Modern Tire Dealer - January 2011

JANUARY 2011 • VOL. 92, NO. 1 • THIRTY DOLLARS • A BOBIT PUBLICATION

THE E INDUST T TRY’S LEADING PUBLICAT T TION

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Saul L Ludwig

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JANUARY 2011 • VOL. 92, NO. 1 • THIRTY DOLLARS • A BOBIT PUBLICATION

THE E INDUSTRY’S T LEADING PUBLICATION T

‘A recovery is clearly underway.’

Saul Ludwig

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Feature 16 Always looking ahead Saul Ludwig knows the tire industry as well as anybody. He thinks we will need more tires and more jobs in 2011

45th annual Facts Section 28 Introduction A $32.1 billion industry! — Replacement tire sales set a record in the U.S.

30 Domestic tire shipments A tire explosion — Pent-up demand coupled with a deliberate reduction in supply created the perfect storm

32 Imports Made in China. And Indonesia. And Taiwan... Consumer tire imports are up 15.5%

34 Market share Major wins for major brands — Consumer tire market share shows increases

36 Distribution Everywhere a warehouse — And American Tire Distributors has room to grow

38 Sales and pricing Saul Ludwig begins his 38th year of analysis for Modern Tire Dealer.

Planning ahead on a global scale — Pirelli sets aggressive sales goals through 2013

40 Tire dealer profile Want to compare your dealership to the other 30,000 independents? Here are some benchmarks

42 Plant capacities Capacity up 0.8%

44 Commercial No more cannibalism — Fleets take their trucks out of park and buy new and retreaded tires

48 Canada Canada catches up — Replacement passenger tire shipments drop 12%

50 Tire size popularity

The Industry’s Leading Publication January 2011, Volume 92, Number 1

Departments 4 Editorial ‘Hire fast, fire slow’ doesn’t work

6 Online Blogs = bonus information

8 News/views Twenty-five years and counting — Andreoli & Associates looks to the future

26 Ludwig Report Look for tire demand and production to continue to increase

52 NVH solutions Don’t dump on the dumping unit — ABS codes may be affecting the Nissan Quest actuator

54 TPMS 2007-10 GM Avalanche service — There are three ways to learn vehicle’s new sensors

56 Counter intelligence Change is dangerous if left unmanaged — ‘How’s Zat sound?’

57 Focus on industry Two FIRSTS for Falken — Tire company addresses consumer and commercial markets

58 Focus on dealers A truly ‘Grand’ Opening — The Tire Choice celebrates its 30th store close to home

60 Products 62 Quik-Link 64 Classified

Top OE sizes get toppled — But don’t say ‘goodbye’ to P215/60R16 and LT245/75R16 just yet

Modern Tire Dealer is a proud member of:

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TRIB

TIRE RETREAD & REPAIR INFORMATION BUREAU

Member An Industry Association

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Editorial

‘Hire fast, fire slow’ doesn’t work

H

ire slow, fire fast. That business advice is as true now as when it was first conceived.

Remember that caveman who invented the wheel? Perhaps he hired his brother-in-law to help out at the wheel dealership without doing a background check on him first.

Getting the hire right the first

By Bob Ulrich time is the first step. Keeping the hire happy and engaged is the second, because there are substantial direct and indirect costs to replacing a productive employee.

There are recruiting expenses. It also takes time to interview and evaluate applicants. And productivity is necessarily lost while the associate is being trained.

I bring this up because Modern Tire Dealer is in the process of hiring a new senior editor. Mike Manges accepted a wonderful offer from The Timken Co. after 13 years with our magazine.

I’m not saying that Mike was wellliked, but his fan club in the tire industry had a membership waiting list. Had that caveman hired Mike, the slogan would have been “Hire once, fire hot.”

I’ve only been editor for 10 years, so this is the first time I’ve had to hire a full-time employee. There’s more to it than I thought (just ask our Human Resources Department).

As many of you know, there are a number of questions you cannot ask for legal reasons. I’m sure the list is longer than it was 10 years ago. For example, you can’t ask any job applicant the following:

form essential requirements of the job. You also can ask them to describe how they would perform necessary job functions.

Can you inquire about union membership? No. The National Labor Relations Act makes it unlawful to discourage or encourage membership in any labor organization when hiring.

However, union membership can be a requirement of the job in some circumstances.

In the 22 states that have passed “right to work” legislation, it doesn’t matter. According to the National Right to Work Legal Defense Foundation Inc., a right to work law “secures the right of employees to decide for themselves whether or not to join or financially support a union.”

Titan Tire Corp. recently offered contracts to United Steelworkers union members at its tire manufacturing plants in Des Moines, Iowa; Freeport, Ill.; and Bryan, Ohio. The contracts were specific to each plant.

Des Moines workers ratified their contract. Workers at the other two plants did not.

Iowa is a right to work state. Illinois and Ohio are not. I wonder if that had anything to do with the initial outcome?

Just a thought.

And after you have made the hire, don’t forget about the other candidates. If you invited them into the office for an interview, try not to leave them hanging.

As soon as the hunt is over, let them know. You can either do it personally or have your human resources director handle it. E-mailing them with the news is fine. A phone call is certainly acceptable.

Respect the process from beginning to end. You never know when another job needs to be filled.

No discussion about hiring would be complete without some mention of firing.

The second part of the business advice, “fire fast,” is fine in theory. Break ties before too many problems arise.

To paraphrase former General Electric Co. CEO Jack Welch, “Face reality as it is, not as it was or as you wish it to be.” If only it were that easy.

In his book, “By the Seat of your Pants: The No-nonsense Business Management Guide,” author and former tire dealer Tom Gegax defines firing as “freeing up someone’s future for more suitable work.”

That’s a good way of looking at it. ■ If you have any questions or comments, please e-mail me at bob.ulrich@bobit.com.

As a rule of thumb, you can ask nondiscriminatory, jobrelated questions.

• Where were you born?

• What is your maiden name or marital status?

• Do you have any children?

• How old are you?

• Do you have any disabilities?

• Have you ever undergone psychiatric evaluation?

You also can’t inquire about an applicant’s lineage, ancestry or nationality; height or weight; and arrests that did not result in a conviction (unless, of course, you are a law enforcement agency).

As a rule of thumb, you can ask non-discriminatory, job-related questions. Although you can’t ask applicants if they have disabilities, you can ask them if they can per-

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MTD January 2011 4/26/11 10:55:11 AM

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Online

Blogs = bonus information ‘The 19 degrees of checking tire pressure’ ‘B Bucking past trends, gas prices and miles traveled are both on the rise’ ‘T Tire issues from the truck driver’s perspective’ ‘Good vibrations: Chipping away at the scrap tire problem’ ‘Pearl Harbor (and Olin Mott) vs. John Lennon: no contest’

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ntriguing titles, certainly. But you won’t find the information on the pages of this magazine. To find it, simply go to our Web site, www.moderntiredealer.com, and check out the blogs written by MTD editors Bob Ulrich and Lori Mavrigian.

The “B.O.B.” blog has covered a wide variety of subjects, including one honoring the industry friends we lost during 2010 and some background on the Titan Tire Corp./United Steelworkers Union struggle. “Lori’s Listening” has presented topics from gas prices to scrap tires to Goodyear Tire and Rubber Co.’s blimp operations getting great free PR from the Late Show with David Letterman.

A wide array of topics written specifically to pique your interest. Check them out at www.moderntiredealer.com! ■

Total access — totally free www.moderntiredealer.com

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 Contributors: Auto Service/Technical: MIKE MAVRIGIAN Training/Tire Service: KEVIN ROHLWING Industry Analyst: SAUL LUDWIG Art Director: NEAL WEINGART Neal.Weingart@bobit.com Production Manager: KAREN RUNION Karen.Runion@bobit.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 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

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.

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MTD January 2011 4/26/11 10:55:24 AM

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News/views

Twenty-five years and counting Andreoli & Associates looks to the future

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ndreoli & Associates Inc. celebrated its silver ISE enables parts lookup and ordering from suppliers, such anniversary last year, and the company is look- as NAPA, as well as labor lookup for jobs using a vehicle’s ing forward to its golden 50th. “We’re half-way VIN number or the year/make/model.

“Up-to-date parts pricing and labor is added right to the there,” says Mike Andreoli, the company’s founder and work order, which helps ensure more accurate billing of president.

The business built its foundation at the J.H. Heafner Tire parts and cost tracking,” says Andreoli.

The company also has been at the forefront of what is Co. (now American Tire Distributors), where Andreoli worked from 1983-85 helping create HITS (Heafner’s In- known today as “cloud” computing. Since 2001, the company tegrated Tire Software), a retail point-of-sale package for has offered its software exclusively via the Internet, or “the Heafner’s dealers. When management decided to phase-out cloud.” Servers running HITS are not at his customers’ sites the retail software project, Andreoli struck out on his own or at Andreoli’s office, but rather are located at large commercial “data centers.” A typical data center houses 5,000 with Heafner’s blessings.

“It was extremely helpful not having to start from scratch. computers, includes 24/7 monitoring for virus protection, Heafner never pushed the technology on its customers and uninterrupted server availability and data backup. “The that’s still our (Andreoli’s) philosophy today. We are a ‘Build dealer can have more peace-of-mind because his data is off-site, virus protected, and automatically backed up each it and they will come’ kind of company.”

It was the early days of the personal computer and Andreoli night,” notes Andreoli.

Andreoli’s goal for the next 25 years is “to leverage the decided to redevelop HITS using new programming tools power of emerging offering advantages over older mainframe technologies to enand mini-computer technology. It took able independent about eight months to get a working sectire dealers to better ond generation HITS package ready. serve their customAndreoli’s first customer to use the ers and compete in a company’s new HITS PLUS software was digital world.”

Bobby Robbins, CEO of Robbins Tire Of particular in& Auto Center with two stores in South terest to dealers is Carolina; the original one in Greenville, the area of commuand the second in Powdersville. nications, Andreoli It was the first computer system and notes. “Progressive software Robbins’ company ever had. dealers are capital“Mike trained me,” says Robbins. “We izing on multiple helped each other, really. I’d call him up methods of reachand say ‘I wish it could do this or that.’ ing customers, And Mike would listen to my suggestions, and if it was possible, he’d incorporate it Andreoli created mouse pads to commemorate including social his company’s 25th anniversary. Looking ahead, networking. We into the software.” one thing Robbins would like to see Andreoli envision a greater Today Robbins uses Andreoli’s most develop is a voice-activated English/Spanish role for point-ofcurrent version of the software for inven- translator to enhance his dealings with his tory management, billing, statements, Hispanic employees and customers. “Someone sale and business and for creating “all kinds of reports. It’s could get super-rich creating that,” says Robbins. management software in helping user-friendly. You don’t have to have a dealers communicate with their customers.” degree in computer science to be able to operate it.”

Likewise, Andreoli says his company is also looking at Andreoli credits Robbins with being instrumental in helping guide the then young software company in developing new ways to reach prospective dealers. The company has its software with a focus on the dealers’ needs. Andreoli says, signed on with WECnology LLC, an Amherst, N.H.-based “Bobby cemented my early training from Heafner that all I company founded by Wayne Croswell, which is building a needed to do was listen to the customer. That philosophy network of technology providers to serve the tire industry. “In the course of consulting with dealers, if WECnology thinks continues to guide our development efforts.”

Today the company’s most current version, HITS BPOS, our software is a good fit, they’ll make a recommendation. has enhanced POS capabilities such as integration with It’s consistent with the way we have marketed for the past Activant’s new ISE parts and labor catalog system. Activant 25 years,” says Andreoli. ■

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MTD January 2011 4/26/11 10:55:41 AM

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News/views ATD enters Northwest in a big, sudden way American Tire Distributors Inc. (ATD) has acquired three distribution centers in the northwestern United States, bringing its total to 86 nationwide. The two acquisitions are: 1. Lisac’s of Washington Inc. (“substantially all the assets,” says ATD). The purchase includes distribution centers in Portland, Ore., and Spokane, Wash., that serviced more than 1,400 customers in Montana, Washington, Oregon and northern Idaho.

2. Tire Wholesalers Inc. Tire Wholesalers operated one distribution center in Kent, Wash., that serviced more than 750 customers in western Washington.

ATD says its recently announced plans to build a 126,000-squarefoot distribution center in the Seattle, Wash., area in the first quarter will continue as scheduled.

“Lisac’s and Tire Wholesalers have both developed solid distribution businesses in their respective markets,” says William “Bill” Berry, CEO and president of American Tire Distributors.

ATD offers depth of both product and dealer marketing programs to its wholesale dealer network in 39 states.

Titan to buy more Goodyear farm tire units Titan Tire Corp., a subsidiary of Titan International Inc., has entered into agreements with the Goodyear Tire & Rubber Co. to buy its European and Latin American farm tire businesses, including a licensing agreement that will allow Titan to manufacture and sell Goodyear-brand farm tires in Europe, Africa, Eastern Europe, Russia, Latin America and North America, for approximately $130 million, subject to post-closing adjustments.

The company did a similar deal with Goodyear when Titan purchased the assets of Goodyear’s North American farm tire business, including a plant in Freeport, Ill., in December of 2005.

The Latin American portion of the transaction includes Goodyear’s Sao Paulo, Brazil, manufacturing plant, property, equipment and inventories.

Subject to customary closing conditions and regulatory approvals, it is expected to close in the first half.

The European portion of the transaction is subject to the exercise of a put option by Goodyear following completion of a social plan related to the previously announced discontinuation of consumer tire production at its Amiens North, France, manufacturing plant and required consultation with the local Works Council. Upon completion of this action, as well as customary closing conditions and regulatory approvals, the transaction will include the Amiens North plant, property, equipment and inventories.

