Top Retreaders Find Ways to Compete Against Low-Cost Tier 4 Truck Tires
It’s difficult to find a topic most people agree on, but among retreaders, concern over low-cost Chinese tires is one of them. Donald B. Rice Tire Co. Inc., which goes to market as Rice Retreading Inc., considers Tier 4 tires its biggest challenge. “We are constantly looking for ways to cut cost out of the retread process so that we can be competitive,” says Chris Chase, president. Retread sales were flat year-over-year at the Frederick, Md.-based company, which has one plant and is ranked No. 82 on this year’s Modern Tire Dealer Top Retreaders list.
Bill Ziegler, president of No. 27-ranked Ziegler Tire & Supply Co., says bluntly: “Tier 4 tires are slowly killing the retread business.” Retread sales were flat in 2017 versus 2016 for the Massillon, Ohio, based company. Ziegler says to be more competitive requires an increase in volume to spread costs over more units. “We are trying to sell more retreads and casings versus selling Tier 4 new tires.”
At Wonderland Tire Co. Inc., which is tied for No. 68, retreading made up 40% of company-wide sales in 2017. “Our units were up about 4% over 2016 but this was mainly due to two acquisitions that we made in June of 2017,” says Jon Langerak, president.
“Pricing is very competitive in the retreading sector, and we see this trend continuing because of the cheap disposable Chinese truck tires being dumped into the United States.”
Retreading volumes have declined year over year at No. 47-ranked Eastern Iowa Tire Inc. “In our area of the country the first quarter is always slow,” says Gary Van Blaricom, president and CEO. However, 2017’s first quarter was very good for Eastern Iowa Tire, making comparisons to 2018’s first quarter challenging for the Davenport, Iowa-based company, which has five plants.
Van Blaricom attributes some of the loss to original equipment purchases made by his retreading customers. Tier 4 tires are responsible, too. “Chinese cheap import tires have greatly affected retreading. When you consider that the price of a cap and casing is about the same price as what you can sell a Tier 4 Chinese tire for, most customers are probably going to go with the new tire and just throw the casing away.” To help boost retread sales, the company has incentivized its salespeople on retreading this year in addition to their normal commission programs. Van Blaricom also notes that Bandag has come out with some programs which have “helped us a considerable amount.”
Casings are a surprise
The volume of low-cost Chinese imports declined briefly last year, according to Brad Raben, vice president of commercial sales at Raben Tire Co. LLC. But when the U.S. International Trade Commission (ITC) voted to not levy duties on Chinese truck and bus tires in March 2017, the flow of imports resumed.
“I don’t think there’s any relief in the near future,” he says. “It’s a concern that retreading is falling to the Chinese tires, but the real surprise this year is casings.” In contrast to a few years ago when medium truck tire casings were in short supply, this year they are plentiful.
“Is there less demand for retreading or are we just kind of caught up on a cycle?” asks Raben. “We were hoping lower prices with casings would make us more competitive with Chinese tires, but it seems like retreading is flat.” Raben Tire, based in Evansville, Ind., holds the No. 40 spot on this year’s Top Retreaders list.
In contrast, casings are in short supply for retreaders of off-the-road tires. Jim John Jr. is president of Craft Tire Inc., which does business as Shrader Retreading in Uniontown, Pa., and holds the No. 38 spot. He says there’s a possibility of a slight shortage on some OTR tire sizes.
“It does appear that some sizes, specifically larger sizes then moving down to the smaller sizes, may be short in the middle of 2018,” he says.
Retreaders could step in to make up for a shortage of replacement OTR tires, but the availability of quality retreadable casings is a concern, according to John. Conversely, short supply of quality major brand casings along with increased retread rubber and material costs will continue to make competition against Tier 3 new tires difficult on smaller OTR sizes.
“When the tire shortage ended and pricing fell in 2015 and 2016, folks just started running tires to destruction,” says John. Equipment operators purchased low-cost Tier 3 tires that were not as retreadable as Tier 1 and Tier 2 tires. “Running the major brands to destruction as opposed to retreading them and incorporating off-brand third tier tires is really going to put a strain on quality casing supply.”
Even with the uncertainty on OTR casing supply, John is looking forward to growth in 2018 spurred by increased spending by government and private business alike.“I think the tax cut has loosened the pocketbook a little bit so we’re optimistic that spending will continue. It looks like internationally Caterpillar’s equipment sales are up so that would imply that minerals and natural resources are moving compared to 2016 and the beginning of 2017. We’re all cautiously optimistic for growth for 2018.”
