%

19,000

1.2%

UTILITIES

18,503

1.3%

18,503

1.2%

18,503

1.2%

TELEPHONE

8,805

0.6%

8,805

0.6%

8,805

0.6%

DATA PROCESSING

8,500

0.6%

8,500

0.6%

8,500

0.5%

INTEREST

7,800

0.5%

7,800

0.5%

7,800

0.5%

TRAVEL & ENTERTAINMENT

9,845

0.7%

9,845

0.7%

9,845

0.6%

MISCELLANEOUS

3,000

0.2%

3,000

0.2%

3,000

0.2%

TOTAL EXPENSES

582,927

40.2%

592,927

39.5%

592,927

37.6%

NET PROFIT BEFORE TAXES

69,573

4.8%

97,073

6.5%

147,323

9.4%

EXPENSES:

54 MTD_47-55.indd 54

MTD January 2012 1/13/12 10:43 AM

Quik-Link: 800-687-1557 ext. 11129 MTD_47-55.indd 55

1/13/12 10:43 AM

Counter intelligence

Stop, look and listen It’s time to examine your business to discover areas where a complete revamp would create new opportunities

By Wayne Williams

T

he most rewarding part of my 35-year experience in the automotive aftermarket has been people. I love cars. I love wheels, tires, service and customers. I love the interaction of connecting the dots to satisfy the needs within our industry. Manufacturers build ’em, distributors By Wayne Williams move ’em around, retailers sell ’em to the public, and the cycle continues. People make it happen. Our business is a “people” business. People buy from people. Yes, the Internet has become a powerful “influencer” with its wide variety of ways to search and find information, but statistics show that customer/people research online and buy local, from local provider/people.

At the Specialty Equipment Market Association (SEMA) Show in Las Vegas last November, I spoke with many people in our industry. Like I said, I love cars and trucks and bikes, etc. The SEMA Show is like no other event; it is truly a “show.”

For me, however, the best part is the people. This year, three teams of people stick out in my mind. They were

56 MTD_56-63.indd 56

excited to be at the show. They were excited to share their ideas, their discoveries, and their fresh commitments to serving the customer/people.

These three provider/people represent the core message of my article this month, dealers who have “stopped, looked and listened” and are making changes to their businesses after taking time to better understand how they might improve their business. All three are paying close attention to hearing and understanding their customers, two are revising their incoming phone call procedures.

All in the family

One team of two brothers by all standards operates one of the best full-service tire and repair outlets in California.

Their approach is nothing short of “total customer care” from start to finish to follow-up. They have seemingly been unaffected by the economic downturn and continue to redefine new, higher levels of service.

I can barely express their enthusiasm as they described to me their complete overhaul of their approach to incoming phone calls. They have hired an expert, a specialist in teaching sales staffs to really listen, to truly hear and understand and respond to customer requests in ways that build trust and confidence and sales revenue. They are listening daily to phone calls from the previous day and are measuring their performance against their training and

Quik-Link: 800-687-1557 ext. 11130

MTD January 2012 1/13/12 10:53 AM

Quik-Link: 800-687-1557 ext. 11131

MTD_56-63.indd 57

1/13/12 10:53 AM

Business insight new standards. These brothers/owner/people could not have been more excited and pleased with the results. The brothers/ owner/people and the employee/people and the customer/ people are all benefiting.

Buddy system

The next team I spoke with is a pair of buddies who worked together as teenagers mounting tires in a shop, and then started their own tire shop in 1989. Partners now for over 22 years and also highly successful, these owner/people are embracing the new digital age. Not only are they upgrading their website, but are partnering with their longtime distributor/supplier/ people with a variety of digital initiatives that have been proved successful.

Independently, they have hired a phone service provider that is recording incoming phone calls.

This is a family business, and the family team has evaluated their phone skills and openly agreed that they

As much as offering wheels and tires, they offer specific solutions with personalized service that exceeds the ordinary. needed to improve. They have revamped their approach and are completely sold on and committed to providing the best phone procedures to improve their customers’ experience.