“Titan is pleased to be adding these new regions to our current book of global business,” says Maurice “Morry” Taylor Jr., Titan chairman and CEO. “These acquisitions support our global vision of becoming the premier farm tire manufacturer in the world. In the past these assets have had sales in excess of $400 million U.S. dollars annually. Going forward, my expectations are to increase the sales in a short period of time.”

Richard Kramer, Goodyear’s chairman and CEO, says, “This transaction reinforces our focus on our core consumer and commercial tire businesses.”

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News/views

bites

RTA adds charter members The Retread Tire Association (RTA) is officially a legally recognized non-profit organization, according to Managing Director Harvey Brodsky. RTA’s charter membership roles include companies from the U.S., Canada and around the globe, Brodsky notes. For more information on RTA membership, e-mail Brodsky at info@retreadtire.org.

Costco is going lead-free Costco Wholesale Corp. reports it plans to voluntarily replace all remaining lead wheel weights with Perfect Equipment Inc.’s non-lead alternatives in all stores throughout New York and Vermont. In 2008, Costco began adopting a non-lead program on a regional basis. As a result, the Costco Wholesale stores in California, Washington and Oregon are 100% lead free.

Federal hosts dealers Federal Corp. recently played host to independent tire dealers from Hong Kong at the company’s headquarters in Chungli, Taiwan. The dealers participated in a full day of workshops and training seminars.

The event covered a wide range of topical issues, including a look at global markets and strategies.

Federal also showcased its new eco-friendly Formosa Terra tire and Couragia F/X asymmetrical tire.

WECnology Twitters dealers WECnology LLC is reaching out to tire dealers via Twitter to help them better understand today’s technology. Tire dealers who visit the company’s Twitter page at http://www. twitter.com/wecnology will be able to interact with the WECnology staff and also find links to articles from WECnology’s newsletters, partners and third-party Web sites, and online industry publications.

Tyrexpo India 2011 planned The first staging of Tyrexpo India will be held July 5-7 at the Chennai Trade Centre, Chennai, India. The exhibition will showcase tires and related equipment, notes show organizers ECI International. Additional information about Tyrexpo India 2011 can be found at www. eci-international.com.

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Toyo buys all shares in Malaysian manufacturer Toyo Tire & Rubber Co. Ltd. has acquired Silverstone Berhad, a tire manufacturer based in Kuala Lumpur, Malaysia.

According to Toyo, the purchase positions Toyo “to make a full-scale entry into the fast-growing Southeast Asia market.”

Last year, Toyo began construction of its first manufacturing plant in China. Located in Jiangsu Province, the facility will be run by Toyo Tires Zhangjiagang Co. Ltd.

Cooper increases ownership in Mexican businesses Cooper Tire & Rubber Co. has increased its ownership levels in its affiliated Mexico operations. As part of its long term strategy “to produce high quality, cost competitive products,” Cooper raised its ownership level in: • Corporacion de Occidente SA de CV to 58% from 38%; and • Cooper Tire & Rubber Co. de Mexico SA de CV to approximately 100% from 50%. (The increase in ownership of this entity, which conducts sales and marketing in Mexico, is the result of a capital call by the entity and conversion of an existing loan into equity.)

According to Chairman, CEO and President Roy Armes, these actions align with the company’s strategic plans, “and should allow us to conFor complete daily, tinue investing and growing these important pieces of the even hourly news Cooper organization.”

Corporacion de Occicoverage of the tire industry, dente SA de CV is located check out in Guadalajara. It has the capacity to produce 20,000 Modern Tire Dealer’s passenger, light truck and Web site at truck tires a day, based on Tire Dealer’s latest www.moderntiredealer.com Modern research.

Hall of Famer Jerry White dies Jerry White, chairman emeritus of White Tire Supply in Beaumont, Texas, died Dec. 20, 2010. He was 79.

White was inducted into the Tire Industry Hall of Fame at last year’s Specialty Equipment Market Association (SEMA) Show in Las Vegas, Nev. His induction was part of the Tire Industry Association’s Tire Industry Honors event.

White had 60 years of experience in the tire industry. He also was a founding member of the Texas Tire Dealers Association, and had served on numerous industry boards, including the board of the old National Tire Dealers and Retreaders Association (NTDRA).

He is survived by his wife of many TIA’s President Mike Berra conyears, Norma, and two sons. gratulated long-time tire dealer Jerry Memorial contributions may be made White upon his induction into the to Some Other Place, PO Box 843, association’s Hall of Fame during the SEMA Show last November.

Beaumont, TX 77704.

MTD January 2011 4/26/11 11:00:29 AM

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Reifen China attendance up The fourth Reifen China, which took place in the Shanghai New International Exhibition Center late last year, was a big success with 9,356 trade visitors from 75 countries, show organizers say. That is an increase of more than 30% over the previous year’s numbers.

Tyrexpo Asia 2011 set for March More than 130 exhibitors have already committed to taking part in Tyrexpo Asia 2011, show organizers state. The show will be staged in the Singapore Expo Centre March 29-31. Full details can be viewed at www.eci-international.com.

Conti is SmartWay certified Continental Tire the Americas LLC reports its Continental HDR1 Eco Plus has been SmartWay certified by the U.S. Environmental Protection Agency. The drive tire is available in size 275/80R22.5.

Ecopia paired with Nissan Leaf Bridgestone Corp. is supplying its eco-friendly Ecopia tires to Nissan Motor Co. Ltd. for use on the new Nissan Leaf electric car. In North America, the Leaf will be equipped with Ecopia EP422 tires in size P205/55R16 89 H. TIREMAX adds franchises TIREMAX of North America has added five franchisees to its network of upscale stores. To date, the company has awarded 10 franchises (TIREMAX also has 15 company-owned stores).

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Amateur golfer Curtis Schilling joined profesional golfers Warren Jacklin (left) and Tony Jacklin (right) in the 2010 Callaghan Tire Charity ProAm Golf Tournament which raised money to fight cancer.

Callaghan Tire raises $40,000 for cancer research Bradenton, Fla.-based Callaghan Tire recently raised more than $40,000 for cancer research via the 2010 Callaghan Tire Charity ProAm Golf Tournament, which was held late last year in Parrish, Fla. The event included 72 amateurs and 24 golf pros, including high-profile names like Dana Quigley, Bobby Cole, Dow Finsterwald, Tommy Horton, Tom McKnight and others.

The tournament itself was part of a multi-day event that included three parties and a silent auction that alone generated $25,000. All proceeds will be donated to Golfers Against Cancer, a Houston, Texas-based organization that supports cancer research, says Callaghan Tire CEO Dan Callaghan.

Callaghan and his family created the event five years ago after his wife’s sister was diagnosed with breast cancer. Over the years, the event has raised $140,000 for charity.

The event was a resounding success, he says. “A lot of people who didn’t even play in the tournament showed up for the other events. And everyone who attended assured us they will be back next year.”

DSP and Modern Tire Dealer join forces Dealer Strategic Planning Inc. (DSP) and Modern Tire Dealer have formed a strategic alliance to better serve the tire industry by sharing resources.

DSP invites non-competing independent tire store owners to join together in 20 Groups to improve bottom line profits through idea sharing, financial benchmarking and best practices. Co-owners Norm Gaither and Stu Zurcher believe the alliance with Modern Tire Dealer will help deliver DSP’s message to potential members.

“As the only 20 Group focused on the tire industry, our members significantly outperform the industry,” says Zurcher. “Too many dealers leave profits on the table, and we aim to change that when they join a 20 group.”

MTD Publisher Greg Smith says DSP has a proven record of success. “We have been impressed by DSP’s ability to help dealers uncover potential profits and increase financial stability in a tough economic environment. We are looking forward to collaborating on future articles and sharing their secrets in our magazine for the benefit of our readers.”

Together, DSP and MTD plan to reach out to interested tire store owners by sponsoring Gaither’s highly acclaimed financial workshop, “Improving Bottom Line Profit.”

Details for this “by invitation only” event will be announced soon.

DSP runs four 20 Groups, and is forming more. You can find more information on the DSP Web site: www.dsp-20group.com, or call (910) 409-7293. ■

MTD January 2011 4/26/11 11:00:45 AM

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Interview: Saul Ludwig

“With unemployment around 10% — and there being no signs of it getting much better anytime soon — the recovery is fragile, in my opinion.”

Always looking ahead Saul Ludwig knows the tire industry as well as anybody. He thinks we will need more tires and more jobs in 2011

By Bob Ulrich

W

e first asked analyst Saul Ludwig to predict the future of the tire industry in our January 1973 “Facts Issue.” At the time, many independent tire dealers and investors were concerned about the growth of radial tires, and the proliferation of sizes.

They also were confused about what was happening in their industry. The federal government was implementing business-altering legislation. States were wrestling with minimum tread-depth laws. And tires were being imported at record levels.

Ludwig was optimistic despite the uncertainty.

“When changes occur in an industry, two things happen,” he said. “First, those who view the change as an opportunity usually come out stronger; and secondly, those who view change with apprehension and uncertainty usually come out as losers.”

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Thirty-eight years later, the issues haven’t changed that much. Neither has Ludwig.

Although he left KeyBanc Capital Markets in April to work for Northcoast Research Holdings LLC, he’s still a managing director, still based in Cleveland, Ohio — and still the top analyst in the business.

Ludwig admits he wasn’t optimistic enough last January, when he predicted 2010 domestic replacement and original equipment consumer tire shipments would increase 2.6% and 10%, respectively, compared to 2009.

The final numbers finished closer to 6% and 34%, as demand greatly outpaced supply through the first half of the year.

“Who would have guessed that U.S. auto and light truck sales would have increased 14% in 2010?” he says.

MTD: Are the effects of the recession over for tire manufacturers? Tire dealers?

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Interview: Saul Ludwig Ludwig: No — for both manufacturers and dealers. Total tire unit shipments in 2010 are estimated to have been 284 million, but that would still be 8% below the former peak of 310 million shipped in 2007.

On the other hand, a recovery is clearly underway, as evidenced by the recent sharp recovery in truck tires. I also think the new tax bill will be a positive.

The key, however, will be unemployment. With unemployment around 10% — and there being no signs of it getting much better anytime soon — the recovery is fragile, in my opinion.

MTD: We estimate that Chinese consumer tire imports to the U.S. will be down

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Defining moments in 2010 Modern Tire Dealer asked Saul Ludwig, a managing director with Northcoast Research Holdings LLC, what the defining moments in the tire industry were in 2010. Here are his answers.

1. “Leadership changes at any large company is always important because you never know if the new person will make substantial changes. So the retirement of Bob Keegan and the appointment of Rich Kramer to CEO at Goodyear and the change from Mark Emkes to Gary Garfield at Bridgestone Americas were important events.”

2. “The surge in raw material costs, including a near doubling of natural rubber prices, was surprising. The demand for natural rubber was up 12%, while natural rubber production may have increased just up to 6%. This necessitated three rounds of price increases by tire manufacturers, putting added pressure on consumers. “ 3. “There also was a surge in announcements for new tire plants, to be built in China, Indonesia, India, Mexico and Brazil. By 2015, these plants could add approximately 340 million tires to today’s global capacity of about 1.4 billion tires. Even in the U.S. there have been some modest expansions announced.”

4. Cooper turnaround. “Cooper Tire lost $220 million in 2008; in 2010, it might have had record earnings. This was a remarkable transformation. Cooper benefitted from capacity rationalization, plant efficiencies and the tariffs.”

5. The restructuring of Pirelli. “Pirelli shed virtually all of its non-tire operations to become a pure tire company, and outlined an aggressive global expansion program supported by $2.5 billion in new capital investments.”

6. Long-term planning. “Michelin increased its capital base as it plans to build a new tire plant each year for the next five years, while Hankook, now the 10th largest tire manufacturer in the world, boldly rolled out a plan to become the fifth largest within five years.”

7. OEM success. “Who would have guessed that U.S. auto and light truck sales would have increased 14% in 2010, and that GM would emerge from bankruptcy and successfully go public once again?”

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4/26/11 11:02:05 AM

Interview: Saul Ludwig nearly 28% compared to 2009. Yet imports were way up.

Who picked up the slack?

Ludwig: Chinese consumer tire imports in 2010 were, indeed, down about 30%, but imports from all other countries increased 50%, bringing the total number of imports up about 16%. The biggest increases came from Korea and Indonesia.

MTD: Is the tariff reduction from 39% to 34% — and to 29% next Sept. 26 — enough to significantly increase Chinese imports in 2011?

Ludwig: The tariff for Chinese passenger and light truck tires was reduced 5% last September and will be reduced another 5% in September 2011. For 2011, I expect Chinese imports to increase about 10% even as prices on those tires have been increased due to higher raw material costs.

When the tariff was first imposed, there was great consternation among importers of those tires, and it took a while to make pricing adjustments to justify beginning to import them. Some of the Chinese companies may have reduced their export prices to offset some of the tariff ’s impact.

Chinese passenger tires imported in each of the first three quarters of 2010 were as follows: 6.1 million in 1Q10, 6.8 million in 2Q10, and 7.1 million in 3Q10.

It seems manufacturers and marketers became a little more comfortable importing Chinese tires as 2010 unfolded.

Ludwig (talking with his intern, Matthew Kukla) is getting used to his new digs in Cleveland.

MTD: What were the U.S. shipment highlights in 2010 vs. 2009 for passenger, light truck and medium truck tires?

Ludwig: What a difference a year makes (see chart on page 22). Replacement and OE shipments were up in every category in 2010. The previous year, they were all down dramatically.

