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By John Healy

Our recent conversations with dealers leave us with the view that retail sell-out trends are continuing to improve on a year-over-year basis, while also showing strength over 2019 levels.

However, activity levels did fall slightly from what our dealer base experienced last month.

From a volume standpoint for the month of August 2021, surveyed dealers reported that unit sales were up 10% to 15% versus August 2020.

But consumer demand for passenger and light truck tires fell slightly compared to prior-month levels. Contacts noted that the fall-off was likely attributable to the unpredictable nature of the tire and auto repair business.

Overall, we believe that August benefited from the continued rebound in driving that has taken place since the initial slowdown in miles driven associated with the early start of the COVID-10 pandemic in March 2020.

As stated in previous columns, we continue to believe that long-term volumes will become more closely aligned with GDP growth.

That said, there is a degree of uncertainty in the months ahead as the delta variant of COVID-19 has taken root.

The bright side, though, is that consumers are expected to continue to drive more, especially when compared to last year.

Each month, we look at a number of data points in an effort to accurately assess the health of automobile travel, which has a direct impact on tire wear and replacement.

While states across the country have been fully open the last several months, we note that the delta variant could cause government officials to reimpose some lockdown measures in the coming weeks and months.

This has already been observed in some states.

The good news is that miles driven trends remain steady.

August 2021 levels were down 1.7% versus August 2019 levels, which compares to a year-over-year decline of 1.1%.

Raw material prices — in almost every category — continue to escalate.

Looking at specifics, we note that the price of carbon black continues to increase on a month-after-month basis.

Carbon black prices have experienced double-digit growth over the last several months.

Crude oil prices, which experienced extreme cost pressures at the start of the COVID-19 pandemic — with average prices down 37% year-over-year, through the end of the year — continue to spike.

As noted in last month’s column, July 2021 saw a year-over-year hike of 76%.

Natural rubber prices continue to be on the upswing — continuing to show strong, double-digit gains.

And the price of synthetic rubber continues to increase. Last month marked the

Increase 22% 75% 38% 24% 65% 61% 41% Flat 22% 12% 31% 52% 29% 25% 28% Decline 56% 13% 31% 24% 6% 14% 31%

first time this occurred since April 2017.

From a pricing standpoint, the only tire component category that continues to track downward is reinforcement items.

Last month, I wrote that tier-two remains the segment of most significant growth among our surveyed contacts and that trend has continued.

We note that this is typical of what we have seen in our extensive coverage of the tire industry over time, with fluctuations in other directions likely a function of transitory items, such as what happened during 2020 with the start of the COVID19 pandemic.

We note that tier-one brands have been ranked third by respondents to our most recent surveys for the past several months.

But recent trends indicate that consumers are very likely leaning more toward performance than value, which is the opposite of what our contacts observed during the earlier days of the pandemic.

Dealers also note that inventory remains below desired levels.

And the continuation of price increases by tire manufacturers is having an impact on sell-out rates.

We believe that aggregate pricing gains of 20% to 30% have taken place over the past 12 months.

We have seen throughout the pandemic that consumers seem to change their tire preference based on the current COVID-19 situation.

While having significant impact in other ways, we believe the delta variant has caused little change in consumer driving patterns — leading us to believe that sell-out rates will improve over time. ■

John Healy is a managing director and research analyst with Northcoast Research Holdings LLC, based in Cleveland, Ohio. Healy covers a variety of subsectors of the automotive industry.

By MTD staff

The United States unemployment rate has been steadily dropping. At the beginning of 2021, it registered at 6.3%. By August, the last month for which United States Bureau of Labor Statistics numbers were available, the percentage had dropped to 5.2%.

With the unemployment rate on a downward slide, why are small businesses — including independent tire dealerships — having such a tough time finding workers?

Reasons vary, say dealers, many of whom are rethinking their approach to recruitment — and how to hang onto the people they already employ.

The difficulty in finding recruits is not due to a lack of available positions, according to Jim Baxter, owner of Neighborhood Tire Pros & Auto, which has four stores in the Atlanta, Ga., area.

“I currently have a service manager position open that pays between $50,000 and $75,000 a year,” he says. “I can hire two service advisors right now in that price range.

“I have one store where we have a master technician spot open. It’s a $65,000-to $125,000-a-year position.

“This is a large range because I want to provide an accurate depiction of what (master technicians) can make. An entry-level tech might be in the neighborhood of $65,000. A seasoned guy can make $125,000 with no problem at all.”

Service writer roles have been even tougher to fill, he adds. And general service tire technicians are few and far between.

“I could hire four tomorrow. Those are $35,000- to $55,000-a-year positions.”

Baxter, who has 72 employees, estimates that he spends up to 40% of his time on recruitment, which keeps him from pursuing other things that will move his business forward.