Their excitement is contagious, and the results thus far are outstanding.

Like father, like son

Thirdly is a father and son team who provide specialty services to a narrow and specific niche in the automotive aftermarket. Their specialty is tires and wheels. They know there are a variety of online providers and local options to meet the needs of their clients.

The father and son enjoy a relationship that allows them to speak openly about the details of their business, and the company is growing and expanding because they have agreed to listen to the customer, and they have decided to offer extreme customer service.

As much as offering wheels and tires, they offer specific solutions with personalized service that exceeds the ordinary.

They have a knack, especially the son, for spotting trends that allow them to offer unique solutions. They do this through carefully listening to the nuances and concerns of each and every individual client.

At your service

For all the talk about change in today’s business environment, and yes there is plenty of change, unrelenting fast-paced changes that can be wearisome, it’s good to hear provider/ people who are carefully listening to customer/people and responding to their needs and concerns. This people business of ours is the best business of all, filled with opportunity. If you’re a people person, then you never tire of serving people.

Successful people are taking the time to “stop, look and listen,” looking, listening, understanding and responding, and they are excited beyond words about the results they are getting.

All I’m saying is to take a look at your business, cut a piece of it out and completely revamp it.

This will be good for all the people who your business touches! ■ Wayne Williams is president of ExSell Marketing Inc., a “counter intelligence” firm based in La Habra, Calif. He can be reached at exsellmkting@gmail.com.

58 MTD_56-63.indd 58

Quik-Link: 800-687-1557 ext. 11132

MTD January 2012 1/13/12 10:53 AM

Business insight

Online appointment scheduling Catering to customers who prefer to use the Internet

By Wayne Croswell

D

o you offer online scheduling for service appointments? Why not? It’s easy, inexpensive, and it gives your customers a convenient way to do business with you. Have you ever heard of the Golden Rule? I am not referring to the one that says, “He who has the gold ... rules.” I mean, “Treat others as you would want to be treated.”

For the most part, this rule will suffice in everyday business. However, it’s not always the best methodology when dealing with customers. People don’t always want to be treated the way you want to be treated. In general, it’s not a bad axiom. But, sometimes it’s better to employ the “Platinum Rule.” The Platinum Rule suggests that you “Treat others the way they want to be treated.”

Simply stated, not everyone is the same, and what might appeal to you might not appeal to every customer.

So, it’s smart business to offer choices.

someone to pick up the phone, and they can do things on their time. Many dealers offer a promotional coupon for making the appointment online to encourage the practice.

The basics

Whenever possible, the online booking system you choose should provide an estimate for the cost of service. If you have to provide a range, go ahead. Customers booking online want to get an idea of what the cost will be before they commit to an appointment.

When the service requires a more comprehensive quote, or possibly an inspection before work can begin, let them know that through the system in advance. No one likes surprises when it comes to price, unless of course the surprise is a lower final cost.

Also, the customer should be able to dictate the method of communication regarding an appointment. The online appointment system you employ should provide the customer with choices. Do they prefer The choice is theirs e-mail? Do they want text mesThis is where online appointment sages? Let the customer decide. scheduling fits into the picture. Some Remember the “Platinum people like to call a shop and talk with Rule.” It should be effortless a human and some simply do not. An for them to make an appointonline appointment scheduling system ment, and it should be just as affords the customers who prefer to effortless for you to manage use the Internet the option to book an the scheduling process. A good appointment with one of your shops A good online service bay scheduling sys- automated system can provide for a day and time that is convenient for tem will help you manage your bays better that for you. by using your techs’ time efficiently. them — quickly and easily, and without An online appointment having to pick up the phone. An online system allows them scheduling system will show you the time-slots that are to see what time-slots are open, it lets them choose what reserved and the services that are being requested. A good service they are coming in for, and schedule the service system also will manage your bays and allow you to set for when they would like to come in. up service appointments in the proper time increments.