Replacement passenger tire shipments last year broke the 200 million barrier again for the first time since 2007, jumping from 189.5 million units in 2009 to 201 million in 2010. OE units were up 35%, from 24.3 million to 32.8 million.

Light truck tire shipments at the replacement level increased more than 5%, from 27.5 million units to 29 million. At OE, LT shipments were up 28.5%, to 3.6 million units.

In contrast to last year, medium truck tire shipments were up in 2010. Replacement units rose more than 17%, while OE units grew 29%., to 3.1 million.

In 2011, I predict shipments will continue their upward trend. My specific

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4/26/11 11:02:24 AM

Interview: Saul Ludwig Domestic tire shipments, 2009-2011 (in millions of units)

Replacement Passenger Light truck Truck

Look for further consolidation among tire manufacturers and distributors, Ludwig says. Also, announcements may be forthcoming about new tire plants in countries such as India, China, Russia, Brazil, Indonesia — and even the U.S.

forecasts are as follows: Replacement passenger and light truck tires to grow an additional 2% and 3.6%, respectively. At OE, passenger tire shipments should increase 6.7%, while light truck tire shipments will grow by 7.6%.

This year also will be another great year for replacement and OE truck tire shipments, with each growing by 17%.

MTD: Will the change in the political climate in Wash-

22 MTD_16-24.indd 22

2009 2010 2011(est.) % change 189.5 201.0 205.0 +8.1% 27.5 29.0 30.0 +9.1% 12.7 14.9 17.5 +37.8%

Original equipment Passenger 24.3 Light truck 2.8 Truck 2.4

32.8 3.6 3.1

35.0 3.9 3.6

+44.0% +39.3% +50.0%

Source: Northcoast Research Holdings LLC

ington, D.C., have an effect on tire manufacturers? Tire marketers? Tire dealers?

Ludwig: The political climate is unsettling given the inability to get much done, although passage of several bipartisan bills at year end was a welcome change. The resolution of the tax situation was a good thing, so that gives manufacturers and dealers clarity to plan. But in the near future, politics may not have much influence on this industry unless there emerges some success in job creation. Jobs, more or less, will be the

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4/26/11 11:02:43 AM

Interview: Saul Ludwig biggest influence on the health of the tire industry.

Raw material cost changes, year-to-year

(in U.S. dollars per pound) MTD: How did raw material costs in 2010 compare to 2009?

Raw material Dec. 2008 Dec. 2009 Dec. 2010 How will raw material costs in 2011 % change % change % change compare to 2010?

Styrene 0.37 -36% 0.48 +30% 0.52 +8% Ludwig: Raw material costs inButadiene 0.44 -15% 0.58 +32% 0.87 +50% creased an average of 25% in 2010 Natural rubber 0.57 -50% 1.27 +123% 2.06 +62% compared to 2009. In 2011, I estiCarbon black 0.47 +42% 0.37 -21% 0.42 +14% mate that, on average, raw material Zinc oxide 0.58 -50% 1.15 +98% 0.91 -21% costs will rise another 10%. That’s a Source: Northcoast Research Holdings g LLC high number — inflation is normally 3%. Using averages, however, may Ludwig: As raw material costs increase, so will tire prices. be misleading. So for greater clarity, I compared prices for raw materials in December 2010 vs. December 2009 to show more You can expect another round of price increases in 1Q11. Will dramatically what has occurred (see chart). Natural rubber was manufacturers be able to pass them on?

Also, how will the consumer cope with ever increasing tire up 65% and the cost of butadiene rose 50%. prices?

I think consolidation among tire manufacturers could occur.

MTD: Who were the market share winners and losers I expect distributors will continue to consolidate. among tire manufacturers in 2010?

Despite tariffs, Chinese consumer tire imports may resume Ludwig: The winners were Hankook, Falken, Cooper, Pirelli and non-Chinese imports. Share losers were Chinese imports and an upward path.

Finally, I expect more plant announcements targeting countries Goodyear. Michelin, Conti and Bridgestone held fairly steady. such as Brazil, Indonesia, India, China and Russia. There even MTD: What are your top matters of concern or interest will be a new plant in the U.S. if Kumho goes through with its plans to build a plant in Macon, Ga. ■ to watch out for in 2011?

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Ludwig Report

Look for tire demand and production to continue to increase

W

forward. Truck and retreaded tire sales were strong, increasing hen the last round of 13% in November year-over-year. tire price hikes were announced last September/October, natural rubber was Costs and selling prices were up for major brands selling at about $1.50/lb.; today it is In comparing the month of November 2010 with October at $2.20/lb. There are approximately 2010, average costs for size 215/60R16 major brand tires were four pounds of natural rubber in a conup 3% and selling prices were up about 6%. The average costs sumer tire, so that means the cost of a for a 215/60R16 private brand tire were down 1% while selling tire to the manufacturer has increased prices were essentially flat for the month. $2.80 just from natural rubber alone in just three months! Also of note is Pricing remained normal to firm that the price of oil is now above $90/ By Saul Ludwig In November 2010, 33% of the passenger tire dealers described bbl., and since about 65% of the raw pricing as normal, 17% perceived pricing as aggressive, while materials used in a tire are oil-based, those raw materials also the remaining 50% thought pricing was firm. Conversely, 67% are going to move higher. So far, Goodyear had an 8% price hike of truck tire dealers suggested pricing was normal, while the on Jan. 1 for medium truck tires and Michelin announced a balance of the truck tire dealers believed pricing was firm. We 7% hike for some commercial tires starting next month, but I continue to expect manufacturers to raise prices this year. expect to soon hear of another round of price hikes for consumer tires from all manufacturers.

Raw materials were a major headwind for tire manufacturers throughout 2010, and given my Dealers JUL AUG SEP OCT(R) NOV(P) NOV(09) expectation that tire demand (and especially Passenger tire tire production) will be growing throughout Will improve 78% 40% 67% 33% 17% 58% 2011, I see no reason to expect easing of raw Will worsen 0% 0% 0% 0% 50% 25% material costs this year.

Will stay level 22% 60% 33% 67% 33% 17%

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 2010 survey are compared with those of November 2009.

Truck tire Will improve Will worsen Will stay level R-Revised

43% 14% 43%

50% 0% 50%

40% 0% 60%

0% 0% 100%

0% 33% 67%

37% 25% 38%

P-Preliminary

Survey indicates tire inventories were in line Passenger tire dealers’ six-month outlook is mixed According to our dealer survey, the majority of passenger tire dealers sense that in the next six months business will worsen, as truck tire dealers think the environment will remain the same. Roughly 50% of passenger tire dealers suspect business will worsen, 17% expect improvement, while the remaining 33% think business will remain the same. Approximately 67% of all the truck tire dealers sense that in the next six months business will remain about level with currently strong business conditions, while 33% expect business to worsen. These outlook comments tend to be seasonally directed rather than year-to-year comparisons.

Sixty-seven percent of the passenger tire dealers noted that their current inventories were in line with business levels, but the remainder were mixed as 16% felt inventory was too high and 17% too low. Likewise, 67% of truck tire dealers noted that inventories were in line with business levels, while the balance thought that their inventory was too high.

Service revenues are up significantly, dealers reported

All tire sales were higher in November

According to our tire dealer survey, dealers who provide automotive service reported that 52% of revenues, on average, were generated by service during November. Dealers indicated that service business was up over 14% in November vs.

November 2009. Service business remained strong through most of 2010. â–

According to dealer reports, on average, retail sales of new replacement passenger tires were strong with many reporting as much as a 15% increase in November vs. November 2009.

Some dealers we surveyed noted that traffic was better than expected in November, and expect modest improvement going

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.

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MTD January 2011 4/26/11 11:03:29 AM

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4/26/11 11:03:35 AM

Facts section: introduction

A $32.1 billion industry!

Replacement tire sales set a record in the U.S.

By Bob Ulrich

costs — are there any other kind? — will force tire manufacturers to announce multiple price increases. Passing them along wo years ago, domestic replacement tire sales broke the to the consumer is another matter. $30 billion mark for the first time, finishing at $30.1 But take heart: On Sept. 26, those once mighty tariffs on billion. Last year, sales dropped more than $3 billion Chinese consumer tire imports will drop another five perto $26.8 billion as the recession took its toll. centage points, to 29%. When they were first implemented The roller-coaster ride continued in 2010, with pent-up on Sept. 26, 2009, they added 35% to the existing 4% duty on demand and double-digit price increases resulting in record consumer tires. The world didn’t end then, and when the tariff (hopefully) goes back to 4% on the same day in 2012, you will replacement tire sales of $32.1 billion (see Chart 1).

Dr. Ken Mayland, president of ClearView Economics LLC, be able to conduct business as usual, with additional low-cost tire options to boot! predicted the turnaround.

MTD’s 45th annual Facts Issue not only ana“I wouldn’t say (the tire industry) Chart 1 is bullet-proof, but people are holding lyzes what happened in our industry in 2010, 2010 U.S. REPLACEMENT onto their cars longer... eventually, they but also offers some insight into what you can TIRE SALES expect to see in 2011. We hope it will help you are going to need maintenance.” (a $32.1 billion industry) run your businesses more profitably. ■ Consumer tires, defined as passenger Passenger $ 21.8 billion and light truck tires, represented 81% of tires: total sales, or $26.1 billion. Both passenAll figures in the 14-page Facts Section are Modern Light truck $ 4.3 billion ger ($21.8 billion) and light truck ($4.3 Tire Dealer figures unless otherwise noted. tires: billion) tire sales also set records.

Truck tires: $ 5.1 billion Overall tire shipments are expected Farm tires: $502 million to rise again in 2011. So are tire prices, OTR tires $401 million as the need to meet rising raw material

T

E IN MAD NA CHI

Clockwise from upper left: Sam’s Club is the largest warehouse membership club in the U.S. with more than 600 stores; replacement truck tire shipments rose nearly 20% last year; natural rubber costs reached $5,000 a ton on Jan. 1, 2011; there was a dramatic decrease in consumer tire imports made in China; Tire Kingdom Inc. is the second largest independent tire dealer chain in North America with 735 stores (Discount Tire Co. Inc. ended the year with almost 800); ATD has 86 distribution centers; Chairman and CEO Mauro Pessi says Pirell Tire North America “is not interested in bringing truck tires here.”

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Facts section: domestic tire shipments

A tire EXPLOSION! Pent-up demand coupled with a deliberate reduction in supply created the perfect storm

D

omestic tire shipments were down dramatically in 2009 as the effects of the recession lingered and lack of demand prompted tire manufacturers to ramp down production and jettison inventory.

According to Rubber Manufacturers Association (RMA) and MTD data, U.S. consumer tire plants ran at close to 65% capacity in 2009.

In 2010, however, those same tire producers were caught off-guard when pent-up demand resulted in increased spending on tires (see Chart 2) and vehicles.

They ramped up production — some even announced investments in capacity — and increased imports. But they couldn’t keep up, which resulted in backorder problems.

As for retail tire dealers, 47.3% reported their unit sales were up by an average of 11% through the first nine months of 2010, according to MTD’s exclusive “State-of-the-Industry Survey.”

When asked to predict their unit sales for the year, the respondents were more optimistic: 52.3% said they would be up for the year.

Wholesale distributors fared even better: 68.3% said their unit sales were up by an average of 13%. And 71.8% believed their sales would be up at year’s end.

In December, the RMA predicted passenger, light truck and truck tire shipments in the U.S. would collectively be up more than 9% in 2010 vs. 2009.

Leading the way were OE passenger tire shipments, which the RMA estimated would be up 44%, a year-over-year gain of 11 million tires.

The anticipated jump in shipments is the result of an increase in domestic vehicle production, plus consumers taking advantage of incentive programs and low interest rates.

Overall replacement tire shipments

30 MTD_28-51.indd 30

also experienced significant growth in 2010 “as a result of increases in vehicle miles traveled, stable energy prices, longer vehicle life and overall positive domestic economic conditions for both the consumer and commercial sectors,” according to the RMA. The 5% increase in replacement passenger tire units was spurred by non-Chinese imports.

“The imposition of a three-year Chinese import tariff in September 2009 decreased Chinese imports, but effectively increased imports from other Pacific Rim countries such that nonRMA imports are forecast to increase nearly 6% in 2010.”

(The RMA will release its preliminary numbers, which sometimes vary dramatically from its forecast, in February.)

The RMA’s Tire Market Analysis Committee sees some improvements in the replacement and OE categories in 2011, although the increases will vary.

The growth in replacement passenger tire shipments “will be tempered, as continued economic uncertainties for the consumer will result in a less than 2% increase, or nearly 3 million units.”

Replacement light truck tire shipments may be flat “in keeping with commercial economic forecasts.”

After a 19.2% increase in 2009 vs.

2008, replacement truck tire shipments, which include wide-base and heavy truck tires, will increase another 3.8% in 2011.

OE passenger tire shipments will be up this year because of a projected 6% increase in vehicle sales. Little or no growth is anticipated for OE light truck tire shipments because “no increase is anticipated in domestic vehicle production” in this segment.

The OE truck tire sector is expected to continue to rebound in 2011, perhaps by 750,000 units. ■

Chart 2 UNITS SHIPPED: 2001-2010 (in millions) PASSENGER TIRES Year

Replacement

OE

2010

198.7

34.6

2009

184.0

25.0

2008

195.0

39.0

2007

205.0

48.0

2006

199.1

49.0

2005

205.8

53.0

2004

199.4

53.0

2003

194.0

54.6

2002

190.5

57.5

2001

192.0

54.0

LIGHT TRUCK TIRES 2010

27.6

3.4

2009

26.0

2.6

2008

30.0

3.0

2007

35.7

4.9

2006

35.0

5.2

2005

36.6

7.0

2004

36.5

7.9

2003

34.5

8.1

2002

34.0

8.4

2001

32.0

6.3

MEDIUM/HEAVY TRUCK TIRES 2010

15.2

2.7

2009

12.7

2.1

2008

15.5

4.3

2007

16.7

5.0

2006

17.6

7.1

2005

17.8

6.6

2004

16.5

5.8

2003

15.8

4.3

2002

15.0

3.9

2001

13.8

3.6

MTD January 2011 4/26/11 11:04:48 AM

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Facts section: imports

Made in China. And Indonesia.