“A good tire tech probably installs anywhere from 30 to 50 tires a week. If you don’t have the people to install the product, it affects your overall ability to grow.

“The number one way it has affected me is when I have opportunities to grow” through acquisition or expansion.

“The first thing I think about is, ‘Will I be able to staff those locations?’ I turned down two opportunities recently because I wasn’t sure if I could staff them.”

To attract new talent, “we’re having to do things we’ve never done before. I’m offering a $3,000 sign-on bonus, which is payable $1,500 after the first three months of service and $1,500 after six months of service.

“We’re marketing our business differently than in the past. We’re trying to give candidates reasons to look at us.”

Traditional recruitment methods, like advertising through Indeed.com, have been less effective, says Baxter.

“With those, we get people who apply, but don’t have the qualifications to come work for us. It’s difficult to train an employee who has never worked in the business, especially when you’re talking about technicians.

“Traditional, vocational tech people who want to work with their hands — that has just dried up. So you have to try to recruit from an existing pool.”

That pool, however, is shrinking, he believes.

“Right now, I think a lot of people are ingrained where they are and aren’t looking to make changes.”

This has forced Baxter to look outside the tire and automotive sectors for candidates.

“We are actively recruiting from areas we haven’t before” — including the mortgage industry.

He’s discovered that people who work in the mortgage business “can become good service advisors.”

They are used to fluid situations “and they have to handle a lot of different steps in order to close a deal. They have to gather a lot of different data from consumers.

“Sometimes there’s friction because something doesn’t go exactly right. They have to navigate that friction and those hurdles to make something work.

“It’s a process you have to walk through. And it’s the same kind of thing when servicing vehicles. Things might not go perfectly, so you have to go back to the drawing board to come up with another solution to make it work.”

Baxter also is targeting former restaurant workers, “who are used to working in a fast-paced environment.”

Baxter believes that the COVID-19 pandemic has permanently changed the labor market.

“There are people who might have been in the service industry before who had to reevaluate where they were. Some said, ‘I don’t want to do this anymore. I want to do something different.’ Because so many industries came to a grinding halt” during the early days of the pandemic “and then ramped back up, that break gave people a moment to think about what they wanted to do and they’re now doing something different. They’re just gone.”

He believes this will remain the case “until we see another upheaval of some sort — like an economic bubble that bursts and forces people to look outside their comfort zones.”

Baxter says he also is redoubling his efforts to keep current employees happy.

“I’m usually good about staying ahead of the curve in pay. I like to make sure that if someone calls (an employee) and offers a dollar more an hour, they don’t look.

“Our stores are extremely busy. They see up to 60 cars a day,” which he says is different from some of the competitors in his market.

“We tend to be busier than they are, which means we have the opportunity to make more money. We’re not as capped as if we were seeing 10 to 20 cars a day.

“I’m also a big believer in a five-day work week for employees,” he says. “I think they should be able to have at least two days off each week so they can handle their personal stuff and have some private time to enjoy.”

“To say that finding people has been extremely challenging is an understatement,” says Chris Guldalian, vice president of Grand Prix Tire & Automotive Center in Monterey Park, Calif. The single-store dealership is 10 minutes east of downtown Los Angeles.

“Every single business in my area is having the same problem. Everyone is short on labor. They can’t find good help.”

Guldalian attributes the problem to government stimulus money. (Editor’s note: MTD interviewed Guldalian before national unemployment benefits expired.)

“When unemployment benefits are so lucrative, even people who are eager to get back to work have stopped to think twice. It’s ‘Should I go back to work and give this up or should I ride this out?’”

There are exceptions, he says, including “people who need to stay home and take care of other people, but I can’t think of another explanation.

“A few months back I interviewed a candidate” for a lube tech position.

“He had the experience and we really needed somebody with his skill set. He wasn’t working at the time, so it was ideal. I called him back the next day and said, ‘You can start the day after.’

“But when that day came, he didn’t show up when he was supposed to. He called a few hours later to thank me for the offer, but told me he simply wasn’t ready to go back to work. And he hasn’t been the only one.”

Guldalian, who pays above-market wages, has six full-time employees and one part-timer.

“Pre-pandemic, we were at 10 full-time people. I have to say we are blessed to have the core group of employees that we have, who have stayed on board.

“Everybody realized that the work is not going to get done unless they work more efficiently and everyone is doing their best to make things happen. But we need more talent to ease the strain on all of us.”

Guldalian has tweaked some policies at this dealership to make life easier for his employees.

“One of the things we did was change to an appointment-only program for our auto service work. We know what’s coming in ahead of time, so that has eased the strain a bit. I’m hands-on, as well, so wherever I see a need, I help.”