In addition, some systems can interface to popular What are the capabilities? point-of-sale systems; this makes the scheduling system A really good online appointment system will provide even more powerful. With an integrated model, not only your customers with a list of services. Based on what they are you allowing your customers to schedule their own select, it will schedule the necessary time the appointment appointments, the appointments are also being entered will take. The system will alert you (the service provider) as work orders into your POS system. You can then manand the customer that the appointment has been confirmed, age the process, but don’t have to re-key anything — this remind them in advance about the service, and thank them eliminates errors and increases productivity. when the service is complete.

This technology is simple to install, easy to implement, Simple appointments for oil changes and the like don’t and available today. ■ need to take up valuable phone time with your staff. An online appointment scheduling system frees-up staff to As CEO and president of WECnology LLC (see website service the customers standing at the counter. Custom- www.wecnology.com), Wayne Croswell is a “complimentary ers who use your online appointment scheduler get the technology advisor” for independent tire dealers. Croswell can bonus of immediate service — they don’t need to wait for be reached at wcroswell@wecnology.com or (603) 249-5530.

www.moderntiredealer.com MTD_56-63.indd 59

59 1/13/12 10:53 AM

Focus on industry

‘Let’s Go’ brand building Kumho promises dealers better fill rates, more targeted ads in 2012

By Bob Bissler

D

espite an uncertain economy, Kumho Tire CEOs were optimistic about business next year at the 2012 Kumho Tire Dealer Meeting in Costa Rica, Central America, Dec. 8-12, 2011.

While plans for a U.S. facility are on hold, the company has taken steps to improve fill rates by consolidating its five U.S. warehouses down to three locations — Atlanta, Ga., Chicago, Ill., and Rancho Cucamonga, Calif.

The company originally broke ground for the 1.3 millionsquare-foot tire plant in Macon, Ga., in May 2008. The recession forced Kumho to postpone the project.

“There is one investment we had to decide to delay: our factory in Georgia. This project will be pushed back as we deal with the uncertainty of the economy and the Chinese tariff situation,” says J.H. Kim, global CEO of Kumho Tire.

“We will continue to focus our resources on providing you, our most dedicated customers, with the highest fill rates and the highest quality product in the coming year.”

“We are going to improve delivery service in 2012,” says J.B. Kim, president and CEO of parent company Kumho Tire Co. Ltd.’s Kumho Tire North America division. “In 2010 we began a new focus on sports marketing, and our commitment to change is not over.”

J.H. Kim said the company continues to progress through the debt workout situation of the company’s umbrella conglomerate, Kumho Asiana Group. He stressed that Kumho Tire is fully committed to the North American and South American markets.

“The outlook for 2012 includes much uncertainty for the global economy as well as the tire industry,” says J.H. Kim. “But one thing is certain: we will see more change in 2012. This change will bring challenge and opportunity for all of us next year.”

J.H. Kim has seen many changes since he was named global CEO in 2009. Most notable is the company’s focus on sports marketing. He said that in addition to sports marketing, Kumho is also investing more in advertising and focusing on the brand’s core consumer — collegeeducated male decision makers. The company’s sports marketing efforts have improved the brand’s awareness, and demand has gone up in the past year.

“Our sports marketing initiative is not just about signage,” says David Koh, pricing manager for Kumho Tire.

“It has to be relevant, memorable, interactive and have an emotional connection. Sports marketing is elevating the Kumho brand.”

Koh outlined some of Kumho’s initiatives for 2012, including dealer and retailer communications, point-of-sale

60 MTD_56-63.indd 60

Kumho Tire Global CEO J.H. Kim (left), with President and CEO of Kumho Tire North America J.B. Kim, says the uncertain economy forced the company to postpone a planned U.S. tire plant in Georgia.

materials, social media and promotions. Kumho’s latest rebate program “Let’s Go!” will last through this month.

