Latin expo speakers chart tire industry growth
During the Latin American & Caribbean Tyre Expo, a wide range of topics were discussed by industry executives, including a strong look at Chinese brands being offered in Latin America.
After a welcoming speech by Gustavo Lima, show CEO, Dr. Roy Littlefield, Tire Industry Association Executive Vice President, explained the many tire safety and training materials that the association was producing. Of importance to the audience, Littlefield stressed the number of programs that are now available in Spanish.
Walt Weller, vice president of CMA LLC, provided attendees with an inside look at Chinese radial tire production and positioning worldwide. Weller said Chinese tire manufacturers produce 55% of global radial truck tire units.
He said global TBR sales totaled 144 million units in 2012. Weller cited changing attitudes toward Chinese products, similar to what happened with Japanese tires in the 1980s, as one of the reasons the companies continue to grow.
Sourcing data from steel wire transformation company NV Bekaert SA, Weller broke down 2012 TBR sales as follows: China, 58 million units; North America, 24 million units; Europe and Russia, 21 million units; Latin America, 10 million units; Middle East, 7 million units; Japan and India both 6 million units, with the remainder going to other regions.
The same statistics showed that Chinese-produced TBR tires made up 23% of North American sales, as well as sales in Europe and Russia. In total, the Bekaert data shows Chinese tire manufacturers had an output of 88 million total TBR tires in 2012, but had a capacity to produce 120 million TBR tires.
Looking at radial passenger tire capacity, the statistics showed that China had an output of 326 million units in 2012, but had a capacity to produce 400 million units. These capacity numbers led Weller to believe there will be consolidation among Chinese manufacturers that will result in a restructuring of the survivors, which will place more emphasis on brand development by them. He believes the manufacturers will continue to focus on exports to supplement their domestic production.
Weller showed a chart of the changing nature of the positioning of brands in North America as an example of what has happened in the market. In the 1990s, the three Tier One tire companies (Michelin, Goodyear and Bridgestone) held a 65% share of market in truck tires. Tier Two companies held a 25% SOM, while Tier Three companies (that included Hankook and Kumho at the time) stood at 10%.
Currently, Tier One companies hold between 45% to 50% SOM, with Tier Two companies (that now include Hankook and Kumho) at 25% and Tier Three companies (now almost exclusively Chinese manufacturers) at 30%.
Reasons cited by Weller for growth of Chinese tire brands are that the “quality gap” has narrowed dramatically and dealers are looking for alternatives. With acceptance coming at the OE level, perceptions among fleets and end users are changing about Chinese brands, similar to what happened earlier with Japanese and Koreans brands, according to Weller.
A retreadability chart was shown by Weller that detailed completion and rejection rates by tire brand by a North American retreader. The chart showed relatively low differences in completion rates by brands ranging from Tier One to Tier Three.
Wilberth Campos, director of human relations for Bridgestone of Costa Rica S.A., brought a unique perspective to attendees. He cited surveys of executives about their plans for their employees. One survey of European CEOs revealed that 78% of them planned to make changes in their personnel, but 31% felt their companies lacked the talent to be moved upward.
And 70% of the CEOs said they did not know the talent level in their companies.
Campos compared this to other surveys that cited 85% of consumers would pay more to get customer service from companies. He emphasized that customer service meant better interaction with people in companies, not infrastructure. The same customers said they would pay a full 9% more for this increase in service.
Campos used the results, and the need for increased productivity and employee satisfaction to emphasize the necessity of on-going training programs for employees and management. Campos said companies polled with satisfied employees had a productivity increase of 16% and 2.4 times greater profitability.
The other benefit to companies is much longer employee retention.
“I believe HR is not the most important thing for companies, but it is talented HR that should be the most important thing,” he said. He said Bridgestone has a variety of training initiatives for its employees; it also provides a whole host of employee benefits, including a gym, medical center, theatre and sports sponsorships.
Campos said that all of this is important, but it must be sustainable to the company in order for the company to be competitive. Campos revealed that Bridgestone spends about 50 cents per $100 in sales in HR.
An in-depth look at worldwide retreading was done by Heriberto Romero, director general of Hules Banda of Mexico. Using the year 1970 as a starting point on an index scale of 100, Romero said the world had 50% fewer retreaders by 2000 still producing the same number of total retreads.
While the number of retreaders is stable for 2013, the total production has dropped so far to 90% of 1970 totals.
Romero’s prediction for 2020 is for there to be 25% fewer retreaders producing 120% more retreads. He also pointed out the emerging production of retreads by Chinese companies. Romero estimates there are roughly 2,000 to 3,000 retreaders in China, and they have the capacity to produce 15 million truck tire retreads annually. He believes these companies will increase their capacity to 20 million by 2017.
Romero also cited a new law in Ecuador that says if a company imports 10 new tires, it must retread three tires. The law is designed to increase retreading and help the local economy.
Romero ended his presentation to laughter with a business truism that everyone appreciated: “A sale is a gift until you’re charged for it.” ■