Retreaders Feel Pressure on Many Fronts
Until daily life came to a near standstill to help stop the spread of COVID-19, many of the nation’s top retreaders were optimistic for 2020.
In this year’s MTD Top 50 Retreaders survey, they cited pressures on many fronts, such as low-cost import tires, pricing, employee retention and the tendency of fleet operators to overlook retreading in their tire programs. Yet many expected to find ways to overcome the challenges and grow.
Like all business leaders, retreaders will develop strategies to weather the economic consequences of the current COVID-19 pandemic. And MTD will cover their progress in the coming months as they shift from crisis response to recovery efforts. The following story, drawn from responses to the MTD Top 50 Retreaders survey conducted this past February, recounts industry activity in the last year.
Several retreaders have expanded into new markets via acquisitions. The most recent is the merger of Logan, Utah-based Jack’s Tire and Oil Inc., which at the time had 12 stores and five Michelin retread plants, with A&E Tire Inc., based in Denver, Colo. The deal was finalized on April 1. The new entity is No. 23 on MTD’s top retreaders list. It has 17 locations and six Michelin retread plants throughout Utah, Colorado, Idaho, Arizona and California, and a combined annual revenue of $150 million.
In January 2020, Pomp’s Tire Service Inc. bought 19 GCR Tires & Service (GCR) stores in nine states from Bridgestone Americas Inc. Pomp’s Vice President Paul Wochinske expects the purchase to “increase opportunities to service fleets with a complete tire program to include a consistent supply of retreads.” No. 4-ranked Pomp’s Tire gained two retread plants with its acquisition of Lincoln, Neb.-based Dillon Tire Inc. last June. The Green Bay, Wis.-based dealership has 17 retread plants.
No. 6-ranked McCarthy Tire Service Co. Inc. gained three GCR retread plants as well as 13 GCR stores in August 2019. The Wilkes-Barre, Pa.-based dealership has 10 retread plants in total.
Bauer Built Inc. purchased Allied Oil & Tire Co.’s tire business in April 2019. The transaction added seven new locations in five states and a retread plant. Durand, Wis.-based Bauer Built holds the No. 11 spot on this year’s MTD Top 50 Retreaders list.
The No. 1-ranked company in MTD’s current retreader rankings, Southern Tire Mart LLC, purchased six retread plants and 46 GCR Tires & Service stores from Bridgestone Americas Inc. in March 2019. The dealership operates 21 retread plants.
John Boynton, who oversees operations for Southern Tire Mart, says the company has grown its retreading business even though demand for retreading has been relatively flat overall. “We have focused on finding opportunities to increase our retreading demand and are seeking out customers that understand and really value the retreading side of it.”He says the company’s greatest opportunities are in working with its core customers to grow their retreading business and finding ways to reduce turn times. “If retreading wasn’t a most cost-efficient way of running a tire program, it really wouldn’t exist for the most part today.”
A retreading program takes a lot of work and effort between the dealer and fleet customer. “But when it’s done and done very well, it delivers fantastic results.”
David Mickelson of No. 43-ranked Graham Tire Co. agrees. “Selling retreads takes more effort than selling a new tire but again can be more beneficial for all involved.” Mickelson, who is president of the company’s South Dakota and Nebraska locations, says Graham Tire is educating its customers about the benefits of retreading .
New and renovated plants
In Toledo, Ohio, Best-One Tire Group’s new retread plant has capacity for about 200 medium truck tire retreads per day. That’s up from 88 retread tires per day when the plant began production in January 2020.
By the middle of March, daily production had reached 132 retread tires per day and growing, according to Pete Glesing, president of Best-One’s commercial sales and operations. Jim Jones is Best One Tire Group’s operating partner for the plant, which is housed in a renovated building. No. 7-ranked Best One Tire Group, based in Monroe, Ind., has 18 retread plants.
No. 22-ranked Tredroc Tire Services Inc. has invested more than $1.5 million in its retread facilities. One project involved remodeling a 31,000-square-foot building that contained a retread plant, which encompasses just over 17,000 square feet, and a warehouse in Wyoming, Mich. The project was completed in March 2019.
The Elk Grove Village, Ill.-based dealership also renovated its warehouse and commercial store in Allen Park, Mich., to make room for its retread plant a short distance away. Now known as Tredroc’s Allen Park “super center,” the building houses the retread plant, distribution center and the commercial tire store, which offers light mechanical services, as well as tire sales.
The approximately $1 million project was completed in the fourth quarter of 2019.
In addition, Tredroc consolidated its retread plant in Romeoville, Ill., with another plant in the city of West Chicago, about 25 miles away.
No. 19-ranked BestDrive LLC, which is owned by Continental Tire the Americas LLC, grew its business in large part by increasing production at its newest retread plant in Grande Prairie, Texas.
An expansion at the BestDrive retread plant in Forest Park, Ga., is underway and is scheduled to be online this year.No. 27-ranked Valley Tire Co. Inc. built a 60,000-square-foot facility housing a warehouse and comme rcial store in 2019. The warehouse occupies 40,000 square feet. The commercial service center has six drive-through truck bays and four retail bays.
Valley Tire’s retread plant is located at its headquarters in Charleroi, Pa. President Jim Stankiewicz says retreading has been steady. “OE is pretty stagnant so that means (fleets are) going to keep their trucks and maintain them, so retreading should get better.”
Role of the majors
Retread manufacturers still play a huge role in the industry’s growth potential, according to Tredroc officials.“If they decide to raise rubber prices and lessen the price gap between retread and Tier 4 (products), this could derail any growth. Additionally, there is still the threat of Chinese radial truck and bus (tire manufacturers) moving more operations to other Asia-Pacific countries.”