Noah Hickman, president of H&H Industries Inc., notes that the coal industry retread business jumped dramatically in 2017 mainly due to legislation on the state and federal level. “Idled mines went back online and new mines are continuing to open,” he says.
“With the shortage growing in several sizes such as the 33.00R51, 45/65-45 and some 57-inch inch tires, the retreading industry has again become the solution to new tire manufacturer shortages. I expect 2018 to continue to grow the retread and repair industry for the coal mining sector.”
Hickman’s Oak Hill, Ohio-based company holds the No. 24 spot. His employees are pushing the value of product and services to their customers. “Finding good quality casings is becoming more difficult. We’re expanding our buying market to compensate.”
Retreading represents approximately 50% of annual sales at No. 26-ranked BestDrive LLC. The Continental Tire Americas LLC subsidiary says that is the same mix as prior years, and overall sales have increased. “In terms of making our products more competitive, we are seeing increased demand for retread tires that ‘look like new, run like new,’ and that’s the promise of the ContiTread brand,” says Steve Postel, Continental’s head of retail for commercial vehicle tires in the Americas region and head of BestDrive.
“Many of the tread patterns and rubber compounds match what is used in a new Continental tire, which helps our customers feel confident that they can rely on their ContiTread retreads. Continental has also been offering a cap and casing promotion this year that is making the prices even more competitive,” says Postel. He adds the company is focused on increasing its distribution network to make ContiTread premium retreads available to more fleets across the U.S.
The No. 3 ranked retreader, Bridgestone Americas Tire Operations LLC, which does business as GCR Tires & Service, operates 26 plants, three less than last year.
In 2017, Bridgestone introduced two Bandag-exclusive equipment innovations designed to improve non-destructive inspection to assure curing system integrity. Additionally, Bridgestone launched a “Bandag Built for Better” campaign aimed at educating consumers on the merits of retreading.
New shops, services, even a buying group
Despite the challenge created by Tier 4 tires, tire dealers are finding ways to compete and to grow their retreading business. Their strategies range from building plants and expanding service offerings to establishing a buying group.
In November, Beasley Tire Service Inc. celebrated the opening of a 36,000-square-foot retread plant constructed next to its Houston, Texas, headquarters. Capacity at the plant is 400 medium truck tire retreads per day. Currently the plant, a Michelin Retread Technologies (MRT) licensee, is producing 200 tires daily.
Beasley Tire began producing its first retreads in November 2016 at a leased facility in Hungerford, Texas. Up to that time, the company, which operates seven stores in Houston and southern Texas, had been among the largest MRT associate dealers, according to President Bob Beasley.
“The size and the amount of fleets we service required us to recap a good number of tires. To get the turn times and overall quality we desired, we needed to begin retreading our own tires.”
After just one year in the leased facility, retreading represents about 10% of Beasley Tire’s total business. Now that he’s in his own plant on his own property, Beasley expects the growth to continue. “We’ll expand to other markets and we’ll expand within our market.”
To counter the impact of Tier 4 tires on his cap and casing sales, Beasley says his employees sell the quality of the Michelin tread rubber and the quality of the casing. It’s a battle that his company sometimes loses to the Chinese tires.
“The low-cost Chinese tires will have an effect on the amount of cap and casings that we sell, but even at that we expect to grow our market, and we’re aggressively trying to do so. We’re a service company, and we’re interested in becoming expert retreaders to complement the other things we do. “
The “other things” Beasley Tire offers are emergency road service, mounted tire programs, truck alignment, front end repair, wheel refurbishing, and a mobile offering called “Rolling Tire Shop” that mounts and balances tires on light fleet vehicles on site. The company also sells and services industrial tires.Houska Automotive Inc., a single store offering retail and commercial services in Fort Collins, Colo., is a newcomer to retreading. The company is the only family-owned commercial tire center and the largest independent tire retailer in northern Colorado, according to Jason Lightbody, manager of the dealership’s tire and oil division.
The Oliver re tread facility, which produces about 23 medium truck tires a day, is located inside a new seven-bay truck center opened in January 2017. “We are at about one chamber a day currently, but starting to pick up some steam,” says Lightbody. “We know we are the bottom of the industry from a quantity standpoint, but we are excited to distribute a locally built product to our neighbors in northern Colorado.”
Retreaders add services
Expanded service offerings also help retreaders attract and keep customers. Pete’s Tire Barns Inc. added facilities for steel rim powder coating and aluminum rim polishing services at its retread plant and distribution center in Orange, Mass. The company coats 240 rims a day at the retread plant and polishes 28 rims a day at its distribution center, according to Bert Bonavita, manufacturing manager.
