"For the manufacturers, 2007 has been characterized as much better profitability-wise, in part due to major cost reduction programs," says tire industry analyst Saul Ludwig in the November installment of the "Ludwig Report" for Modern Tire Dealer magazine.
"Cooper Tire is still targeting $170 million in net savings by 2008, Goodyear Tire & Rubber Co. has a gargantuan $1.8 billion to $2 billion cost-savings program in process toward 2009, Groupe Michelin recently announced more high-cost plant closings in France and Spain, and Continental AG continues shifting production to low-cost countries. Pirelli Tire North America surprisingly changes its CEO, and that implies to us some goal of additional cost cutting," notes Ludwig.
"And finally, Bridgestone Firestone North American Tire LLC still has not settled its union contract, but once completed, lower costs will be a part of the deal.
"All of these moves are positives for the manufacturers that contributed to strong earnings in 2007, even with tepid tire demand," Ludwig says. "As I see it, the ground is being laid for more profit progress in 2008."
Ludwig is a managing director with KeyBanc Capital Markets Inc. based in Cleveland, Ohio. Look for the full "Ludwig Report" in the next issue of Modern Tire Dealer magazine.