He also has become more flexible with employee scheduling. “I’ve never been as lenient as I am now. Everyone has my cell number. I ask for as much heads-up as possible” when it comes to call-offs or schedule adjustments.

“We’re just going with the flow. How am I going to find replacements for employees (who leave) right now? The last thing I want is for my good, core group to say ‘I’ve had it’ and walk away.”

Spencer Carruthers owns a single-store dealership, Kenwood Tire & Auto Service in West Bridgewater, Mass, some 30 miles

south of Boston. He says the labor market in his area “is very lacking.”

When MTD talked with Carruthers, the state of Massachusetts was providing unemployed residents with an extra $300 a week.

“It’s an upside-down situation because if you’re paying people to stay home, there’s no incentive for them to come work for a place like us.

“It’s an economic thing. ‘Why would I get in my car and drive half an hour to make $17 an hour changing tires when I can collect 60% of what I was making, plus an extra $300?’”

People weren’t easy to find before COVID-19, says Carruthers — particularly those near the bottom of the pay scale.

But the pandemic, he notes, quickly brought existing labor market problems into stark relief.

“We’re still in that space. Companies don’t know if they’re going to get people back. A lot of people don’t want to go back to work.

“Even though we like to think everything is back to normal,” there are a lot of unknowns, he says.

“It’s really hard to make any kind of

Finding people to ll sales and service writer roles can be dif cult, says Jim Baxter, president of Neighborhood Tire Pros & Auto, which has four stores in the Atlanta, Ga., area. Finding quali ed auto service technicians is even tougher.

When it comes to skilled trades, “there’s a huge educational gap that pre-dates COVID-19,” he says.

“I rst got into this business in the ‘90s. And if a technician wasn’t working out, it wasn’t a big deal because you had three or four people on the bench who could come in and work without any issues.

“That has slowly disappeared over the years. COVID-19 just laid it bare.”

The problem “boils down to (our) education system,” he says. “There used to be a vocational path. There used to be a college prep path. Now everybody’s on the college prep path” and schools are steering fewer students toward the vocational track, he says.

“It’s not just automotive. It’s plumbers, electricians and heating and cooling people. Those are the most important jobs. If we don’t have people to ll those roles, our economy will grind to a halt.”

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marketing plan or set business goals because we don’t know how this is going to shake out.”

Spencer, who works the counter at his store, employs three technicians. (At one point, Kenwood Tire had two retail locations.)

“ ey’re mostly doing tires, brakes, oil changes and alignments. ose are the four things we focus on.”

One employee has been with him for 18 years. Another has been with him for 15 years. “I’ll do whatever it takes to make them happy and they know that.” at includes adjusting their schedules.

Before COVID-19 hit, “they were working 48 hours a week,” says Carruthers. “When the pandemic came around, we went down to 38 to 40 hours a week. And they were happy with that. ey were happy to have weekends o .”

A shortened work week delivered an unexpected bene t — increased productivity.

“I noticed they were working harder during the week to get stu done, so I now reward them on their e ciency.” e situation suits all parties, he says.

“I thought they were going to ask for the hours back a er business picked back up, but they haven’t. ey’re pretty much making what they were before. ey are happier. Morale is better. Quality of work is better. It’s improved our pro tability.”

Carruthers also had to “reevaluate” the services his dealership o ers.

“We got rid of doing diagnostic work, air conditioning stu — things I don’t make money on. I refer them out. It’s hard to get paid for those jobs. And it’s worked out. We’re not getting caught up in jobs that we can’t make money on.

“Our forte is tires and alignments,” he says. “ at’s why people come here. By cutting out diagnostics, it’s enabled us to be better at (our core) work. I just bought a brand new Hunter li . So by focusing on fewer things, we can improve our service.”

Carruthers also schedules more appointments, rather than relying on walk-ins. And more Kenwood Tire customers are making appointments by text, “so I don’t have to pick up the phone each time it rings.

“ at’s helped us become more e cient, too. But if someone has a nail in their tire and shows up at our door, we’ll drop everything to take care of them.”

Perhaps most importantly, Carruthers says the pandemic changed how he views his business.

“I had plenty of time to gure out what my bottom line was and what I needed to do to make this work. It was kind of like a bottom-up approach. I never would have done that before.

“You always go from the top down. ‘I want $1 million in sales. at way I can make so much and pay everybody else so much.’

“But to me, it was more about guring out what I needed and then making the business work for me. e pandemic forced me to do that. It was fortunate. I’m happy with how things have turned out.”

Like Carruthers, Jim Melvin reports that business at his dealership, North Kingstown, R.I.-based Melvin’s Tire Pros, is up.

“It’s been great, but the biggest problem we have now is employees. We have four retail locations and generally, we have about 75 employees. Right now, I am at about 59.”

Melvin says that during the height of the COVID-19 pandemic,