The previous $50 mail-in rebate program was introduced for the new Ecsta 4X. The new program features both the Ecsta 4X and Ecsta LX Platinum tire lines. Kumho also has various Ecsta 4X point-of-purchase materials available to dealers that feature a removable decal advertising the rebate promotion.

Rick Brennan, vice president of marketing, told the dealers in attendance that electronics, especially cell phones, are changing the world and changing the way people shop.

As a result, Kumho is looking at ways to tap into that as a retailing tool. He also says a number of things bode well for tire dealers.

“Consumer confidence in the economy is going up.

November 2011 was the best auto sales month since the ‘Cash for Clunkers’ program in August 2009. The U.S. economy grew 2% in 2011, and the same is expected for 2012.”

Brennan added that the number of SKUs is going up, “and people are keeping their cars longer,” which are also positives for dealers. He said Kumho’s marketing efforts are evolving. The company plans to continue relying on sports marketing in a big way in 2012.

“Our new focus on sports marketing has placed the Kumho brand with some of the most well-known and popular sports teams in the U.S.A,” says J.B. Kim. “Our commitment to change is not over. Our theme for this year’s meeting is ‘Let’s Go.’ We want to stress our partnership with you and your strong success in 2012.” ■

MTD January 2012 1/13/12 10:53 AM

Quik-Link: 800-687-1557 ext. 11133

MTD_56-63.indd 61

1/13/12 10:53 AM

Focus on industry

AAPEX 2011: Target buyers hit the mark Attendance was up 17% from 2010, say officials

By Bob Bissler

T

he 2011 Automotive Aftermarket Products Expo (AAPEX) had strong participation in key target buyer categories. The exposition, held Nov. 1-3 in Las Vegas, Nev., had 2,292 exhibitors, 230 more than in 2010.

Overall, buyer attendance during Automotive Aftermarket Industry Week, which includes both AAPEX and the SEMA (Specialty Equipment Market Association) Show, increased by 17% over 2010.

AAPEX 2012 takes place Oct. 30-Nov. 1 at the Sands Expo Center in Las Vegas.

Bosch: Wipers chase storms, fluid exchange Storm-chasing vehicle “The Domina- portfolio debuts tor” features three sets of ICON Robert Bosch LLC wiper blades from Robert Bosch LLC. promoted its ICON beam wiper blades and introduced a new series of fluid exchange products at AAPEX 2011.

Last year Bosch partnered with Discovery Channel’s popular “Storm Chasers” TV series. Three sets of Bosch ICON wiper blades are used on the show’s storm chasing vehicle, The Dominator, which was on display in the Bosch booth at AAPEX. On hand to show off the vehicle was show star Reed Timmer, owner and lead storm chaser for TornadoVideos.net.

Two Bosch TV spots feature Timmer and The Dominator 2.

More than 400 spots are airing nationwide on Discovery and Science Channel programming through February 2012.

Bosch also introduced a new series of fluid exchange products. The series consists of the Bosch Automatic Transmission Fluid Exchanger, the Engine Coolant Exchanger, the Brake Fluid Exchanger, the Power Steering Fluid Exchanger and the Differential Fluid Exchanger.

Left to right: the VCX 400, the BFX 200 Brake Flush System, the Bosch Multi Coolant Exchanger, the Bosch ATX 200 Automatic Transmission Fluid Exchanger, and the Bosch PSX 300.

62 MTD_56-63.indd 62

DENSO celebrates new division, 40th anniversary DENSO Corp. announced at AAPEX that it has formed a new aftermarket division based at the headquarters in Kariya, Aichi, Japan.

“This establishes a structure where the aftermarket is operated as an independent business entity apart from our original equipment business,” says Toshiaki Fujii, head of the new DENSO Aftermarket Business Unit.

In addition, Fujii announced a significant anniversary for the company.

“This year is the 40th anniversary of NIPPONDENSO of Los Angeles, the predecessor of DENSO Sales California,” says Fujii. “Forty years ago, DENSO Sales California was established as DENSO’s first overseas subsidiary.”

