The following is the latest in MTD's exclusive series of interviews with top tire industry executives about the impact of the COVID-19 crisis on business and what their companies are doing to prepare dealers for a post-pandemic market and industry. Stay tuned to www.moderntiredealer.com for more coverage!
As the economy begins to reopen, Brandon Stotsenburg, vice president of American Kenda Rubber Co. Ltd.’s automotive division, says “we will start seeing recovery from the current situation by the end of May,” followed by more activity as consumers regain confidence.
“Value-based passenger and light truck will recover faster than other segments,” he says. “There may be some delay in recovery for plus-size fitments with wheel upgrades while consumers recover from unexpected wage decreases or job losses.
“In the near term, it may be more practical for people to drive to destinations rather than take planes and the automotive segment and independent tire retailer will be in a prime position to benefit from this.”
Flight to value
Kenda makes tires for a wide range of applications – everything from passenger and light truck tires to specialty products for trailers, golf carts, ATVs, lawn and garden machines and other applications.
Stotsenburg says the company is well-positioned to “over-index” in the consumer tire arena “based on our value. Other segments will vary based on how the economy recovers.”
Kenda’s non-passenger and light truck lines “all have an opportunity to rebound quickly.”
The firm’s U.S.-based warehouses have remained open during COVID-19 “and we have adjusted some of our program targets to reflect short-term demand reductions,” says Stotsenburg.
“Our sales and marketing team has sent out multiple podcasts and emails to our distributors and retailers to (provide) updates about our programs. Additionally, we have conducted numerous web meetings, which allow us to interact with our partners and work to resolve short-term issues as they arise.”
Stotsenburg believes that continuing to launch products sends a positive message to customers – and the marketplace, in general. And it makes strategic sense for the company, he adds.
“Products emphasizing exceptional performance at a value price are exactly what our channel partners need for consumer demand – as long as we offer strong, above-average margin opportunities. Consumers want that value product. And at the end of the day, the margins for dealers on value products are improving, too. As we watch local markets’ adaptations to the next phases of the pandemic response, we will evaluate projects to confirm timing and impact.”
The company’s technical center near Akron, Ohio, remains fully operational. And disruptions stemming from initial production slowdowns at its plants in Asia “were resolved quickly,” he says.
Fill rates have been close to 100% “and will remain at that level.” And while pricing and terms remain proprietary, “Kenda remains very responsive to our customer needs.”
While optimistic that the economy will rebound eventually, Stotsenburg harbors no illusion that things will return to exactly where they were before COVID-19 hit the U.S.
“Without confidence and better understanding of the risks” associated with continued virus transmission, “we will be forced to maintain physical distancing with a ‘new normal,' (including) masks, temperature checks, etc., in our daily work lives,” he says.
“Until there is a better (virus) testing program that allows tracing or, preferably, a vaccine, consumer activity for driving will remain lower” than pre-COVID-19 levels.
In the meantime, there are several things that dealers and distributors can do to position their businesses for the inevitable rebound in consumer demand, he advises.
“Make sure you have a good relationship with your key vendors. If there are needs for supply and cash flow, have an open dialogue with them so there are no surprises.”
Take advantage of all the economic support programs that federal and local governments are making available.
In addition, “anticipate how the needs of your customers may be changing. Kenda feels strongly that consumers will want value-priced brands but won’t want to sacrifice performance. In the near-term, initial margin of the sale should be emphasized over the back-end margin provided by loyalty programs to improve cash flow.”