The following is the latest in MTD's exclusive series of interviews with top truck tire executives about the impact of the COVID-19 crisis on business, plus their outlook on demand, shipments and other key factors during the second half of the year. Stay tuned to www.moderntiredealer.com for more coverage!
In this interview, Paul Williams, executive vice president of commercial vehicle tires, Americas region, Continental Tire the Americas LLC, discusses the expected effect of COVID-19 on truck tire demand, how shipments for the rest of the year could be impacted and more. “Overall, we believe that our strong partnerships with our customers will lead Continental to success,” he says.
MTD: How did the COVID-19 pandemic and resulting government actions impact your commercial truck tire business in the United States and Canada?
Williams: Continental has a large manufacturing footprint in the U.S., which helped us mitigate any impact. Our plant in Mount Vernon, Ill., is Continental’s largest truck tire plant worldwide, with a capacity of more than three million truck tires annually. The plant suspended production for a short period to give us time to implement additional protective measures for our employees – and in line with demand. OE business was on hold, as many (truck manufacturers) implemented production shutdowns. The plant has already resumed production, and we don’t anticipate any impacts to stock or availability this year. We are here and ready to keep our customers rolling.
In fact, we kept the precure tread plant on the same Mount Vernon campus, which produces tread rolls for retreading, open throughout the entire period under the “essential manufacturing” provision. Due to differences in the production process for tread rolls, employees in that building were already socially distanced, so with increased sanitation efforts and following all Centers for Disease Control guidelines, we felt it was safe for our employees to continue working.
Our independent ContiLifeCycle retreaders and BestDrive locations continued to order stock, since they want to be prepared to supply premium retreads to their customers. On both the new tire and retread side, Continental is ready to supply our customers now and as the market continues to rebound.
We also are continuing to move forward with new product introductions. Several additional products are planned for release this year, with testing and development continuing despite any challenges from COVID-19.
MTD: It is expected that truck tire plant shutdowns and/or production suspensions that took place earlier this year will have a dramatic impact on truck tire shipments for the rest of 2020. Can you quantify expected shipment declines?
Williams: Our fleet customers and commercial tire dealers have continued to fill a critical role during the COVID-19 pandemic. Commercial fleets have been busy transporting essential goods, such as healthcare supplies, food, and personal protective equipment. Ambulances and other emergency service vehicles remain at the ready. The critical nature of the transportation industry means it was less impacted by COVID-19 measures compared to other sectors of the economy.
We are not anticipating a dramatic impact on truck tire shipments. The United States Tire Manufacturers Association (USTMA) estimates that the replacement truck tire market will be down approximately 7% compared to last year, and our production schedule has been in line with demand. On the original equipment side, we expect a more significant decrease. We remain in constant and close communication with our customers, focusing our efforts on forecasting properly to have the right tires in the right place at the right time.
MTD: New Class 8 truck orders and new trailer orders have dropped dramatically in recent months. What effect is this having on your OE business? And how will the knock-on effect of low OE channel demand impact replacement tire sales?
Williams: Many U.S. and international original equipment manufacturers have implemented production shutdowns, and many of those shutdowns are still ongoing. The USTMA currently estimates that OE business overall will be down 31% compared to last year.
MTD: When do you expect OE and replacement tire demand to bottom out and when will demand – in both channels – start to rebound? What are you doing to prepare for this?
Williams: On the OE side, we are cautiously optimistic that April was the lowest month for OE. We hope demand continues to rebound, growing month-over-month through the end of the year. However, it’s important to remember that the OE market overall is expected to be down 31% year over year, according to latest estimates from the USTMA.
On the replacement side, since the market is only anticipated to be down 7% overall, we don’t expect to see a major rebound effect. Trucking is critical, especially in times of crisis – moving essential goods throughout the country. Those trucks still need tires, and Continental is ready with both new tire and retread stocks to supply their needs.
Overall, we believe that our strong partnerships with our customers will lead Continental to success. In addition to our tires and retreads, many of our fleet customers rely on our digital tire monitoring solutions, which help them reduce costs and improve uptime. That becomes even more important during a crisis, as well as having reliable and technically trained representatives to help them.
MTD: Truck tire dealers have played an instrumental role in keeping fleets up and running during the COVID-19 pandemic. What are you doing to support your dealers? What advice do you have for them during this challenging time?
Williams: Continental is committed to supporting the independent commercial tire dealer. With the size and resources of our corporation, we’ve been on the forefront with sharing information to help our dealers plot a course of action, including sharing information and analysis on national and state programs to support them. Our full sales team remains at the ready to support customers.
Having our own distribution network, the BestDrive commercial tire centers, gives us insight and perspective on what our dealers are experiencing on a daily basis. We have taken the learnings from our own initiatives and shared them with our dealer network. Our BestDrive locations have remained open throughout the crisis, giving fleets and drivers access to essential services.
“We are proud of how our dealers are responding to this situation,” says Williams. “They remain ready, willing and able to take care of customers, doing their part to help keep the transportation industry strong during a critical time. We are here to support dealers during and after this crisis.”