The company also built a new commercial outlet in Franklin, Conn., and expanded outdoor storage space for OTR tires in Orange in the last year. In addition, two buffers and two initial inspection machines were purchased.
To reduce costs, Pete’s Tire Barns is emphasizing recycling at its retreading plants. Bonavita says the company is saving more than $900,000 by not sending waste to landfills.
The company also invests in training its 35 retread plant employees. All receive entry-level training in retreading , and three employees completed master craftsman training at Bridgestone Americas Inc.’s facility in Nashville, Tenn., in March 2018. Pete’s Tire Barns holds the No. 45 spot on this year’s Top Retreaders list
Service Tire Truck Centers Inc. added a two-cap casing warranty to compete with the Tier 4 tires. The Bethlehem, Pa.-based company, which holds the No. 11 spot, has also increased its focus on retread plant tours for customers, according to Walt Dealtrey, chief operating officer. To improve productivity, the company is training personnel for higher output and required quality standards, for which they are compensated.
Dealers also are upgrading their equipment to be more competitive. Rice Retreading, Atlanta Commercial Tire Inc., Tredroc Tire Services LLC, Jack’s Tire and Oil Management Co. Inc., and Free Service Tire Co. Inc. reported new equipment investments in the last year.
Wonderland Tire has purchased several pieces of semi-automatic equipment in the last few years that improve units per man hour ratio, according to Langerak.
“This equipment has allowed us to increase our production without increasing personnel. We currently are at a unit to man hour ratio of 2.3. In comparison, that ratio was 1.5 just three years ago.”
Independent dealers buy TCi plants
Michelin North America Inc. sold seven of its nine Tire Centers LLC (TCi) retread plants to commercial dealers in the last year. The buyers included Toledo, Ohio-based Shrader Tire & Oil Co., which bought one plant. Two plants were sold to T&W Tire LLC., based in Oklahoma City, Okla. Greensboro, N.C.-based Snider Tire Inc. purchased four TCi retread plants.
The transactions bumped TCi out of the top ten in the rankings of the nation’s largest retreaders. TCi is in the No. 30 spot and has retread plants in Hudson, Colo., and Fontana, Calif.
Love’s Travel Stops & Country Stores Inc., which does business as Love’s Truck Solutions LLC, moved into a tie for the No. 13 spot. Love’s retreads as well as new tire brands are sold at Love’s Truck Tire Care and Speedco locations, which totaled more than 330 as of March 2018. The Oklahoma-based truck stop chain bought Bridgestone Americas Inc.’s Speedco network, which provides quick lube and inspection services to the trucking industry, in September 2017.
Dealers across eight states band together
In 2016, Van Blaricom organized a group of dealers into Tire Service Solutions, or TSS for short, to better compete against truck stop chains like Love’s Travel Stops as well as the TA Truck Service Commercial Tire Network operated by Travel Centers of America LLC. TSS also enables its member dealers to compete more effectively against large dealers that cover a large geographic area.
“TSS is a group of independent dealers that have banded together to provide service and product to all of our customers who travel the geographic area that we encompass, which is an eight-state area,” says Van Blaricom.
Customers of TSS member dealers receive the same pricing regardless of their location. “It gives us the ability to capture customers that might not be in our area. For instance, if Royal Tire has a large customer coming through here, that customer is going to get the same pricing as they would get at Royal Tire. They’re not going to be taken advantage of with $200 used wheels and $400 cap and casings,” says Van Blaricom. “Additionally, if Royal Tire, for example, has the business of a large trucking company with a location in Iowa, then we will probably get that business as well.”
TSS also is a buying group whose purchases represent about $600 million in sales. To further lower costs, the group is considering performing billing, payables and receivables functions for all the member companies.
“It’s a concept that is working well for us. It isn’t new, but we’re actually going about it in a different way than some of the other groups that are out there,” says Van Blaricom.
TSS consists of 12 dealers, and Van Blaricom wants the group to grow. In addition to Eastern Iowa Tire, TSS members are Wentworth Tire Service Inc., Chicago, Ill.; Tredroc Tire Services LLC, Elk Grove Village, Ill.; Southside Tire Co. Inc. , Antigo, Wis.; Royal Tire Inc., St. Cloud, Minn.; OK Tire Store Inc., Fargo, N.D.; Garrett Tires and Treads, Grand Island, Neb.; Heartland Tire and Treads of Omaha, Omaha, Neb.; Heartland Tire and Treads of Kansas City, Kansas City, Mo.; Weldon Tire Inc., Dubuque, Iowa; and Davis County Tire Inc., Bloomfield, Iowa. All the members are Bandag retreaders, as well as Bridgestone, Firestone and Falken dealers. ■