And Taiwan... Consumer tire imports are up 15.5%

C

hinese consumer tire imports were down 27.6% last year compared to 2009. Passenger tire imports were hit particularly hard, dropping from 38 million units to 27.4 million units (see Chart 3).

It’s easy to pinpoint the reason for the dramatic decreases.

A series of tariffs, which went into effect on Sept. 26, 2009, are directly responsible. In the 15 months since they were implemented, consumer tire demand in the United States has outpaced domestic supply.

After depleting their inventories in 2009, some domestic tire manufacturers have tried to catch up by returning to 24/7 schedules. They also increased plant capacity by 1%.

It wasn’t enough. Because the tariffs — which dropped from 39% to 34% on Sept. 26, 2010 — drastically reduced Chinese produced tires, tire manufacturers and marketers Chart 3 U.S. CONSUMER TIRE IMPORTS FROM CHINA (in millions) Year

Units

Yr./yr. change

2010

31.1

-27.6%

2009

43.0

-7.5%

2008

46.5

+14.8%

2007

40.5

+50.0%

2006

27.0

+28.0%

Source: U.S. government, MTD figures

Chart 4 U.S. CONSUMER TIRE IMPORTS BY COUNTRY 2010 Rank/ country

2009 rank

% change vs.

2009

1. China

1

-27.6%

2. S. Korea

4

+81.0%

3. Canada

2

+10.0%

4. Japan

3

+34.0%

5. Indonesia

5

+78.0%

6. Thailand

8

+77.5%

7. Mexico

6

+44.5%

8. Brazil

7

+9.6%

9. Taiwan

9

+118.0%

10. Germany

11

+17.0%

The top 10 countries account for 92% of all passenger tire imports in the U.S.

32 MTD_28-51.indd 32

turned to countries such as South Korea and Indonesia (see Chart 4). The result? Overall consumer tire imports to the U.S. were up 15.5% in 2010 vs. 2009. Still, China remained the number one importer.

“Tire production in the U.S. increased 15%, or about 25 million tires, in 2010 vs. 2009, and employment increased slightly, but at a much lower rate than the increase in production,” says Saul Ludwig, a managing director with Northcoast Research Holdings LLC. “So the USW can certainly claim victory.

“However, because imports from countries other than China increased even more than those from China decreased, there were other influences that may better explain the increase in production. Inventories (in units) that had been chopped by 30% in 2009 had to be rebuilt, and actual tire demand also increased. In my opinion, those factors trumped the tariffs as the principal reason for the increase in production and employment.”

Both the United Steelworkers union and the Alliance for American Manufacturing (of which the USW is a member) say domestic tire production is up and jobs have been created because of the tariffs. The Tire Industry Association believes there is no reliable data to support the claim that the tariff has protected tire manufacturing jobs.

Either way, the production of low-cost radial consumer tires in the U.S. has not increased, and may never return. In addition, consumer shipment numbers from China are not anywhere near as low as predicted. The International Trade Commission estimated the tariffs would decrease shipments anywhere from 38.2% to 58.4%. Many opponents of the tariff legislation claimed shipments would drop to almost nothing. ■ Chart 5 U.S. TRUCK TIRE IMPORTS FROM CHINA

440,000 bias (11%) 3.56 million radial (89%) Source: U.S. government, MTD figures

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Facts section: market share

Major wins for major brands Consumer tire market share shows increases

W

hen is a bad year a good year?

When your name is Goodyear Tire & Rubber Co. That question was moot in 2010, as Goodyear gained market share for its flagship brand (see Chart 6). A marketing success story in the Assurance Fuel Max tire, introduced in 2009, didn’t hurt.

Demand for replacement consumer tires was high and supply low in 2010. So if you had tires, you probably sold them. That also meant a brand could increase its unit sales and retain the same market share.

Goodyear lost associate brand market share last year, as Republic was dropped and Kelly production couldn’t keep up with the nearly 8% increase in replacement shipments (see page 30). But it sold more tires in 2010 than it did in 2009.

Other brand share winners on the replacement passenger tire side were Cooper, Hankook, Yokohama, Falken, Nexen and Pirelli. Gaining market share on the replacement

Brand Goodyear

% of total 15.0%

Brand Goodyear

% of total 12.5%

8.5%

BFGoodrich

9.0%

Bridgestone

7.5%

Bridgestone

8.0%

Firestone

7.5%

Michelin

7.0%

BFGoodrich

5.0%

Firestone

6.5%

Cooper

5.0%

Cooper

6.0%

Hankook

4.5%

Multi-Mile

4.5%

General

3.5%

General

4.0%

Falken

3.0%

Toyo

4.0%

Kumho

3.0%

Yokohama

4.0%

Uniroyal

3.0%

Hankook

3.5%

Yokohama

3.0%

Kumho

3.0%

Nexen

2.5%

Uniroyal

2.5%

Toyo

2.5%

Cordovan

2.0%

Continental

2.0%

Falken

2.0%

Dayton

2.0%

Mastercraft

2.0%

Dunlop

2.0%

Nexen

2.0%

Hercules

2.0%

Pirelli

2.0%

Michelin 16.8%

Multi-Mile

2.0%

Continental

1.5%

Bridgestone 17.3%

Pirelli

2.0%

Dayton

1.5%

Cordovan

1.5%

Hercules

1.5%

Mastercraft

1.5%

Kelly

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%

Dunlop

1.0%

Kelly

1.0%

Laramie

1.0%

Nitto

1.0%

Sigma

1.0%

Sears

1.0%

Others

5.5%

Sumitomo

1.0%

Others

6.0%

Goodyear 17.6% Others 48.3%

Chart 8 DOMESTIC CONSUMER TIRE BRAND SHARE (by type; based on 226.3 million units)

Associate brands 9.9% Private brands 11.9% Major brands 78.2%

MTD_28-51.indd 34

PASSENGER TIRES LIGHT TRUCK TIRES (based on 198.7 million units) (based on 27.6 million units)

Michelin

Chart 7 2010 U.S. CONSUMER TIRE MARKET SHARE (by company, three top brands; based on 226.3 million units)

34

Chart 6 2010 U.S. REPLACEMENT CONSUMER TIRE BRAND SHARES

Because numbers are rounded to the nearest one-half percent, the total may not equal 100%.

MTD January 2011 4/26/11 11:05:11 AM

light truck tire side in addition to Goodyear were Firestone, General, Yokohama, Hankook, Kumho, Falken, Pirelli, Continental and Maxxis.

Goodyear, Bridgestone Americas Inc. and Michelin North America Inc. account for more than 50% of the replacement consumer market in the U.S. with nine brands (see Chart 7).

Goodyear has 17.6% with Goodyear, Dunlop and Kelly; Bridgestone 17.3% with Bridgestone, Firestone and Dayton; and Michelin 16.8% with Michelin, BFGoodrich and Uniroyal.

Major brands increased their consumer tire market share year over year from 73.8% to 78.2% (see Chart 8).

The 27.6% drop in Chinese imports hurt the private brand and associate brand segments a lot more than major brand manufacturers. Compared to 2009, private brand share was down almost two percentage points, from 13.8% to 11.9%.

Associate brand share decreased even further, from 12.4% to 9.9%.

Putting the shipments in some context, there were more than 217 million registered cars and light trucks in the U.S. in 2010.

the original equipment level, an OE supplier had to increase its shipments by 37% in 2010 (see Chart 9). OE tires that were shipped downstream through the replacement channel are not included.

Not surprisingly, light vehicle production in the U.S. and Canada was up by about the same percentage. Close to 9.8 million vehicles were produced last year.

Out of bankruptcy, General Motors Corp. regained the market share lead it lost to Ford Motor Co. in 2009 (that’s production market share, not sales). ■

OE market share Just to keep up with market share at Chart 9 U.S./CANADIAN OE CONSUMER TIRE BRAND SHARE (excluding imported vehicles; based on 46 million units) Brand

2010

2009

Goodyear

28.8%

28.0%

Michelin

22.2%

22.6%

Bridgestone

14.3%

14.2%

Continental

9.8%

10.2%

BFGoodrich

5.8%

6.0%

Firestone

4.9%

5.2%

Hankook

3.9%

3.6%

Pirelli

3.4%

3.5%

General

3.0%

3.1%

Kumho

1.5%

1.0%

Dunlop

1.2%

1.2%

Others*

1.2%

1.4%

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

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Facts section: distribution

Everywhere a warehouse And American Tire Distributors has room to grow

O

ne year ago, American Tire Distributors Inc (ATD), was the largest wholesale tire distributor in the United States. That hasn’t changed. However, it had serious gaps in its nationwide coverage.

Weak spots included Seattle and Portland in the Northwest, and the Great Lakes region, which includes Illinois, Indiana, Michigan and Ohio.

ATD has been working overtime to fill those holes.

Late in 2010, it acquired two Northwest distributors: Lisac’s of Washington Inc. and Tire Wholesalers Inc., adding distriChart 10 bution centers in U.S. CONSUMER TIRE RETAIL Portland, Ore., and MARKET SHARE Spokane and Kent, (based on retail sales) Wash. The company Distribution channel 2010 2009 also announced plans to build a Independent tire 60.0% 60.0% 126,000-square-foot dealers distribution center Mass merchandisers 14.5% 14.5% in the Seattle, Wash., Warehouse clubs 9.5% 9.5% area in the first quarTire company-owned 7.0% 7.0% ter of 2011. stores A new distribution center in Auto dealerships 6.0% 5.5% McCook, Ill., will Service stations 1.5% 2.0% serve the greater Miscellaneous outlets 1.5% 1.5% Chicago area. And the New England area is being heavily targeted (the company says it is conducting site evaluations in eastern Pennsylvania, New Jersey, New York, Massachusetts, Connecticut and other New England states).

“The growth of ATD was expected, as was the growth of other tire distributors such as Hercules, TCI and TBC (Carroll Tire Co.),” says tire industry analyst Saul Ludwig.

“It is a trend that has been going on the last few years.

“Given the ever-growing plethora of brands, tire names, sizes and styles, it is impossible for the average tire dealer to stock everything any customer may need.

Dealers are relying more on warehouse distributors to carry the right inventory, and this trend is likely to continue.”

(According to a recent MTD survey, retail tire dealers average almost five wholesale tire suppliers each.)

ATD is based in Huntersville, N.C. It has 86 distribution centers servicing 39 states. The warehouses inventory approximately 26 brands and 40,000 SKU’s.

Dealer Tire LLC, the second largest independent domestic wholesale distributor with 20 distribution centers, wholesales solely to the automobile dealer channel. Not surprisingly, the Cleveland, Ohiobased distributor sells 11 original equipment brands: BFGoodrich, Continental, Dunlop, General, Goodyear, Hankook, Kumho, Michelin, Pirelli, Uniroyal and Yokohama.

Dealer Tire sells tire programs to car dealerships. It is “exclusively dedicated to helping original equipment automobile manufacturers design, implement and manage profitable tire programs for their dealerships that, in turn, increase customer satisfaction, customer safety and customer retention,” according to its Web site.

It has deals with 15 vehicle manufacturers, including Mercedes-Benz USA LLC, BMW of North America LLC, Toyota Motor Sales U.S.A. Inc., Chrysler Group LLC and Kia Motors America Inc. Based in Cleveland, Ohio, Dealer Tire services between 4,000 and 8,000 automobile dealerships nationwide.

Nearly 52% of the 30,000 independent tire dealers in the U.S. also sell to car dealerships. ■

Chart 11 CONSUMER TIRE DISTRIBUTION CHANNEL MARKET SHARE Initial channel Independent tire dealers Tire company stores Miscellaneous*

2010

2008

2006

2004

76.0% 75.0% 74.0% 72.5% 8.0%

8.5%

16.0% 16.5%

8.5%

8.5%

17.5% 19.0%

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

36 MTD_28-51.indd 36

MTD January 2011 4/26/11 11:05:15 AM

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

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4/26/11 11:05:20 AM

Facts section: sales and pricing

Planning ahead on a global scale Pirelli sets aggressive sales goals through 2013

P

irelli & Cie SpA developed the plan; Pirelli Tire North America will help implement it. In 2010, the parent company released its aggressive 2011-2013 Industrial Plan, which calls for average annual growth of 8% and an earnings target of 11.5% in 2013.

Pirelli plans to accomplish this by increasing its focus on premium tires, especially in the replacement segment.

“What we call the premium market is broadening,” says Mauro Pessi, Pirelli Tire’s chairman and CEO. “We try to set the standard, (and) 70% of our business is in the premium standard.”

He defines “premium” more in terms of pricing than tire category.

“The upper half of the market is where premium and ultra-premium live,” he says. It represents about one-third of the total market and is “less impacted” by a recession or slowdown in the auto sector.

Pirelli posted global tire sales of $6.2 billion in 2010, a 12.7% increase over 2009 (see Chart 12). In the U.S. and Canada, its tire sales were up 25%, compared to 15.5% overall for the top 11.

Three rounds of price increases by many of the tire manufacturers greatly helped the dometic sales figures. Taking the high-end of the increases into account, they averaged between 11% and 22.5% for the year.

Not all the price increases stuck, however. MTD estimates that the average consumer price increase was closer to 10% to 12%.