SPX unveils brake drum puller, tech scope SPX Corp. launched two new products at AAPEX, the Heavy-Duty Brake Drum and Rotor Puller (No. 6980), and the OTC Tech-Scope (No. 3857).

The Heavy-Duty Brake Drum and Rotor Puller was designed to offer automotive technicians the ability to handle large component pulls such as brake drums, rotors, drive wheels, gears, flywheels and pulleys.

The OTC Tech-Scope is a stand-alone two-channel highspeed lab and ignition oscilloscope with a multimeter. The SPX launched the OTC Brake Drum and Rotor Puller at the tool includes an ignition scope 2011 AAPEX show. and a digital multimeter with an ohm meter.

Gabriel expands ReadyMount line Gabriel Ride Control LLC had a lot to share with AAPEX 2011 attendees. The new Gabriel website features an enhanced parts search and a mobile parts search, and the company’s new Facebook page promotes the advantages of the expanded ReadyMount strut line.

“We know customers have a lot riding on the preassembled struts they choose, so we precision- Gabriel Ride Control LLC’s engineer and extensively test expanding line of Readyour ReadyMount assemblies Mount struts now covers 105 and components,” says Christine million vehicles.

Fisher, the company’s marketing and communications manager.

Gabriel now offers 140 new ReadyMount fully assembled SKUs. The expansion brings Gabriel ReadyMount coverage to 105 million vehicles with 2,000 applications. ■

MTD January 2012 1/13/12 10:53 AM

Quik-Link: 800-687-1557 ext. 11134

MTD_56-63.indd 63

1/13/12 10:53 AM

TPMS

Jeep Liberty: Proper positioning protects TPMS sensors Install original valve stem caps to keep sensors dry SUBJECT VEHICLE: 2005-07 Jeep Liberty.

RESET PROCEDURE? Yes, directions follow.

SPECIAL TOOLS NEEDED? Yes, a thin-walled socket.

T

he tire pressure monitoring system (TPMS) on the 2005-07 Jeep Liberty uses radio and sensor technology to monitor tire air pressure levels. Sensors, mounted to each road wheel as part of the valve stem, monitor tire pressure, air temperature inside the tires, wheel acceleration and the sensor internal battery status for all four active road tires and the spare (in vehicles equipped with a full-size spare).

The sensor will broadcast this information, along with a unique 32-bit ID, to a central receiver circuit located inside the Wireless Control Module (WCM).

If a warning or fault condition exists, the Figure 1

64 MTD_64-69.indd 64

WCM will send a message that illuminates the low pressure warning light and sounds a chime. If a system fault is detected, the indicator light will flash on/off for 10 to 60 seconds, once every 10 minutes.

To remove a faulty sensor, follow these steps. CAUTION: Wheels and tires are match-mounted at the factory. Before demounting a tire from its wheel, a reference mark should be placed on the tire at the valve stem location.

1. Remove the tire and wheel assembly.

2. Demount the tire from the wheel following the tire changer manufacturer’s instructions. Pay special attention to the following: a. When breaking front and rear tire beads loose from

MTD January 2012 1/13/12 10:57 AM

the wheel rim, avoid using the bead breaker near the sensor. b. When preparing to demount the tire from the wheel, carefully insert the mounting/demounting tool at the valve stem +/-10 degrees, and then proceed to demount the tire from the wheel.

3. Using a thin-walled socket, remove the special nut retaining the sensor to the wheel. While removing the nut, hold pressure against the rear of the metal valve stem to keep it from pushing rearward, which could damage the antenna strap.

4. Remove the sensor from the wheel.

See Figure 2.

To install a new sensor, follow these steps. NOTE: Before reinstalling an existing tire pressure sensor, replace the seal and the metal washer at the base of the valve stem to ensure proper sealing.

See Figure 1.

direction from the mounting end of the tool. Make sure the sensor is clear of the lower bead breaker area to avoid damaging the sensor when the breaker rises. Rotate the tool in a counterclockwise direction to mount the tire. Use this procedure on both the upper and lower tire beads.

