OTR Market Wellness Check: Off-the-Road Tire Conference Reports Market Is Under Stress
There was no hiding the pessimism and concern that attendees felt regarding the overall health of the OTR marketplace during the 2016 Tire Industry Association (TIA) Off-the-Road Tire Conference held in San Diego earlier this year.
Many attendees, both dealers and manufacturers alike, openly discussed deep concern over the worldwide mining industries, oil and natural gas prices and the health of the companies that work in those industries during networking opportunities. Translated, the attendees felt that 2016 and perhaps 2017 would be soft in terms of tire sales to those segments.
A state-of-the-industry report by Kevin Rohlwing, senior vice president of training for TIA, addressed various OTR market segments individually. Rohlwing broke down the OTR tire market into three segments:
Aggregate — large OTR tires with rim diameters of 29-49 inches.
Mining — giant OTR tires with rim diameters of 51-63 inches.
Citing figures from a 2016 Dodge Construction Outlook report, Rohlwing said both residential and commercial building construction should increase in 2016. The report was projecting a 16% increase for the housing market, with the commercial side increasing 9%. Buried within these numbers, however, were decreases expected for manufacturing plants and electric and gas plants.
Rohlwing said the report painted a much bleaker picture for non-building construction. Electric utilities were being projected to be down 43%, while highway and bridge construction were projected to be off 4%. Other public works projects were expected to increase by 7%, for a total non-building construction projection of minus 14%.
It should be noted that the report cited by Rohlwing was produced before the highway bill was passed last year, and Rohlwing expects that this could lead to a more positive outlook.
Based on the bill’s passage, Rohlwing said that the aggregate industry should be up in 2016. He cited two different reports produced by the National Stone, Sand and Gravel Association (NSSGA) for his projections.
The first is a baseline scenario that has a 65% probability. This scenario shows a moderate growth in aggregates for 2016, followed by a slowdown in 2017 and a low-point in 2018 with a very gradual increase in 2019 followed by a big upturn for 2020. The rationale behind the report echoes what the Dodge Report showed regarding construction.The big downturn in 2017 and 2018 will be due to what Rohlwing said would be a shift of state and federal dollars away from rebuilding the nation’s infrastructure to pensions and health care spending.
The NSSGA’s steady state scenario is slightly more bullish than its baseline scenario, but it reflects similar trends, simply not as great of a downturn.
When Rohlwing turned to the mining segment of the market, the news was not good. He said he believes that all segments of mining, except for gold, will contract over the next year. Environmental and regulatory pressures on coal will continue to have a negative impact on that industry.
A new tire manufacturers’ panel held during the conference echoed Rohlwing’s overview regarding current market conditions. The panelists agreed that although they expect pockets of growth in some parts of the U.S. this year, “we have more tires than we need for 2016.”
Panel members Michael Baggett, national OTR sales manager for Yokohama Tire Corp.; Les Garner, product development manager OTR for Double Coin Tire; Taylor Cole, president, Bridgestone OTR, Bridgestone Americas; and Michael Aguon, associate vice president, BKT Tires Inc., also addressed how each of their companies viewed its own growth in the U.S.
Baggett said Yokohama is not looking for more distribution, but rather is looking to “support our current base.” Garner said Double Coin “is trying to fill in holes in our distribution, that’s all.”
Cole said Bridgestone is “mature, but we continue to look at coverage areas. It is always a changing industry.” BKT’s Aguon said, “We definitely want to increase distribution in the U.S. since we are the new guys.”
On the issue of tariffs for OTR tires, Aguon said, “Our company produces a quality product and we go to market to compete. Tariffs only create an artificial market.” Cole said tariffs are in place to help the U.S., but he also said “people are willing to pay for quality and value... and it is up to us to produce a quality product with a perceived value.”
Garner added a different perspective. “Instead of breaking out the real culprit, tariffs apply to everyone across the board. Tariffs would create minor shortages and help dealer and manufacturer profits, but we would see increases in prices.” Baggett was in favor of tariffs on OTR tires and said “they should help the situation and even the playing field.” (See more on the tariff issue on page 8.)
TIA Senior Technical Consultant Marvin Bozarth moderated a panel of tire repair industry experts who discussed a variety of technical topics surrounding OTR tire repair ranging from ways to keep repair techs safe to what type of tire injuries could be successfully repaired.
There were 450 attendees at this year’s conference, with roughly 50 different dealerships being represented.
Next year’s OTR conference will be held Feb. 15-18 at the Turtle Bay Resort in Hawaii. ■
TIA offers insight on important industry issues
The legislative report delivered by TIA Executive Director Roy Littlefield included insight into the association’s positions on important industry issues.
Littlefield said the association supports the idea of imposing a sales tax for online sales of tires. He related a story a dealer told him while he was in New Jersey meeting with Congressman Frank Pallone about the highway bill. The dealer said following a sale of a set of tires a week before Black Friday, he sent in paperwork for tire registration, but entered his name instead of the customer’s name in the paperwork. Within a week, the dealer said the manufacturer of the tires sent back an email that stated the next time he wanted to buy tires, he could get around paying state sales tax by buying tires directly online from them and he could “bypass the dealer and avoid the dealer markup.”
Congressman Pallone was presented this information and then included language in a transportation bill that will require the secretary of transportation to do a study on the subject.
Littlefield also said the association wants a full repeal of the estate tax, and in 2015 had the House of Representatives vote to repeal it. The bill did not proceed any further. Littlefield said he knows if the bill were to go to President Barack Obama, he would veto it. The association sent a request to all Republican presidential candidates on the subject, and all of them pledged to appeal the estate tax. Both Democratic candidates want to raise the tax, according to Littlefield. Hillary Clinton would raise it to 60% and Bernie Sanders would increase it to 80%, he told the audience.
Littlefield said TIA is closely monitoring the anti-dumping and countervailing duty investigations now taking place by the Department of Commerce for both OTR and truck tires. Modern Tire Dealer asked Littlefield if the association had taken a position on either OTR tire or truck tire duties. He said at this point, no.
Littlefield also told attendees that the association now has the largest membership in its history. TIA has more than 8,000 members. To put this in perspective, when the group was first formed by combining the former International Tire & Retread Association and Tire Association of North America memberships, it had 3,200 members. ■