OTR open forum: Execs discuss shortage prevention, customer relations, future technology, and taking care of dealers
From dealers to manufacturers, the Tire Industry Association's annual Off-the-Road Tire Conference attracts the "Who's who" of the OTR tire segment.
More than 400 registered attendees gathered near Orlando, Fla., recently to discuss the key issues that are facing the OTR tire market.
As part of the event, Modern Tire Dealer Publisher Greg Smith moderated a panel of top OTR tire executives for an open, round-table discussion. Participants included:
* Shawn Rasey, executive director, North American OTR sales, Bridgestone/Firestone Off-Road Products.
* Jack Fenner, director of NAFTA OTR replacement sales, Continental Tire North America Inc.
* Jim Pearl, senior vice president of sales and marketing, Denman Tire Corp.
* Tim Good, manager, global accounts, off-road tires, Goodyear Tire & Rubber Co.
* John Funke, director of mining sales, Michelin Earthmover Tires.
* Gary Nash, director of OTR tire sales, Yokohama Tire Corp.
Most of these executives discussed what they are doing to ramp up OTR tire production in the February 2006 edition of Commercial Tire Dealer. During the OTR Conference, Smith asked them to address how supply shortages can be prevented in the future, how dealers can placate tire-hungry customers, and other subjects.
Smith: What caused the supply imbalance and what can we do to prevent something like this from happening in the future?
Funke: On the surface mining side, nobody really saw the demand coming at the end of 2003 and going into 2004. Throughout 2004, all the manufacturers basically sold off their tire inventory. By late 2004, all the stocks were depleted, and going into 2005, the only thing we were able to sell and ship was what we were building that day. It hasn't changed since then.
Rasey: We have to find the right balance with our partners to make this a profitable endeavor.
Smith: What can OTR dealers do to help bridge the supply gap we're seeing in the marketplace?
Good: There's been a lot of work done over the last year, a lot of it working with end users. Enhancing tire life is critical. It has to start with people at the mine sites. The thing we have to do is keep educating -- not only operators, but people managing those operations.
Smith: What do you perceive as the role of the bias-ply tire manufacturer in the future?
Pearl: The radialization of the OTR market was inevitable, but as in farm and other segments, I think there will always be a place for bias tires.
Nash: Ninety percent of our business has been bias tires. I always see a big interest in bias tires for the loader segment. I think we'll never get away from the bias business.
Smith: What OTR technology is being explored as we move into the future?
Nash: There's definitely a new building process we're experimenting with. When you get to 63-inch, that's where all of your technology is today.
Rasey: Most of the technology invested in giant tires will be toward creating products that will run longer and be more productive.
Funke: Enhancing the compounds available for sidewalls and treads -- and the way these compounds are extruded -- to maximize the tire's casing life.
Good: At Goodyear, we have the Two-Piece Assembly, which we consider new technology. We're very pleased with its results.
Smith: How does an OTR dealer make himself or herself indispensable with the customer, particularly since many larger companies are buying directly from the manufacturers?
Fenner: You have to get back to what I call "OTR 101" as far as maintenance of the tires is concerned. Our dealers are close to their customers and ought to be preaching the maintenance of tires. Most of our dealers have picked up the pace.
Smith: Are tires going to get much larger than 63 inches?
Good: We've done some looking... I don't think you can say (sizing) is ever going to stop. Will there be bigger sizes? Yes, there probably will be some day. How large? I don't think anybody can say at this point. The customer will always demand something larger.
Funke: It's been a learning curve for OEMs, customers and the tire manufacturers. The 63-inch tire's performance is much improved due to a lot of things. If (larger) requirements are there, I think you'll see Michelin responding.
Dealers in the audience also got in on the action. One asked if panelists are worried about losing market share to Chinese imports when supply gets caught up in 2008 and 2009.
Fenner: (Chinese tires) have been around for some time, especially the smaller sizes. There will always be a place for third tier, fourth tier -- ninth tier, whatever -- tires. A guy has a piece of equipment that he runs three times a day... he's going to buy the cheapest thing he can.
Nash: They've always been there and I think in the past years, (Chinese tires) have driven down prices somewhat. But their quality is suspect. If you're a retreader, I think it's better to have a premium-type casing.
Good: You have to look at the quality of the casings.
Funke: We've been trying to track (Chinese imports) but it's difficult; they don't report to the RMA (Rubber Manufacturers Association). You don't know which sizes are coming in. We need to encourage our customers to look at the quality of our tires, and the long-term integrity of our tires.
Perhaps the toughest question came from another dealer, who bluntly asked, "Where's (your) concern for dealers who have been with you for 20, 30 or 40 years, and can't get tires?"
Fenner: We separated our dealers into what we call “key dealers” -- those who were key to our success in the past and key to our success in the future. The top 30 or 40 dealers got over 100% in 2005 over their purchases in 2004.
Funke: We like to think we dance with the ones who brought us, and we work with the dealers who have committed to us and work closely with us. We're not looking for new distribution. We try to treat everybody as fairly as we can.
Good: I think a lot of it is just communicating with everyone, and working with dealers prior to the next year.
Rasey: It's an issue of alignment; looking at key dealers we've been affiliated with. That's the approach we've taken -- being consistent in planning... and focusing on what's coming.
Nash: In 2005, we started out with less than one month's supply on hand, so we had to use an allocation process, and that was basically, "What you bought the previous year is what you were likely to get in 2005."
Pearl: Of course, we're 29.5-inch and lower, but we're looking to add about 18 to 20 new SKUs this year, so hopefully we'll be able to provide (dealers) with another choice.