Based on advertised pricing, some tire sizes experienced lower increases (see Chart 13).

The most popular advertised size was P175/70R13, which was predominantly marketed in newspapers around the country as a low-cost radial (LCR). Its average price was $50.91, or 7.3% higher than in 2009.

In regard to the U.S./Canadian rankings, it should be noted that companies with company-owned stores like Bridgestone and, to a lesser extent, Goodyear, have the advantage of counting retail pricing on tires through their outlets. Also, retreading revenue is included in the sales figures of Bridgestone, Goodyear and Michelin. ■ Chart 13 AVERAGE RETAIL TIRE PRICES ADVERTISED PRICES Size

Major brand

LCR

Average

P205/65R16

$103.10

$65.10

$86.81

P235/75R15

$114.33

$87.06

$106.72

MEDIAN SELLING PRICES P205/65R15 2010: $89.79 2009: $90.47 2008: $91.95 P195/75R14

38 MTD_28-51.indd 38

2010: $67.95

2009: $66.00 2008: $68.97

Chart 12 WORLD LEADERS IN NEW TIRE SALES (fiscal year 2010; in billions of U.S. dollars) Company 2010 2009 $26.4 $22.9 1. Bridgestone Corp.

2. Groupe $21.7 $19.5 Michelin 3. Goodyear Tire $18.3 $16.3 & Rubber Co. 4. Continental AG $9.2 $8.0 5. Pirelli & C. SpA $6.2 $5.5 6. Sumitomo $5.4 $4.6 Rubber Industries Ltd. 7. Hankook Tire $4.7 $3.8 Co. $4.2 $3.5 8. Yokohama Rubber Co.1 9. Cooper Tire & $3.2 $2.8 Rubber Co. $3.1 $2.7 10. Cheng Shin Rubber Ind. Co. Ltd.2 11. Kumho Tire $3.0 $2.2 Co. Inc. $2.5 $2.3 12. Toyo Tire & Rubber Co. Ltd.3 U.S./CANADIAN LEADERS IN NEW TIRE SALES (fiscal year 2010; in billions of U.S. dollars) Company 2010 2009 $9.2 $8.1 1. Bridgestone Firestone 2. Goodyear $8.0 $7.0 3. Michelin North $6.6 $5.8 America 4. Cooper Tire $2.2 $1.8 5. Continental Tire $2.0 $1.7 the Americas 6. Yokohama Tire $1.1 $.92 Corp.

7. Hankook Tire $1.0 $.83 America Corp.

8. Toyo Tire Hold$.85 $.74 ings of Americas Inc. $.76 $.64 9. Sumitomo Rubber Industries4 10. Kumho Tire $.73 $.57 U.S.A. Inc. 11. Pirelli Tire $.54 $.43 North America 1 Fiscal year ending March 31, 2011. Yokohama will change to a January-December fiscal year in 2012.

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 2011 4/26/11 11:05:26 AM

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4/26/11 11:05:32 AM

Facts section: tire dealer profile

Tire dealer profile Want to compare your dealership to the other 30,000 independents? Here are some benchmarks

S

ingle-store owners make up two-thirds Survey respondents purchased tires from Chart 14 of the 30,000 independent retail, an average of five wholesale distributors 2010 BRANDS LISTED wholesale and commercial tire dealer each.

BY OUTLETS locations in the U.S. The vast majority of The average age of the vehicles serviced (Total outlets: 5,018) locations offer consumer tires; close to 60% by tire dealers is 10.2 years. According to Rank by number Dealers/ of the locations sell truck tires. the latest applicable research data from of dealers outlets Wholesale distributors represent 13% of R.L. Polk & Co. (which takes into account 1. Michelin 83/4,200 the 30,000 dealers. scrappage rates, including the 2009 “Cash 71/3,877 Retail tire dealers dominate the automo- 2. Goodyear for Clunkers” program), the average age of tive aftermarket. They account for 60% of 3. BFGoodrich passenger cars is 10.6 years. For light trucks 70/3,733 retail consumer tire sales (see page 36), (Class 1-3), the average is 9.6 years.

4. Bridgestone 62/2,928 which totaled $15.6 billion in 2010. DealOn average, automotive service accounts 55/3,293 ers also perform more than $20 million a 5. Continental for 47% of an independent tire dealer’s sales, year in automotive services. based on MTD’s 2009 Automotive Service 6. Dunlop 52/3,301 Tire dealers specifically influence the tire 6. Firestone Survey. Average earnings are 44%.

44/1,862 brand purchase 70% of the time. Customers The average number of service bays per 48/2,786 ask for a brand and buy that brand 30% of 8. General location is six; the average number of tech47/2,811 the time; however, the dealer still influences 9. Uniroyal nicians is five. the type of tire purchased in half of those 10. Yokohama The most popular service among inde46/3,130 cases. When it’s all said and done, tire dealers pendent dealers is mounting and balancing 11. Cooper 40/1,823 directly influence the purchase of the tire (91%), followed by brake service (82%).

12.

Kelly 36/1,399 by consumers 85% of the time.

Tire pressure monitoring service and oil/ That, in a nutshell, is what the overall 13. Toyo lube service work are performed by 80% 35/1,547 independent tire dealer distribution chan- 14. Pirelli of the dealers.

34/3,007 nel looks like. Here’s a profile of the average Oil and lube service remains one of the 15. Hankook 32/3,023 tire dealer. most competitive automotive services in Independent retailers average between 16. Falken the aftermarket. Whether it is promoted by 20/1,531 $1.9 million and $2 million per outlet. A 17. Kumho time saved (“quick lube”), cost (the most 18/1,407 typical tire dealer handles 11.4 different advertised retail price for an oil change is 17/367 brands, which is in line with what dealers 18. Dayton $19.99) or value (it often includes a “free” Source: The Modern Tire Dealer on the Modern Tire Dealer 100 list offer. tire rotation and safety inspection), an oil 100, 2010 (For a look at brand popularity among the change is used to bring people into a repair MTD 100, see Chart 14.) shop.

The advertised cost of a standard oil (synthetic blend), lube The average tire dealer has owned his or her company for 22 years, according to the latest MTD dealer profile survey. Thirty- and filter remained steady over the course of the year (see Chart seven percent of the dealers have children in the business; of 15). The average advertised cost for an oil change was $20.16, those who do, 81% say they plan to keep the business in the compared to $19.83 in 2009 and $18.99 in 2008. family. Thirty-five percent have spouses working with them.

The average annual sales from oil and lube service per dealer Among retailers, half of the dealers say they get some of their is $55,621. The average annual profit is $17,799 (32%). product directly from tire manufacturers. Of those who say they The geographic breakdown of independent tire dealers in the do, the average is 3.8 manufacturers per dealer.

U.S. favors the eastern and midwestern states: South Atlantic, 20.9%; East North Central, 14.9%; West South Central, 13.6%; Pacific, 13.0%; West North Central, 10.1%; Middle Atlantic, Chart 15 8.6%; East South Central, 8.2%; Mountain, 7.3%; and New AVERAGE ADVERTISED OIL CHANGE PRICING England, 3.4%.

Full The state with the most independent dealers is California. Texas 1Q ‘10 2Q ‘10 3Q ‘10 4Q ‘10 year has the second highest number of dealers, followed by Florida, $19.61 $19.74 $19.75 $20.97 $20.16 Ohio, Georgia, North Carolina and Pennsylvania. ■

40 MTD_28-51.indd 40

MTD January 2011 4/26/11 11:05:38 AM

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MTD_28-51.indd 41

4/26/11 11:05:44 AM

Facts section: plant capacities

Capacity: up 0.8%

T

ire capacity, not production, in North America totaled 321.9 million tires at 51 plants as of Jan. 1, 2011. That’s up nearly 1%, the first year-to-year capacity increase since 2007. (The total does not include race or aviation tires.)

U.S. capacity was 262.3 million tires, a 1% increase over last year and 81.5% of total North American capacity. There are 37 tire manufacturing facilities in the U.S., down from 48 plants 10 years ago.

The increase in domestic capacity can be attributed to investments made

by Bridgestone (Des Moines, Iowa), Cooper (Findlay, Ohio, and Tupelo, Miss.), Goodyear (Fayetteville, N.C., and Topeka, Kan.), Michelin (Ardmore, Okla., Fort Wayne, Ind., and Tuscaloosa, Ala.) and Yokohama (Salem, Va.).

Cooper’s capacity of 97,000 consumer tires a day is still 20% below what it was two years ago, before it closed its Albany, Ga., plant as part of its capacity restructuring. In May 2010, Chairman, CEO and President Roy Armes told investors that Cooper plans to add 10% to 15% capacity at its manufacturing facilities (including Corporacion de Occidente SA de CV in Mexico) over the next two years “without investing in brick and mortar.”

Canadian tire plant capacity remained at 28.1 million tires for the third consecutive year. Canada’s six plants represent 8.7% of total tire production capacity in North America.

Mexican capacity remained fairly stable, increasing less than one-half percent to 31.4 million tires. Its eight plants account for 9.8% of total North American capacity.

Tire production capabilities will increase more dramatically in the next few years, with the possible addition of three manufacturing plants in North America.

1. In 2008, Kumho announced it was going to build a consumer tire plant in Macon, Ga. However, the recession curtailed those plans, maybe for good.

“The construction of the Georgia plant is currently on hold,” says

42 MTD_28-51.indd 42

Chart 16 NORTH AMERICAN TIRE PLANT CAPACITIES as of January 1, 2011 (in thousands of units)

Plant location/ Year constructed 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:

Passenger Nonunion ISO1 QS2 per day: Bridgestone/Firestone 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 North America Inc. Mount Vernon, Ill., 1973 x x x 28.0 8.0 Total: 28.0 8.0 Cooper 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 Buffalo, N.Y., 1923 x 4.3 5.4 Danville, Va., 1966 x x 0.0 0.0 Fayetteville, N.C., 1969 x x 36.5 9.5 Gadsden, Ala., 1928 x x 15.0 10.0 Lawton, Okla., 1978 x x x 65.0 0.0 Topeka, Kan., 1945 x x 0.0 1.0 Union City, Tenn., 1968 x x 35.0 13.0 Medicine Hat, Alberta, 1960 x x 15.0 0.0 Napanee, Ontario, 1990 x x x 19.0 0.0 Total: 189.8 38.9 GTY (General/Toyo/Yokohama) Mount Vernon, Ill., 1988 x x x 0.0 0.0 Total: 0.0 0.0 Michelin Ardmore, Okla., 1969 x x x 40.5 3.5 Dothan, Ala., 1979 x x 1.0 4.0 Fort Wayne, Ind., 1961 20.5 8.5 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 22.5 6.5

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

4.5 4.5

0.0 0.0

40.5 40.5

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 11.2 0.0 0.0 0.0 5.5 0.0 0.0 0.0 18.45

4.55 0.0 0.0 0.0 0.0 1.6 0.0 0.0 0.0 6.15

16.0 11.2 46.0 25.0 65.0 8.1 48.0 15.0 19.0 253.3

7.3 7.3

0.0 0.0

7.3 7.3

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 29.0 28.0 7.0 19.0 0.09 7.0 29.0

MTD January 2011 4/26/11 11:05:50 AM

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 6.0 200.59

0.0 0.0

0.0 0.0

1.7 1.7

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

7.0 7.0

0.0 0.0

0.0 0.0

24.0 24.0

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

51.45 0.0 4.8 56.25

77.88 4.5 1.04 83.42

718.63 77.0 86.44 882.07

+2.4% 0.0% +0.3% -10.7% 0.0% - 2.0% - 4.4% +0.9% +4.0%

+0.8% -5.7% -3.7%

0.0 0.0 6.0 0.0 162.5 26.5 Pirelli Tire North America Rome, Ga., (MIRS), 2002 x x 1.2 0.5 Total: 1.2 0.5 Specialty Tires of America 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 6.0 1.0 Total: 6.0 1.0 Yokohama/Mohawk Salem, Va., 1968 23.0 1.0 Total: 23.0 1.0 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 Guadalajara, Mexico, 2005 x x x 10.0 7.2 Total: 10.0 7.2 U.S. Totals Canadian Totals Mexican Totals TOTAL:

483.0 61.3 59.0 603.3

2010 vs. 2011 2009 vs. 2008 2008 vs. 2007

+0.6% - 5.4% - 3.9%

106.3 11.2 21.6 139.1

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_28-51.indd 43

Marketing Manager David Koh. “We will make a decision in 2011.”

The plant was expected to produce 2.1 million tires a year, with room to expand.

The initial cost was $165 million.

2. Pirelli announced it will build a plant in Mexico “to serve the North American Free Trade Agreement (NAFTA) area.” The initial investment in the plant will be $210 million. The facility is expected to focus on premium tire production, per the company’s 2011-2013 Industrial Plan.

3. CGS Tyres, the tire producing division of CGS Holding, will build a farm tire manufacturing plant in Charles City, Iowa, beginning Jan. 1, 2012. The Czech Republic-based company says the $43.8 million facility will produce Mitas and Continental brand radial farm tires, which will be sold throughout North America. MTD estimates the plant will be able to produce close to 54,000 tires annually, or 150 a day.

In response to strong replacement and OE demand in 2010, a number of domestic tire manufacturers announced additional investments in North American capacity. Yokohama is investing $13 million in its Salem, Va., plant to boost production of passenger and light truck tires. It will be completed

by August 2011.

Pirelli Tire North America is adding a compound mixing facility to its MIRS (Modular Integrated Robotized System) facility in Rome, Ga. The $12 million investment will increase capacity, says Mauro Pessi, chairman and CEO. Both Bridgestone Americas Tire Operations and Toyo Tire North America Manufacturing Inc. are in the middle of expansion plans implemented prior to 2010.