Figure 2

Figure 3

1. Wipe the area clean around the sensor/valve stem mounting hole in the wheel. Make sure the surface of the wheel is not damaged.

CAUTION: To avoid damaging the sensor antenna strap, hold pressure against the rear of the metal valve stem while the sensor is inserted through the wheel mounting hole and the nut is installed. See Figure 2.

2. Insert the sensor through the wheel, keeping pressure against the rear of the metal valve stem. The potted side of the sensor is to be positioned toward the wheel. Do not attempt to mount the sensor otherwise, or damage may occur. Install the sensor nut (with pressed-in washer) by hand. See Figure 2 and Figure 3. NOTE: Before tightening the sensor nut, push downward on the sensor housing in an attempt to make it flush with the interior contour of the wheel 3. Using a thin-walled socket, install the sensor nut. While holding the sensor in position, tighten the sensor nut to 58 in.-lbs. (6.5 N.m).

4. Mount the tire on the wheel following the tire changer manufacturer’s instructions, paying special attention to the following to avoid damaging the tire pressure sensor.

5. Adjust the air pressure to specifications. Make sure the original style valve stem cap is securely installed to keep moisture out of the sensor. Install the wheel and tire assembly on the vehicle.

6. Drive the vehicle for a minimum of 10 minutes while maintaining a continuous speed above 15 mph. During this time, the system will learn the new sensor ID code and will clear any DTCs automatically.

Now you are ready to retrain the sensors. NOTE: If a tire pressure sensor has been replaced, the TPMS needs to relearn the tire pressure sensor IDs. Using an RF signal, each sensor transmits tire pressure data once every minute. Each sensor’s (transmitter) broadcast is uniquely coded so that the WCM can monitor the state of each of the sensors on the four rotating road wheels. The WCM automatically learns and stores the sensor’s ID while driving, after a sensor has been replaced. There is no formal retraining procedure necessary.

On 2005-06 models, drive the vehicle for a minimum of 10 minutes while maintaining a continuous speed above 20 mph. On 2007 models, drive the vehicle for a minimum of 10 minutes while maintaining a continuous speed above 15 mph. On all models during this time, the system will learn the new sensor ID code and will clear any DTCs automatically. If a sensor cannot be trained, see the appropriate manufacturer service information. ■ Information for this column comes from Mitchell 1’s ”Tire Pressure Monitoring Systems Guide” for domestic and import vehicles through 2010. Headquartered in Poway, Calif., Mitchell 1 has provided quality repair information solutions to the automotive industry for more than 80 years. For more information, visit www.mitchell1.com.

a. Rotating wheel tire changers — once the wheel is mounted to the changer, position the sensor valve stem 210 degrees from the head of the changer in a clockwise direction before rotating the wheel (also in a clockwise direction) to mount the tire. Use this procedure on both the upper and lower tire beads. b. Rotating tool tire changers — position the wheel on the changer so that the sensor valve stem is 210 degrees from the head of the changer in a clockwise

www.moderntiredealer.com MTD_64-69.indd 65

Quik-Link: 800-687-1557 ext. 11135

65 1/13/12 10:57 AM

MTD_66.indd 1

1/17/12 9:17 AM

Quik-Link: 800-687-1557 ext. 11136 MTD_64-69.indd 67

1/13/12 10:57 AM

MTD_68.indd 1

1/17/12 9:18 AM

MTD_64-69.indd 69

1/13/12 10:57 AM

MTD_68.indd 1

1/17/12 9:18 AM

MTD_68.indd 1

1/17/12 9:19 AM

MTD_68.indd 1

1/17/12 9:19 AM

Your turn

Banding together will tip the world of tires back toward level Dear Editor: Your recent article “How to level an unlevel playing field” (editorial, August 2011) is a topic I can’t leave alone.

