The impact of COVID-19 on Continental Tire the Americas LLC’s business “has materialized in different ways,” according to Bill Caldwell, the company’s senior vice president of sales and marketing.
But, overall, he says that Continental is “in a good place” to not only weather the current crisis but also “be ready” when the North American tire industry enters a recovery curve.
That includes maintaining “what we have had historically, which are very good fill rates for our customers.
“We’re committed to doing our best to be a good partner for our dealer customers, which means we’ve been in dialogue about the challenges in their businesses and what we’ve been able to do to help them in a responsible way,” he notes.
Confident supply position
Continental’s two United States-based plants – a passenger and light truck tire plant in Sumter, S.C., and a larger facility in Mount Vernon, Ill., which builds both consumer and commercial truck tires – were idled to protect company employees and as a response to reduced customer demand.
Plant ramp-downs began in March, says Caldwell.
“State-by-state executive orders” to restrict consumer activity and movement “had a clear, direct impact on the passenger and light truck side of the business.
“When we talk to customers, depending on where they are and what local guidelines are, we hear that numbers have been down anywhere from 40% to 60% in terms of how their business has declined in recent weeks. That seems to be where things have bottomed.”
Demand for truck tires, he adds, “has been more resilient as trucks are still running – maybe more than they were before. But the truck tire side of the business is probably not enough to compensate for reductions on the consumer tire side.”
Caldwell says he is “confident” in Continental’s supply position. (A Continental spokesperson told MTD that tire production resumed at the company's Mount Vernon plant on April 27. The Sumter plant remains closed.)
“On the passenger/light truck tire side, we’re probably healthier than we even needed to be because the demand curve went down sooner than we ramped down our plants,” he notes.
“The commercial tire business will probably require us to get back into manufacturing a little quicker. We remain committed to maintaining service levels as we have in the past. That might mean we have a different timeline for production of truck tires.”
Continental’s North American business also has seen “a fair amount” of product coming in from its parent company’s plants in Europe. “We had tires on the water when we were ramping down” the company’s U.S. plants. “That’s a longer pipeline, which slower to turn off.”
Adapting and adjusting
The launch of new products is another area that has been somewhat impacted by economic fall-out from the COVID-19 pandemic, according to Caldwell.
“Obviously in the current environment, we’re looking at smart solutions where we can trim costs, as a responsible business,” he says. “And in some cases, that might touch our product development activities.”
While Continental remains committed “to maintaining healthy new product development and introductions, you can imagine, right now, that it might not make sense to launch a new product.
“And quite honestly, if I don’t have a plant operating, it’s hard to ramp up a new product in advance of a launch,” he says.
“So we’re adapting and adjusting schedules. And I would say that ‘tuning’ is a better word than ‘canceling.’ We’re not canceling anything. We’re evaluating the timeline” of new product roll-outs.
The company’s General brand has shown resilience in the current environment, says Caldwell.
“Consumers are treating their cash preciously now – no different than companies – so we’re seeing a certain (trend toward) lower price points.
“And we’re certainly seeing less headwind with our General brand, which is a step lower in price point versus our premium Continental brand.”
During March and April, Continental ran a consumer rebate promotion for its General brand.
“We’re hoping it has helped our dealers close transactions with consumers who are still in the market. In the last week, we started to get the first indications of some lift that we believe is probably connected to (government) stimulus checks going out.”
Pace and frequency
Helping dealers will be a continued priority for Continental during the duration of the COVID-19 crisis, says Caldwell.
“We have constant communication with our dealers and are trying to (help them) find solutions that work for them and also for us.
“In many cases, our customers qualify for a lot of government programs that have been announced, so where appropriate, we’re trying to play at least a consulting or support role to help them navigate those systems. And I know that a lot of our distribution partners are doing that for dealers, as well.
“But the most important thing we have done is increase the pace and frequency of communication because it’s a very dynamic environment and we want to be ready” when demand rebounds.
“We want to be ready from a product availability standpoint, a supply standpoint and all other standpoints,” he explains.
Some dealers, he reports, have expressed concerns about demand spiking sooner than supply.
“That’s why communication is so critical, so we can feed the voice of the customer back into the organization to help us make right plans.”
‘We will recover’
Caldwell says it’s difficult to accurately predict when consumer demand will bounce back.
“I think there are some items that we can’t control. At what points do local governments start to relax some of the guidelines and restrictions? That will be different in every state and it’s going to be a driver. And once those restrictions are relaxed, will people be comfortable?
“I would like to believe – and I think most of our customers believe – that it will be a slow ramp-up. But hopefully in the September timeframe – or the fourth quarter – we’re back to an on-par level.
“There’s no doubt that everybody believes we will recover,” he says. “We just need to find smart ways to weather the storm together and prepare ourselves for brighter days ahead.”