Bridgestone will complete a $77 million, three-year expansion of its Des Moines farm tire plant by the end of this year. Some of the additional capacity in radial farm tire production will serve the North American market.

Toyo’s goal is to increase capacity at its Toyo consumer tire plant in White, Ga., from 2.5 million tires to 4 million tires by 2012.

If Titan International Inc. decides to use the molds it purchased from Denman Tire LLC in bankruptcy court last year, Titan may also add to tire capacity in the U.S. ■

43 4/26/11 11:05:50 AM

Facts section: commercial

No more cannibalism Fleets take their trucks out of park and buy new and retreaded tires

T

he average age of a Class 8 truck is 6.7 years.

That is higher than the historical average, and the highest since ACT Research Co. (www. actresearch.net) began tracking it in 1979.

A dramatic reduction in the demand for freight in 2009 is partially responsible. That led to a decrease in North American commercial truck production, and a 51% decrease in OE truck tire shipments in 2009 vs. 2008.

When fleets needed new tires, they cannibalized the empty trucks they had parked. The result was an 18% decrease in replacement truck tire shipments during the same time frame.

Chart 17 Demand picked up last 2010 REPLACEMENT year, however, and OE and MEDIUM/HEAVY TRUCK replacement tire shipments TIRE BRAND SHARES* increased 28.5% and 19.7%, (Based on 15.2 million units) respectively.

Brand 2010 Ken Vieth, president and Goodyear 20.0% senior analyst at ACT Research, says North American truck Michelin 19.5% production could rise more Bridgestone 18.0% than 50% in 2011.

Firestone 7.5% “The industry closed 2010 with a string of three strong Yokohama 7.0%

months of net orders,” he says. “With nearly 71,000 orders booked, the fourth quarter was the best quarter for Class 8 vehicles since the second quarter of 2006.

“The ramp-up in demand is consistent with the up-cycle we have been forecasting for over a year, and confirms production levels will increase significantly in 2011.”

Although truck tire pricing increased, not all the announced price increases stuck, especially earlier in the year. An 11R24.5 drive tire, load range G, averaged $389.16, which was up 1% compared to 2009 (MTD calculates dealer pricing in December).

The segment remains highly competitive. The Big Three manufacturers account for 68.5% of the replacement truck tire market, but there are 18 brands with at least 1% market share (see Chart 17).

Bridgestone Bandag Tire Solutions, Goodyear Tire & Rubber Co. and Michelin Retread Technologies Inc. represent 93.5% of the domestic retreading market (see Chart 18).

An estimated 14.3 million retreaded medium and heavy truck tires were produced in 700 U.S. plants in 2010. That’s a 10% increase in production compared to the previous year.

The top 100 retreaders in the U.S. accounted for

Continental

4.0%

General

3.5%

Hankook

3.0%

Double Coin

2.5%

Toyo

2.5%

BFGoodrich

2.0%

Hercules

2.0%

Roadmaster

2.0%

Dunlop

1.5%

Bridgestone 42.5%

Dynatrac

1.5%

Goodyear 28.0%

Gladiator

1.0%

Kumho

1.0%

Sumitomo

1.0%

Others

3.0%

* Because numbers are rounded to the nearest one-half percent, the total may not equal 100%.

Brands must have at least 1% of the market in shipment numbers to be listed at 1%.

44 MTD_28-51.indd 44

Chart 18 2010 U.S. MARKET SHARE, RETREADED TRUCK TIRES (based on 14.3 million units)

Michelin 23.0% Marangoni 4.0% Others 2.5%

MTD January 2011 4/26/11 11:05:50 AM

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MTD_28-51.indd 45

4/26/11 11:05:56 AM

Facts section: commercial Chart 19 2010 U.S. REPLACEMENT FARM TIRE MARKET SHARES REAR RADIAL (260,000 units) Firestone 30.0% Goodyear 30.0% BKT 15.5% Michelin 10.0% Titan 7.5% Alliance 2.0% Co-op 2.0% Trelleborg 2.0% Others 1.0% REAR BIAS (430,000 units) Firestone 33.0% BKT 21.0% Goodyear 20.0% Titan 16.0% Akuret 2.0% Alliance 2.0% Co-op 2.0% Trelleborg 2.0% Harvest King 1.0% Others 1.0%

46 MTD_28-51.indd 46

SMALL FARM (1.25 million units) Firestone 30.0% Goodyear 20.0% Titan 16.0% BKT 10.0% STA 6.0% Co-op 5.0% Alliance 3.0% Carlisle 3.0% Harvest King 3.0% Trelleborg 2.0% Others 2.0% Chart 20 U.S. OE REAR FARM TIRE MARKET SHARE (600,000 radial and bias units) Firestone

42.1%

Goodyear

36.75%

Titan

13.55%

Others

7.6%

12 million retreaded truck tires last year, or about 84% of total production, from 318 plants. They also accounted for 155,000 OTR tire retreads.

A lack of casings, particularly out of Japan, will be problematic in 2011, says Bob Majewski, president of the Tire Retread & Repair Information Bureau. He also runs Sumerel Tire Service Inc. in Newport, Ky., as president and COO. “We can sell more, but we cannot find casings.”

As for the farm and OTR tire markets, shipments were up across the board. Replacement rear farm tire units were up 9.5% (18.1% radial, 4.8% bias). OE shipments were up 9.1% (12.5% radial, 8.2% bias).

The Firestone and Goodyear brands (Titan Tire Corp. owns the rights to Goodyear farm tires) remain the top two players, although Balkrishna Industries Ltd. (BKT) has moved up to number two in replacement rear bias market share (see Charts 19 and 20).

Overall OTR civilian tire shipments — replacement and OE combined — were up more than 10%, to 436,000 units. However, that’s still down from the high of 565,000 units in 2008. ■

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MTD January 2011 4/26/11 11:06:02 AM

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MTD_28-51.indd 47

4/26/11 11:06:11 AM

Facts section: Canada

Canada catches up Replacement passenger tire shipments drop 12%

P

erhaps the global recession has caught up with Canada.

The next largest independent tire dealer groups are Alliance After an 18.5% increase in replacement consumer tire Tire Professionals (161 stores; Michelin, BFGoodrich and shipments in 2009 compared to 2008, Canada suffered Uniroyal brands) and Fountain Tire Ltd. (140 stores; Gooda 10.5% decrease in shipments in 2010 (see Chart 21). year, Dunlop and Kelly brands). Goodyear Canada Inc. has a That’s a little misleading, however. Winter tire shipments minority interest in Fountain Tire. were down close to 30% because Canadian dealers found Canadian Tire Corp., with 482 stores, is one of two mass merthemselves overstocked in 2009. (In 2008, Quebec passed chandisers in Canada that sell tires. Each store is operated by an legislation requiring “season-specific” tire use in winter.) independent business owner. They offer 11 brands: Motomaster In contrast, original equipment passenger and light truck tire (see Chart 22), Pirelli, Continental, Goodyear, Michelin, General, shipments rebounded a bit. And replacement and OE medium BFGoodrich, Uniroyal, Hankook, Dunlop and Cooper.

Walmart Canada Corp. has approximately 300 outlets that truck tire shipments were up 8.3% and 15.3%, respectively.

The largest independent dealer in Canada is Kal Tire Inc., sell tires, including 100 Super Centres that host Tire & Lube with 231 locations. Kal Tire offers 11 passenger and light truck Express Auto Centres. Walmart Canada promotes four brands: tire brands: BFGoodrich, Bridgestone, Falken, Firestone, Bridgestone, Nexen, Goodyear and Kingstar.

Goodride, Michelin, Multi-Mile, Nitto, Nokian, Uniroyal and Costco Wholesale Canada Ltd. is the only warehouse Yokohama. It also sells Continental, Bridgestone, Firestone, membership club in Canada. Its 80 outlets offer three brands: Michelin, BFGoodrich and Bridgestone. ■ Kumho, Michelin and Yokohama truck tires.

The largest independent tire dealer group in Canada Chart 22 is OK Tire Stores Inc., with 271 outlets. Each store 2010 CANADIAN REPLACEMENT is individually owned and operated. OK Tire sells 13 CONSUMER TIRE BRAND SHARES* brands: Bridgestone, Kumho, Pirelli, Continental, LIGHT TRUCK TIRE PASSENGER TIRE Toyo, Firestone, General, Dayton, Fuzion, Winterquest (TBC), Primewell, Hankook and Durun. (based on 18.5 million units) (based on 2.8 million units) Chart 21 CANADIAN TIRE UNITS SHIPPED (in millions) PASSENGER TIRE Replacement OE Year 2010 18.5 8.0 2009 21.0 6.0 2008 19.0 8.5 2007 17.4 10.7 2006 16.4 11.6 LIGHT TRUCK TIRE 2010 2.8 .02 2009 2.8 .01 2008 2.6 .04 2007 2.7 .75 2006 2.6 .63 MEDIUM/HEAVY TRUCK TIRE 2010 1.3 .15 2009 1.2 .13 2008 1.1 .30 2007 1.3 .37 2006 1.4 .47 Source: Rubber Association of Canada; MTD estimates

48 MTD_28-51.indd 48

Brand Motomaster Goodyear Michelin Bridgestone BFGoodrich Hankook General Nexen Toyo Yokohama Cooper Kumho Uniroyal Continental Dayton Dunlop Falken Hercules Nokian Delta Kelly Pirelli Others

% of total 14.5% 12.0% 12.0% 8.0% 6.0% 6.0% 4.0% 3.5% 3.5% 3.5% 3.0% 3.0% 3.0% 2.0% 2.0% 2.0% 2.0% 2.0% 1.5% 1.0% 1.0% 1.0% 6.0%

Brand Goodyear Michelin Motomaster BFGoodrich Bridgestone Firestone Yokohama General Hankook Toyo Kumho Uniroyal Dayton Dunlop Hercules Pirelli Continental Kelly Multi-Mile Others

% of total 15.0% 12.0% 11.0% 9.0% 8.5% 5.5% 5.5% 4.0% 4.0% 4.0% 3.0% 3.0% 2.0% 2.0% 2.0% 2.0% 1.0% 1.0% 1.0% 7.0%

* Because numbers are rounded to the nearest one-half percent, the total may not equal 100%.

MTD January 2011 4/26/11 11:06:17 AM

Quik-Link: 800-687-1557 ext. 11129

MTD_28-51.indd 49

4/26/11 11:06:23 AM

Facts section: tire size popularity

Top OE sizes get toppled But don’t say ‘goodbye’ to P215/60R16 and LT245/75R16 just yet

T Chart 23 MOST POPULAR DOMESTIC OE PASSENGER AND LT TIRE SIZES 2009 OE P-Metric/metric Size

% of total

P215/60R16

9.0%

P265/70R17

5.5%

P235/70R16

4.5%

P215/55R17

4.2%

P225/50R17

3.4%

2008 OE P-Metric/metric Size

% of total

P215/60R16

8.0%

P225/50R17

4.8%

P265/70R17

3.9%

P195/60R15

3.8%

P215/55R17

3.6%

2009 OE Light truck (LT) Size

% of total

LT245/75R16

23.4%

LT245/75R17

13.8%

LT225/75R16

11.6%

LT265/70R17

10.5%

LT275/70R18

9.2%

2008 OE Light truck (LT) Size

% of total

LT245/75R16

36.3%

LT225/75R16

16.2%

LT265/70R17

9.4%

LT245/75R17

6.7%

37x12.50R16.5

4.8%

he top 10 P-metric original equipment tire sizes in 2009 accounted for 41.1% of total sizes. That percentage is up from 39.8% in 2008 and 33.8% in 2007. Unfortunately, this trend is not necessarily a sign that dealers will be able to stock fewer SKUS in the future.

“Probably the biggest single issue (for dealers and manufacturers) is SKU count, and it’s not going to get any better,” says Rick Brennan, vice president of marketing for Kumho Tire U.S.A. Inc. At last year’s Specialty Equipment Market Association Show in Las Vegas, Nev., Lexani Tires Worldwide LLC introduced two unique sizes to its LX-9 line: 295/23/ R28 109W and 265/25R30 106V. They are labeled as extra-load sizes.

In contrast, the top 10 OE LT sizes represented 90.7% of the total sizes, up from 88.6% in 2008.

MTD lists the most popular OE P-metric and LT sizes for 2009 and 2008 (see Chart 23) to give tire dealers a better idea of what to look for and stock in 2011. For example, dealers can expect to see vehicles with size P215/60R16 roll into their dealerships over the next few years.

That size had been the most popular P-metric OE size since 2004. The streak was broken in 2010, when P265/70R17 took over the top OE spot (see Chart 24).

It jumped from third in 2008 to second in Chart 24 TOP U.S. PASSENGER TIRE SIZES, 2010

2009 to first last year, with P215/60R16 falling to second.

Two P-metric OE sizes entered the top 10 in 2009: P275/55R20 (eighth) and P275/65R18 (10th).

Both sizes had a resurgence of sorts; they were among the 10 most popular sizes in 2007.

Size LT245/75R16 was the top OE LT size for the 17th consecutive year in 2009.

However, size LT245/75R17 had been trending upward for years, almost doubling its shipments from 2008, when it was the fourth most popular OE LT size, to 2009, when it was the second most popular.

In 2010, the 17-inch version finally overtook the LT245/75R16 for the top OE spot (see Chart 25).

At the replacement level, the top P-metric remained the same in 2010: P225/60R16. However, P235/75R15, runner-up in 2009, dropped to fourth in 2010, behind 205/55R16, a metric size, and P215/60R16.

