'Flexibility' Critical Until Rebound Begins, Says SRNA's Smallwood
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!
“I tend to be a contrarian when it comes to the concept of pent-up demand after an economic shock,” says Richard Smallwood, CEO and president of Sumitomo Rubber North America (SRNA).
As local governments throughout the United States begin to relax stay-at-home orders, “clearly there will be those consumers who have waited to replace their tires until they felt it was safer to do so and will now come back to buy tires,” he notes.
But with more than 36 million Americans now out of work, the market “will most likely take awhile to recover and it will take consumers some time to feel comfortable spending money on anything right now – even tires.”
Smallwood believes that the market could see a “return to normal” by September or October. "But so much of that will be dependent on when shelter-in-place orders are lifted and if there is a second wave of the pandemic.”
In the meantime, he says, dealers should remain flexible, hold on tightly to their cash reserves and maintain a long-term perspective.
Full steam ahead
Smallwood days SRNA is managing its business according to those same principles. The company – which makes and markets the Falken brand in North America – shut down its consumer and commercial tire plant in the Buffalo suburb of Tonawanda, N.Y., in late-April.
The plant resumed production on May 11. At full capacity, it can produce 17,300 units per day, according to MTD research. (Overseas, Smallwood says SRNA parent company Sumitomo Rubber Indsutries Ltd. experienced “minor disruptions, early on” at its plant in China, but the impact “was not significant.”)
The only slowdown caused by the COVID-19 crisis “has been in the physical testing of (our) product,” he reveals. “We’re still able to do the majority of computer simulations and fleet testing on the road. At this time, we are not considering delaying the launch of any of our new products.”
The light truck tire segment is doing “very well. And based on our new light truck tire sales, I would expect that trend to continue well into the future.”
SRNA introduced its Falken WildPeak H/T02 light truck tire last October. “I think families are going to want to escape the shelter-in-place confinement and will look to the outdoors as an escape.”
Product mix is expected to stay constant, according to Smallwood. “But I do expect to see a change in price position. Generally speaking, after a serious economic downturn, we can expect to see consumers drop to lower-price products. That would favor the tier-two and tier-three brands and negatively impact the tier-one brands.
“We’ll definitely see a benefit” as customer preference shifts in that direction.
Show ‘em the numbers
SRNA will make sharing information about market trends – including the impact of the COVID-19 crisis on tire shipments – with customers a top priority.
In mid-April, the company held the first of a series of online, virtual dealer forums, which covered OE and replacement tire demand, pricing and other top-of-mind subjects. (The next one will take place on May 19.)
The series was created by Darren Thomas, SRNA senior vice president of sales and marketing, and Rick Brennan, SRNA vice president of strategic planning, as a response to “hearing so many dealers express concern and frustration with the lack of information about what is happening in the marketplace,” says Smallwood.
“They felt it would be great to create a neutral forum for our dealers where they could learn more about what’s happening in the market.”
The series has been well-received as dealers from all over North American have tuned in and discovered that they aren’t alone as they grapple with COVID-19’s substantial impact on tire demand, says Smallwood.
“In my opinion, what dealers like most (is seeing) that COVID-19 is impacting every dealer, both small and large. They want to hear about what’s happening around the country and how other dealers are dealing with it. It's the sense of community and the gathering of information from a broad set of sources that dealers seem to appreciate."
“Flexibility has been our approach in dealing with COVID-19 and will continue to be our approach going forward,” says Smallwood.
“As a company, we had a two-day’s notice to switch from a 100% work-in-the-office policy to a 100% work-from-home policy. The world changed and we had to quickly change with it. We made that transition seamlessly and our service levels are as high as before.”
The company’s philosophy extends to its dealers, he notes. “There’s nothing to be gained by being an inflexible business partner. We’re adapting our programs to make sure they help dealers through this transitional period. Things will get better.”