As a greater Detroit area two-store independent tire dealer for the past 39 years, I can empathize with the dealer whose despairing comments prompted the article. How often have we independents dreamed of what it would be like to buy at the deep price level the big guys buy at? In the cutthroat world of tires, margins are a thin 30% (if you’re lucky), and handing any margin advantage off to your prime competitors is devastating. What a difference it would make!

The title grabbed my attention as it suggested that you might reveal a new and improved slingshot of advice to slay the Goliaths of our world — or at least some savory advice on how to live among them. But if you meant to lift the spirits of we Davids of the tire world (under a dozen stores by my own definition), by my reckoning it missed the mark. Thinking I cruised a little hastily through the piece and missed the moment of enlightenment, I read it again... and again visualizing the emotions of my fellow comrades.

I’m sure that leveling the playing field references the obvious large/small dealer cost of goods differential, and as you inferred, it’s not a matter of fairness, and I agree. Fundamentally, the world of business has nothing to do with fairness and everything to do with managing effort and investment for maximum return, hopefully in an ethical manner, but generally at someone else’s expense. So it’s no surprise that tire suppliers will pander to the bigger players like warehouse distributors, who are set up to promote and sell large quantities of their product. While tire wholesalers are needful, trying to keep pace by purchasing tires predominately from them is more and more becoming a losing battle.

For the first 25 years in the tire business I was at the mercy of local wholesalers, who in some cases had a retail presence in my market, and who would distribute the same products to all my competitors. The biggest local tire wholesaler would even sell directly to my customers, who would in turn show up at my doorstep to have them installed.

Of late, wholesale distributors and manufacturers have gotten creative as they have teamed together to sign their “select” customers (virtually anyone) to a manufacturer’s associate program, administered by the wholesaler. This is possibly a better arrangement for a small dealer as it affords limited protection in his market, and pricing may be a bit better — but it truly misses the mark when it comes to leveling the playing field with big dealers.

www.moderntiredealer.com MTD_70-74.indd 73

But as big is a relative term (from a personal vantage point that I will later explain), even a 50-store retailer would recognize his bargaining power as insignificant and would belong to multiple tire buying groups. But don’t let this notion of buying group confuse you. It’s not a buying group that your local wholesaler has put together, nor is it a pseudo direct deal with a tire manufacturer with a fancy program label attached.

These guys are in an exclusive club with other immortals in buying groups purchasing up to several million tires a year.

In short, they don’t put their pants on one leg at a time as we would wo like to think.

IIn 1998 I read about a buying group called the Tire Alliance Groupe cal (TAG) on the Internet. They were (T then, and likely still are, the biggest th tire buying cooperative in the natir tion and I decided that I needed to tio join. I only wish I had recorded the jo cconversation with then President Dan Beach when I expressed my D iinterest and answered his first logiccal question: how many stores?

I well remember the friendly laughter — it lasted a little longer than I could comprehend at the mo moment. He informed me that the smallest TAG member had 38 stores, and the biggest had over 500 stores.

So, I was put back in my place, but after a week or so I had an idea and called Mr. Beach back and pitched it. I pointed out that the group had no Michigan presence and asked why I could not form a legal partnership of Michigan tire dealers, and then in turn the partnership would belong to the TAG group. He had never thought of it and promised to get back to me after running the idea past the board members. To shorten the story, he accepted the offer and promised to journey to Michigan once I had assembled about a dozen promising candidates.

In the ensuing weeks I used my precious free time to make cold calls to fellow dealers, and it didn’t go well. I got a cool and often rude reception, and seldom made it to first base. I remember thinking that we really deserved to have the hell beat out of us every day.

Well, quitting has never been an attribute you’d assign to me, and I drafted a letter naming a date and place for a buying group formation meeting, had my attorney at my own expense draft a partnership agreement for the Great Lakes Tire Group (officers and members to be named on exhibit A), and faxed the invitation to every tire business in Michigan that would give me their fax number.