Like its OE counterpart, the LT 245/75R16 replacement size also dropped from one to two. However, the new number one size is not LT245/75R17, which didn’t crack the top five, but LT265/75R16. ■ Chart 25 TOP U.S. LIGHT TRUCK TIRE SIZES, 2010 Replacement

OE

1. LT265/75R16

1. LT245/75R17

2. LT245/75R16

1. LT225/75R16 3. LT245/75R16

Replacement

OE

3. LT265/70R17

1. P225/60R16

1. P265/70R17

4. LT235/85R16

4. LT275/65R18

2. 205/55R16

1. P215/60R16

5. LT285/75R16

5. LT245/75R16

3. P215/60R16

3. P205/55R16

4. P235/75R15

4. P225/50R17

5. P265/70R17

5. P215/55R17

Source: Rubber Manufacturers Association

50 MTD_28-51.indd 50

MTD January 2011 4/26/11 11:06:29 AM

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

MTD_28-51.indd 51

4/26/11 11:06:34 AM

NVH solutions

Don’t dump on the dumping unit ABS codes may be affecting the Nissan Quest actuator

By Paul Kujawa SUBJECT VEHICLES: Nissan Quest/Mercury Villager minivans (up to the 2002 model year).

COMPLAINT: Left/right rear brake is locking up.

CAUSE/SOLUTION: Check ABS codes. Verify that the ABS actuator is not causing the dumping unit to hold brake fluid pressure before replacing the master cylinder to get a new dumping unit.

If you encounter a Nissan Quest/Mercury Villager minivan (up to the 2002 model year) with the left front brake locking up, see if the right rear brake is locking up as well.

This vehicle has a component called a “dumping unit” that is screwed into one of the outlet ports of the master cylinder. The brake line for the left front and right rear brakes come out of this dumping unit. It has been common for the dumping unit to prevent brake fluid from returning back into the master cylinder and releasing the left front and right rear brake, thus resulting in the left front and right rear brakes staying applied.

If the left front and right rear brakes are locked up, loosen the brake line from the dumping unit and verify the brakes free up, which indicates that the brake fluid pressure is not releasing on its own. The master cylinder can be pulled away from the brake booster to eliminate the possibility of a brake pedal free play or pushrod adjustment problem; however, one of those problems should affect all four brakes.

We have had several shops tell us that replacing the dumping unit (which comes with a new master cylinder) fixed the brake lock-up problem, but we have also experienced cases where this has not corrected the problem. The dumping unit is only used in the brake circuit for the left front and right rear brakes. There is no dumping unit in the brake line off the master cylinder for the right front and left rear brakes.

52 MTD_52-57.indd 52

(Note: Drilling out the dumping unit as a means of eliminating its ability to lock up the left front and right rear brakes is not advised as this can affect brake pedal feel.)

Recently, one of our Hotline subscribers in South Carolina called about a Nissan Quest with the left front brake caliper and rotor melted down. The left front brake rotor, caliper and brake hose were replaced — no change; the left front and right rear brake were still locking up after the vehicle was driven for a period of time. When the brake line was cracked loose at the dumping unit on the master cylinder, the left front and right rear brakes freed up. The master cylinder was replaced (to get a new dumping unit) and the problem was believed to be corrected. But after an extended test drive, the temperature of the left front brake rotor was considerably hotter than the right front brake rotor.

Information gathered from a local Nissan dealer indicated the problem was in the ABS actuator.

A problem in the ABS actuator was supposedly preventing the dumping unit at the master cylinder from releasing brake fluid pressure causing the brake lockup problem. The ABS actuator was then replaced with a used component but the problem persisted.

The ABS light was now “on,” so ABS codes were checked manually. There was a normal code 12, and a right front wheel speed sensor open circuit code 21. Not knowing if the original ABS actuator had the code 21 stored, the ABS actuator was replaced again. The left front brake rotor was still getting considerably hotter than the right front brake rotor and the code 21 returned.

Diagnosing the right front wheel speed sensor open circuit code showed a defective right front wheel speed sensor. The speed sensor was replaced and the code 21 did not return.

Checking brake rotor temperatures after a long test drive now showed the brake temperatures to be about the same, fixing the vehicle.

The ABS code was affecting the ABS actuator and the ABS actuator was affecting the dumping unit, causing the dumping unit to hold brake fluid pressure on the left front and right rear brakes.

If you get one of these vehicles in your shop with the left front and right rear brakes locking up, first verify there are no ABS codes that might be affecting the ABS actuator. It is important to also verify that the ABS actuator is not causing the dumping unit to hold brake fluid pressure on the left front and right rear brakes before replacing the master cylinder to get a new dumping unit. ■ Data provided by Paul Kujawa of Identifix Inc. For more information, call (800) 997-1674 or visit www.identifix.com.

MTD January 2011 4/26/11 11:08:06 AM

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

MTD_52-57.indd 53

4/26/11 11:08:17 AM

TPMS

An Avalanche of service There are three ways to learn vehicle’s new sensors SUBJECT VEHICLE: 2007-10 GM Avalanche.

SENSOR IN TIRE? Yes (located in each tire/wheel assembly).

RESET PROCEDURE? Yes (whenever a tire pressure sensor has been replaced).

SPECIAL TOOLS NEEDED? Yes (in certain cases, a TPM Sensor Activation Tool J-46079 may be used).

The 2007-10 Avalanche’s tire pressure monitoring system (TPMS) displays tire pressures and tire locations on the vehicle’s Driver Information Center (DIC), one of the system’s many components. Other components include a Powertrain Control Module, Instrument Panel Cluster, Remote Control Door Lock Receiver (RCDLR), a radio frequency transmitting pressure sensor in each tire/wheel assembly and a serial data circuit.

When the vehicle is stationary, the sensors go into stationary mode, in which they transmit once every 60 minutes.

As the Avalanche’s speed increases to 20 mph, the sensors go into drive mode, in which they transmit once every 60 seconds.

When the TPMS detects a significantly under-inflated tire, a ‘CHECK TIRE PRESSURE” message displays on the DIC.

To service the clamp-in sensor: 1. Remove the tire pressure sensor nut.

2. Remove the sensor from the wheel hole.

3. Remove the sensor grommet from the valve stem.

4. Clean any dirt or debris from the grommet sealing areas.

5. Insert the sensor in the wheel hole with the air passage facing away from the wheel.

6. Install the sensor nut. Position the sensor body parallel to the inside wheel surface.

7. Tighten the nut to 62 in.-lbs.

8. Install the tire on the wheel, and then install the assembly back on the vehicle.

Follow these steps to service the snap-in sensor:

Sensor swap In order to service the Avalanche’s TPMS, you must first demount the tire from the wheel. Follow these steps: 1. Raise the vehicle on a suitable support. Remove the tire/wheel assembly from the vehicle.

2. Demount the tire from the wheel following the tire changer manufacturer’s instructions.

There are two kinds of sensors that can be used on the Avalanche’s TPMS: a clamp-in sensor and a snap-in sensor.

Figure 1: Exploded view of snap-in style tire pressure sensor.

1. Remove the TORX screw from the sensor and pull it straight off the pressure sensor valve stem (see Figure 1).

2. Remove the valve stem by pulling it through the rim.

3. Assemble the sensor to the valve stem and install the new TORX screw.

4. Apply tire soap to the rubber portion of the valve stem.

5. Pull the valve stem through in a direction parallel to the valve hole on the rim (see Figure 2).

6. Install the tire on the wheel, and then install the assembly back onto the vehicle.

Now you’re ready to initiate the new sensor’s relearn process.

Time to learn Before starting the relearn process, make sure that no other tire pressure sensor learn procedure is being performed

54 MTD_52-57.indd 54

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

MTD January 2011 4/26/11 11:08:24 AM

The left front turn signal also will be illuminated. Or, using the vehicle’s DIC, press and release the DIC INFO button until the TIRE LEARN message appears on the DIC display. Then press and hold the SET/RESET button until a double horn chirp sounds, indicating that learn mode has been enabled. The left front turn signal will be illuminated.

2. Starting with the left front tire, increase or decrease the tire 1. Using the tool, initiate the learn mode. A double horn chirp pressure for eight to 10 seconds or until a horn chirp sounds.

The chirp may occur before the tire pressure inwill sound indicating that the mode has crease/decrease time period has been reached been enabled. The left front turn signal or up to 30 seconds after the increase/decrease also will be illuminated. period has been reached.

2. Starting with the left front tire, acOnce the chirp has sounded, the sensor tivate the sensor by holding the antenna information has been learned and the turn of the tool upward against the sidewall signal in the next location to be learned will close to the wheel rim at the valve stem illuminate. location.

3. After the horn chirp has sounded, proPress and release the ACTIVATE butceed as in step two for the next three sensors ton and wait for a horn chirp. Once the Figure 2: Installation of snap-in chirp has sounded, the information has pressure sensor/valve assembly. in the following order: right front, right rear and left rear. been entered into the system. The turn 4. After the left rear sensor has been learned, signal in the next location to be learned a double horn chirp will sound. Turn the ignition switch to the will illuminate.

3. Repeat step 2 for the remaining three sensors in the fol- OFF position to exit the learn mode.

5. Adjust all tires to specification. lowing order: right front, right rear and left rear.

4. When the left rear sensor has been learned and the double Keep in mind that the TPMS will cancel the learn mode if horn chirp has sounded, the learn process is complete and the more than two minutes have passed and no sensors have been RCDLR will exit the learn mode.

5. Turn the ignition OFF and adjust all tire pressure levels learned, or if the system has been in learn mode for more than five minutes. to the recommended pressures.

If the learn mode is canceled before any sensor has been Here’s how to initiate and complete the learn process using learned, the RCDLR will remember all current sensor IDs and their locations. ■ a keyless entry transmitter or the DIC: simultaneously or that tire pressure levels are not being adjusted on a TPMS-equipped vehicle in close proximity.

There are three ways to enable the learn mode: using the TPM Sensor Activation Tool ( J-46079); using keyless entry transmitters; and using the DIC. Here’s how to initiate and complete the learn process using the scan tool:

1. Turn the ignition ON and initiate the learn mode. On models equipped with keyless entry, simultaneously press the keyless entry transmitter lock and unlock buttons until a double chirp sounds. This indicates that learn mode has been enabled.

www.moderntiredealer.com MTD_52-57.indd 55

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.

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

55 4/26/11 11:08:25 AM

Counter intelligence

Change is dangerous if left unmanaged ‘How’s Zat sound?’

By Wayne Williams

T

he changes we are going to discuss in this month’s article and the next revolve around overcoming two major problems that have several contributing factors. The problems are having the necessary tires on hand and how to handle an out-of-stock situation.

The contributing factors to out-of-stock conditions and lost sales revolve around three things —the explosion of SKUs, the cost associated with inventorying tires, and consumers who have done more research before contacting the retailer.

All three of these changing dynamics translate into “change points,” which when properly managed equal opportunity to win business and increase profitability. Unmanaged, they will lead to the deterioration of business revenue.

In previous articles we have discussed how SKU proliferation affects the tire dealer, the counter staff and the consumer.

With the rapid addition of new vehicle categories such as crossovers and hybrids, and the rebirth of the American muscle cars, etc., tire sizing and fitments continue to grow in both number and complexity.

56 MTD_52-57.indd 56

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

In 1980, 102 tire SKUs were required for 80% vehicle coverage. This number has steadily increased to the current 352 SKUs — and it continues to grow! The challenge of having the right tire(s) in stock to meet consumer need has become increasingly difficult. Having the right tire at the right price with the right acceptability for each individual customer is challenging enough, but that’s not all. The “right” tires cost more to inventory today; much more.

There was a time when certain-sized tires were “crossvehicle, cross-platform and cross-manufacturer.” One tire fit many vehicles. Today it’s significantly more complex and expensive. Example: In mid-December, Cadillac premiered its new CTS Sport Wagon. The premium model has “staggered” 19-inch tires — size 255/40R19 on the front, 265/35R19 on the rear. Cadillac will sell a limited number of these vehicles, introducing still more low replacement rate SKUs into the marketplace.

In the years to come customers may call local tire retailers and inquire about tires for their CTS Sport Wagon, and the reply will be, “We don’t have them in stock.” The local retailer is at a distinct disadvantage. It makes no financial sense to inventory the replacement tire for the CTS Sport Wagon because the retailer only services the local market with limited demand. However, the “big online guys” can afford to inventory slow replacement SKUs because they service the entire nation. Selling over one million tires a month, they can afford to stock slower turnover SKUs. This trend is not going to change any time soon. Therefore, you must rethink your approach and develop workable solutions for handling out-of-stock conditions for your business, for your employees, and for your customers!

Next month, we will take a look at what I call the “Zat Method.” Here’s an example of the Zat Method in practice: “I don’t currently have your tire size in stock. May I have your name and the best way to reach you? I’ll do some research and get back to you with a price and availability as soon as possible — no later than noon today. How’s Zat sound?”

Until next month, remember: Better, more professional handling of out-of-stock conditions leads to better profitability. How’s Zat sound? ■

MTD January 2011 4/26/11 11:08:27 AM

Focus on industry

Two FIRSTS for Falken Tire company addresses consumer and commercial markets

By Bob Ulrich

F

alken Tire Corp. launched two tire lines at the Specialty Equipment Market Association Show last November. One targets the growing UHP touring tire segment. The other satisfies the government’s SmartWay certification requirements for medium truck tires. Both are firsts for the company.

Sincera SN211 Touring replacement tire line, which is available in commodity original equipment sizes and backed by an 80,000-mile warranty. It will be available in March 2011.

From Ohtsu to Falken

EcoRun is the first Falken branded medium truck tire line sold in the United States. Falken Tire Corp. has been selling Ohtsu truck tires since March of last year.