Bob Majewski notes the majors are “buying up the retread market and helping dealers subsidize their sales. As independents, we don’t have the deep pockets.”
Majewski is president of Sumerel Tire Service Inc. “We believe retreading will hold its own but low-cost Chinese tires are dropping in price,” says Majewski, adding that lower sales of new trucks in 2020 could mean lower prices for new tires.
Sumerel Tire Service, the 51st largest retreader in the U.S., increased its retread sales by 11% and has installed more equipment to grow its wide-base tire business.
Tier 4 tires return
Inexpensive, Tier 4 tires from Asia are slowly making their way back into the U.S. market, according to Sonny Simpson, manager director for BestDrive. “As this occurs, it is important that we, as a retread industry, continue to prove our value, helping fleets invest in the full life cycle of their tires.”
Simpson says customers are continually realizing the value in a premium, retreadable products.
“In many cases, investing in a premium tire casing delivers better bottom-line value for the fleet, versus purchasing inexpensive tires that do not deliver the same mileage or tire life.”
Jim Osborne, president of McGriff Treading Co. Inc., also cited the influx of low-cost, off-shore truck tires in U.S. markets. “Bandag has offered lower-cost material this year that we can use to compete by offering a quality retread.” The Cullman, Ala.-based company, which holds the No. 18 spot on MTD’s list, has increased daily capacity at its two retread plants.
Todd Coulter, executive vice president at No. 13-ranked Les Schwab Tire Centers Inc., likewise points to the impact of inexpensive new tires and the need to educate small to medium-size fleets about the advantages of a retreading program. “We have seen a steady decline in demand the past few years. January 2020 was no exception.”
No. 9-ranked Service Tire Truck Centers Inc.’s business was up 5% in 2019. The company outperformed the overall retread and new tire market without adding new locations or big national account wins, according to CEO and President Walt Dealtrey. “Cheap foreign imports are declining so retreading will pick up some of those wheel positions. We continue to improve our retreading process so our product is in demand. If Washington passes an infrastructure bill, that will help the earthmover retreading business segment.”
Gary Van Blaricom and Mike Garrett are owners of the Heartland Tire Group, which operates under the names Eastern Iowa Tire, Garrett Tires and Treads, Heartland Tires and Treads of Omaha, Heartland Tires and Treads of Kansas City, Davis County Tire and Weldon Tire.
The midwest region’s poor farming economy has depressed demand for trucking services, they say. The uncertainty surrounding the COVID-19 crisis is further weighing on local economies.
“Originally, I believed that 2020 and maybe early 2021 will be a tough year in the tire business,” says Van Blaricom. “Multiple trucking companies went bankrupt in the past year. Freight rates were down, tonnage was down, and that certainly would inversely affect our business. And with this virus, everyone is scared. However, due to the COVID-19 virus and the hoarding that is taking place, we actually may have a better year than I originally anticipated.”
Sales for Heartland Tire Group were up 5% in 2019, and expense reductions boosted profitability by 22%. “I believe that we’ll be very fortunate to finish the year profit-wise to match 2019,” he says. “We’re in good shape because we are not highly leveraged. But I believe dealers who are highly leveraged could be in serious jeopardy.”
OTR is a bright spot
OTR retreading volumes were up for No. 24-ranked H&H Industries Inc. “2019 numbers were up in all sectors and businesses are wanting to grow, which means they’re using more retreads,” says Noah Hickman, president of the Oak Hill, Ohio-based company.
“We invested close to $200,000 in our production line in 2019, and already in 2020, have invested over $350,000 in new OTR retread equipment. As always, we’re pushing the envelope on new technology for our products and services and keeping customers as our top priority.”
Hickman notes that in 2019, H&H Industries became the first OTR retread and repair facility to be accepted into Rema Tip Top’s Global OTR Repair Accreditation Program as a certified partner. The company also began manufacturing and marketing a line of new solid tires in 2019, following two years of research and development.
New approach to recruitment
In early 2019, Syracuse Retreaders LLC was producing 75 medium truck tire retreads a day. Vice President Dennis Beaudette Jr. was eager to boost production but could not find employees. His primary source for workers was Indeed, the employment-related search engine. “We went through so many people last year it was crazy,” he says.
Then an employee told him about the State University of New York (SUNY) Educational Opportunity Center (EOC), which offers adults free educational programs to gain skills needed to find new or better employment. He contacted SUNY EOC in June 2019. By the end of the year, he had added five people who completed the SUNY EOC program to his payroll.
Before partnering with SUNY EOC, it was “like pulling teeth trying to find people and keep them happy,” says Beaudette. He could not find people who needed jobs because the local employment rate was high. New hires would quit after as little as a week.
He discovered the people in the SUNY EOC program are prepared to be part of the workforce. “They show up on time, they work 50 to 60 hours a week, and they are actually really happy to have a job,” says Beaudette.
Today, five of the 12 people in the company’s retread plant are from the SUNY EOC program. Beaudette credits an incentive plan that rewards employees for meeting production targets for helping to build camaraderie on his team.
The company’s retread plant was aiming for 90 medium truck tire retreads per day when the incentive program began a few months ago.
“We are now getting anywhere between 100 and 120 a day,” says Beaudette.
“The program gives them incentive to keep working because at the end of the day they’re all making money if they work as a team.”
The plant also produces 30 light truck tire retreads per day and five skid steer tire retreads a day.
Retreading volumes at the facility have increased about 25% to 30% year over year, according to Beaudette. ?
See the Top 50 Retreaders chart here.