At some point I suppose I should announce that the rest is history. Since 1998 our little Michigan group has enjoyed the same buying price benefits as TAG’s 550-store Morgan

73 1/13/12 10:59 AM

Your turn Group out of Clearwater, Fla. We enjoy the same powerful benefits on our credit card discount rates, parts costs, tire equipment and tire supplies, and many other deep programs only afforded to huge buying groups.

If this story reads as boastful, I am long past that stage. I am still a small independent tire dealer fighting the fight, but the game has changed for me and for others in the Great Lakes Tire Group. My children have a future in the business they would not have otherwise had. It should not escape the notice of the small independents reading your magazine that what we have done can be replicated in other parts of the country and with other buying groups — it just takes some effort.

While you will still be mauled by the marketing might of a large independent or chain store in your markets, banding together with your brothers and aligning yourselves with a first rate buying group will tip the world of tires back toward level, and will put some of the lost fun back in the business.

Just don’t expect it to be handed to you.

Dan Clark, President Great Lakes Tire Group Detroit, Mich.

Need clarification on budget charts Dear Editor: I have been reviewing your budget in Chart 1 on page 54 of your November 2011 edition.

I am wondering how many counter sales people you are including in this $63,276 annual payroll?

Since labor is one of the variables that can be controlled, I am studying that section of your charts.

Chuck Simons, Owner/manager Tire Pros Newhall, Calif.

We asked the author of that article, Norm Gaither, to respond.

Here are his comments:

“For the purpose of the budget numbers of $63,276, that would make a full-time person and a part-time person.

“The way we suggest to pay the people on the counter with responsibility (assistant manager), is to pay them about $45,000 per year and then pay them 5% of the net profits before taxes.

“We also suggest you pay the manager around $60,000 per year with 10% of the net profits before taxes.

“Of course in California, Chicago, Dallas and all the larger cities your pay may be a little higher.

“Please feel free to call or e-mail with any other questions. My office number is (757) 301-9897 and my cell is (757) 593-7063.

My e-mail address is norm@dsp-20group.com. Or visit our website at www.dsp-20group.com Thanks for your interest.

Norm Gaither, President Dealer Strategic Planning Inc. Virginia Beach, Va.

“I feel business will be soft until June 2012. Manufacturers will have surplus inventory. Wholesalers, in general, are overstocked.”

Jeff Cohen, Co-owner Traction Wholesale Center Bensalem, Pa.

“The tire manufacturers keep raising prices. They are pricing themselves out of the market, forcing the consumer to buy foreign-made tires. Wake up!”

Jerry Reygaert, Owner Reys Auto & Tire Shelby Township, Mich.

“Business is not good. The current trend is customers buying what they need and not buying discounted quantities. In 34 years of the tire business, I never saw any month as slow as December 2011. We had a tremendous 2011 with record sales, but December just didn’t follow suit!”

Marty Gilkes, General Manager Jee Wholesale Tire LLC Houston, Texas

“I think we are seeing some improvement in the overall optimism our customers are feeling toward our economy.”

Bill Anders, President Burlington Tire Service Inc. Burlington, N.C.

“Our rural area is very strong, and we expect it to stay strong for at least the next year.”

Mike Thompson , President Thompson’s OK Tire Inc. Beloit, Kan.

Join Modern Tire Dealer’s National Advisory Council

Each month, Modern Tire Dealer is guided and influenced by a select group of readers — members of our National Advisory Council. These members’ opinions are the heart of the monthly Ludwig Report, compiled by well-known industry analyst Saul Ludwig. If you’d like to join this prestigious group, please let us know. We’d love to hear from you. Contact Editor Bob Ulrich at Bob.Ulrich@bobit.com or call (330) 899-2200, ext. 11.

74 MTD_70-74.indd 74

MTD January 2012 1/13/12 10:59 AM

Quik-Link: 800-687-1557 ext. 11137

MTD_COV1-COV4.indd COV3

1/17/12 9:41 AM

Quik-Link: 800-687-1557 ext. 11138

MTD_COV1-COV4.indd COV4

1/17/12 9:41 AM