“By 2013, our entire TBR line will be Falken branded,” says Andrew Hoit, director of marketing.

EcoRun line premium steer (RI-109), drive (BI-887) and trailer (RI-119) tires are SmartWay certified for low rolling resistance. They are available in size 295/75R22.5.

Craige McFerrin, Falken’s TBR specialist and account manager, says he expects size 11R22.5 to be added to the lineup in the second quarter. Two other sizes — 11R24.5 and 285/75R24.5 — will be added by the fourth quarter.

The 16-ply RI-109 steer tire features a new and flat tread design for improved tread wear. It has an 18/32-inch tread depth.

The 16-ply BI-887 drive tire has a closed shoulder design that promotes even wear. It features a 26/32-inch tread depth.

The Falken PT722 A/S is designed for dry and wet tracThe 14-ply RI-119 trailer tire’s tread design tion. It also has built-in Rotation Wear Indicators. is optimized for improved vehicle stability and fuel-efficient performance. It has a 12/32-inch The new Falken Azenis PT722 A/S is the company’s first tread depth.

“We guarantee two retreads five years from the D.O.T. premium ultra-high performance touring tire. It features a deep tread depth and long lateral tread groove, traits that date,” adds McFerrin. ■ help maximize traction on wet surfaces. An asymmetric tread pattern provides a comfortable ride.

The tire’s 44-size lineup is made up of “OE replacement sizes for vehicles such as large luxury sedans like the BMW 7 Series, Lexus LS and Mercedes CL, as well as some popular This month, Falken Tire Corp. will plus size fitments,” says Robert Chew, manager of product add 17 Large Overall Diameter (LOD) planning. sizes to its 27-size WildPeak A/T light The V-rated sizes are backed by a 60,000-mile tread wear truck tire lineup. The new sizes will range from 33 to 37 inches for 17-, warranty. The W-rated sizes are covered by a 40,000-mile 18- and 20-inch wheel fitments. warranty. They break out as follows: The 37-inch tire debuted at Off Road Evolution’s JK Experience 16-inch: 205/55VR16 through 225/50VR16; last year. At last November’s SEMA 17-inch: 215/55VR17 through 245/40VR17; Show, Falken announced it had ex18-inch: 225/60VR18 through 275/35WR18; tended its deal as presenting spon19-inch: 245/45WR19 through 275/30WR19; sor of the week-long event.

20-inch: 245/45WR20 through 275/30WR20.

The JK Experience, which promotes Falken introduced the on- and off-road capabilities of the LOD sizes for the “It’s the first time we’ve had tires in those sizes with Jeep Wrangler JK, will be expanded WildPeak A/T at the (those) mileage warranties,” says Chew. to three events this year.

Global Tire Expo.

The Azenis PT722 A/S complements the year-old Falken

WildPeak’s wild ride

www.moderntiredealer.com MTD_52-57.indd 57

57 4/26/11 11:08:31 AM

Focus on dealers

A truly ‘Grand’ Opening The Tire Choice celebrates its 30th store close to home

By Bob Ulrich

D

an and Diane Hennelly were waiting anxiously for the Certificate of Occupancy to arrive. Their new tire store in Oakland Park, Fla., was scheduled to open the next day, and there was no room for error.

Too many guests had been invited to celebrate the opening of Hennelly Tire & Auto Inc.’s 30th outlet, which does business as The Tire Choice & Total Car Care. Mario Andretti’s appearance had been three months in the making.

The city’s Municipal Building and its services close for the day at 4:30 p.m.

The certificate arrived at 4:25 p.m. The last hurdle had been cleared.

Getting to that point, however, was a totally new experience for Dan, the Dan played host to some 200 company’s chairman and CEO, and Diane, vice-chairperson and CFO. people at the grand opening of The cost to renovate the 40-year-old building, a former independent Goodyear his 30th location. dealership, was $396,000. That included a new roof, which needed decking replaced and “hurricane standards” met, according to Dan. “It was a huge expense, and we lost time — about two weeks.”

The store is located in an affluent area close to where the Hennelly’s live, and where their headquarters is located.

“In that neighborhood, we really fight the Mercedes and Lexus dealers, not Tire Kingdom and Tires Plus,” says Dan. “It’s impossible to get zoning here in East Fort Lauderdale. And the city doesn’t want the bays facing the street. We want bays facing the street. We want consumers to know what we do.”

Fortunately, the building and location were zoned for automotive service, and the bays that faced the street grandfathered in.

The Hennelly’s plan to open between six and 10 more stores in 2011. ■

Diane and Dan Hennelly (center) and Mario Andretti are all smiles during the ribbon-cutting ceremony as Broward County Sheriff Al Lamberti (left) and Oakland Park Mayor Allegra Webb Murphy look on. The local economy “is moving again,” said Murphy.

58 MTD_58-59.indd 58

Right: There is $180,000 worth of equipment in the new store, which features eight bays. A typical Tire Choice outlet has eight to 10 bays.

MTD January 2011 4/26/11 11:13:39 AM

Left: The Hennellys filmed the grand opening for posterity. Below: Travis Leflar (left) was the store’s first customer, much to the pleasure of Jaime Lugo (right) and fellow store manager Adam Hamill.

Above: “It’s our flagship store,” says Diane Hennelly, who designed it with granite countertops, marble floors and dark wood paneling. “It’s just a lot more comfortable and much more high-end than our typical store.”

Left: The latest Tire Choice covers 7,300 square feet.

The blueprint for each store built from the ground up is 6,000 square feet.

The Hennellys already are working on their 31st store (left), near Largo, Fla. It’s a great location, says Dan. “That store would make a better Starbucks than tire store.”

www.moderntiredealer.com MTD_58-59.indd 59

59 4/26/11 11:13:43 AM

Products Hunter RX10 scissor lift

Hunter Engineering is offering the Hunter RX10 scissor lift with a 10,000-pound lifting capacity and a choice of runway lengths to accommodate everything from passenger cars to the longest crew cab pickup trucks. The scissor design requires minimum bay space and can save further space with a shallow-pit installation that sets the runways flush to the floor when fully lowered, eliminating the need for long approach ramps. Surfacemounted models provide a lowered height of only 8.75 inches, providing clearance for vehicles with low ride height or low-hanging spoilers. The RX10 improves productivity with timesaving features like the optional PowerSlide system, which automatically controls turnplate and slipplate operation, and the optional Inflation Station feature, which speeds service and ensures more accurate alignments by automatically setting a predetermined tire pressure for each wheel simultaneously. The extra-wide 24-inch runways with louvered ramps make positioning the vehicle on the lift rack easy and the open access at the front and rear create an unrestricted workspace underneath the vehicle. Optional 6,000-pound capacity swing air jacks add the capability of lifting vehicles off the runways during alignment procedures and other service operations.

HUNTER ENGINEERING CO. Quik-Link: (800) 687-1557, ext. 11170 www.mtdquiklink.com/11170

General Grabber General Tire’s new Grabber tire has tough, three-ply reinforced body construction and a race-proven chip- and tear-resistant Duragen-tread compound that stands up to the rigors of highway and offroad conditions. General Tire’s Duragen technologies consist of ultra-high-strength steel belts and a three-ply casing.

The Grabber’s “strake and chamfer” tread pattern is designed to take on the elements with ease, the company says. The strake, or sweeping groove across the tread, allows the chamfering (or opening) of the tread block corners to directly interface with off-road terrain. The tread pattern is stable and quiet on paved roads yet has traction “pockets” for aggressive off-road traction.

The tough sidewall is engineered from General Tire’s off-road competition experience. The Grabber is available in a range of popular 15- to 20-inch sizes to fit a variety of pickups, sport trucks and SUVs. And in select sizes, the tire will include the same red lettered sidewalls that are used on the desert racing version of the Grabber, the company notes.

CONTINENTAL TIRE THE AMERICAS LLC Quik-Link: (800) 687-1557, ext. 11171 www.mtdquiklink.com/11171

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New BKT tire size

BKT Tires USA is offering a new size for its Multimax MP 522 radial off-highway tire. Size 500-70 R24 replaces size 19.5 LR 24. The tire is designed with aggressive tread lugs for traction in all service conditions and at higher loads. Reinforced steel belts and a strong casing provide resistance to punctures and a special tread compound has an optimum tread depth for long mileage, the company reports.

BKT TIRES USA INC. Quik-Link: (800) 687-1557, ext. 11172 www.mtdquiklink.com/11172

WP8300 wheel balancer

Wheel Products by McCourt has introduced the WP8300 wheel balancer with an LCD display to make tire calibration quick and easy. The tire optimization feature and the space-saving hood increase the operator’s safety, as well, the company says.

Standard accessories include three passenger cones, a light truck cone and spacer, a quick release wing nut, caliper and wheel weight hammers. The WP8300 comes with a hidden weight program and is accurate to one gram. It can be programmed for use by multiple operators and also includes an easy-to-use automatic data entry system and a weight saver program. The balancer works on tires with diameters up to 42 inches, rim widths of 1.5 inches to 20 inches and rim diameters of 10 inches to 30 inches. It will hold tires that weigh up to 165 pounds and spin them in less than five seconds. Rugged construction assures a long life of everyday use, the company reports. Optional accessories include motorcycle adapters and a pin plate kit to provide additional versatility.

WHEEL PRODUCTS BY MCCOURT Quik-Link: (800) 687-1557, ext. 11173 www.mtdquiklink.com/11173

Rancho Loaded QuickLIFT

Tenneco Inc.’s Rancho Loaded QuickLIFT units — which include the application-matched and installed coil spring and upper mounting plate — speed installs and require no aggressive investment in equipment or training. The units provide 1- to 2.5-inches of additional lift, allowing for the use of larger wheel and tire packages while giving the vehicle an aggressive stance.

The new QuickLIFT units are finished in Rancho Liquid Metallic Silver. Fully compatible with the Rancho MyRIDE Wireless Controller, Rancho Loaded QuickLIFT units can be wirelessly controlled from the cab. The Wireless Controller includes a variety of onetouch presets, including highway, sport, tow/haul, off-road and a driver-determined MyRide, which allows the owner to set his own preferred ride setting and save it for future use.

TENNECO INC. Quik-Link: (800) 687-1557, ext. 11174 www.mtdquiklink.com/11174

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

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Instant information direct from MTD advertisers

To request free product information by phone, call 800-687-1557, enter the extension number listed below, and you will be immediately transferred to the company you want to talk with — it takes only seconds.

To request information online, log on to www. mtdquiklink.com/ plus the corresponding Quik-Link number. You’re just a click away from receiving free information on the new products that interest you.

Advertiser

Page

800-687-1557 + Toll Free Extension

Web site

ASA Tire

24

11116

www.mtdquiklink.com/11116

Atturo Tire Corporation

18

11110

www.mtdquiklink.com/11110

Autopromotec

51

11130

www.mtdquiklink.com/11130

Bartec USA

54

11132

www.mtdquiklink.com/11132

Bee Line Company

55

11133

www.mtdquiklink.com/11133

BKT Tires, North America

10

11105

www.mtdquiklink.com/11105

Bridgestone Firestone, Affiliated Dealer

IFC

11101

www.mtdquiklink.com/11101

CIMS Inc.

56

11134

www.mtdquiklink.com/11134

Continental Tire the Americas LLC

33

11121

www.mtdquiklink.com/11121

Cooper Tire

7

11103

www.mtdquiklink.com/11103

Corghi USA Inc.

20

11112

www.mtdquiklink.com/11112

Dealer Strategic Planning Inc.

39

11124

www.mtdquiklink.com/11124

EcoExpress Tire Centers

25

11117

www.mtdquiklink.com/11117

GE Money

19

11111

www.mtdquiklink.com/11111

General Tire

41

11125

www.mtdquiklink.com/11125

Greenball Corporation

49

11129

www.mtdquiklink.com/11129

GT Radial

13

11107

www.mtdquiklink.com/11107

Hankook Tires

9

11104

www.mtdquiklink.com/11104

Hennessy Industries Inc.

47

11128

www.mtdquiklink.com/11128

Hercules Tires

31

11120

www.mtdquiklink.com/11120

Hunter Engineering Company

35

11122

www.mtdquiklink.com/11122

Identifix

22

11114

www.mtdquiklink.com/11114

Independent Tire Dealers Group

15

11108

www.mtdquiklink.com/11108

Kenda USA

IBC

11136

www.mtdquiklink.com/11136

Kumho Tire USA

5

11102

www.mtdquiklink.com/11102

Marangoni Tread North America Inc.

45

11126

www.mtdquiklink.com/11126

Maxxis International—USA

37

11123

www.mtdquiklink.com/11123

Nexen Tire America Inc.

29

11119

www.mtdquiklink.com/11119

Pirelli Tire North America

17

11109

www.mtdquiklink.com/11109

Reliable Int’l Exhibition Services Co. Ltd.

46

11127

www.mtdquiklink.com/11127

Sentaida International Inc.

11

11106

www.mtdquiklink.com/11106

SKF USA Inc.

53

11131

www.mtdquiklink.com/11131

The Tire Rack Wholesale

21

11113

www.mtdquiklink.com/11113

Tire Centers LLC

IBC

11137

www.mtdquiklink.com/11137

Tire Industry Association (TIA)

61

11135

www.mtdquiklink.com/11135

Toyo Tires

23

11115

www.mtdquiklink.com/11115

Yokohama Tire Corporation

27

11118

www.mtdquiklink.com/11118

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MTD January 2011 4/26/11 11:15:30 AM

www.moderntiredealer.com MTD_60-66.indd 65

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MTD January 2011 4/26/11 11:15:53 AM

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

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