Commercial Business

Stock management

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Stock management

The on-going recession has adversely affected every sector of the commercial tire market, including OTR tires. Construction activity remains at a virtual standstill, while mining operations continue to reduce production, leading to a glut of parked machines.

As a result, many OTR tire dealers find themselves with extra inventory that they are trying to unload. Even this has turned out to be a complicated undertaking.

“It’s very hard” to blow out stock, especially when you’re trying to unload super-expensive, large OTR tires, says Matt King, general manager of King’s Tire, a company based in Bluefield, W.Va.

Here’s how King and another dealer — Scott Stanley, co-owner of Triple S Tire Co. in Elwood, Ind. — are dealing with OTR inventory issues.

Drastic reductions

King says his company’s OTR tire sales were extremely robust approximately one year ago. “We were selling everything we could get our hands on.”

King’s Tire services coal mining operations, including major companies like Consol Energy (formerly Consolidation Coal Co.) and Magnum Coal Co. Inc. Coal mining was roaring this time last year, according to King.

Because of the shortage of giant OTR tires at the time, the dealership had trouble getting product. But even that was OK, he says. The company simply sold whatever major brand products it could obtain.

Business remained strong until early 2009, when orders began to dry up. They’ve since slowed down to a trickle. The result has not been good, says King. “Our OTR business is off 60%.”

He reports that King’s Tire is coping by reducing its inventory “drastically.” However, the dealership is still sitting on a lot of inventory.

“You can only lower your prices so much. And it’s a specialty product. You just can’t take it anywhere and sell it.”

King reports that sales of smaller OTR tires are off, as well. “We’re in a coal-dominated market. When the coal mines are down, the smaller stuff goes down, too.”

When asked if he believes the OTR tire market will rebound in the near future, he says the prognosis “doesn’t look good.”

Fortunately, King’s Tire — which carries Yokohama, Bridgestone and Michelin brand OTR tires — is a diversified operation that sells consumer and medium truck tires. It also manufactures truck tire retreads. Those products and services will keep the operation afloat, says King.

Medium downturn

“We’ve had it pretty good the last two years,” says Stanley, whose company has four locations in Indiana and three in Ohio.

Triple S Tire primarily services coal mines, quarries and construction fleets. The company’s fortunes began to take a turn for the worse during the fourth quarter of 2008, when its construction industry customers began parking equipment.

As a result, Triple S Tire’s medium OTR tire sales “have been far off vs. last year. Our first quarter was down considerably.

“There’s no construction, and everything feeds off of that. If construction equipment isn’t running, tires aren’t wearing down.”

However, Stanley reports that his dealership’s giant OTR tire sales remain relatively robust. (Triple S Tire carries Yokohama, Goodyear, General, Michelin, and Bridgestone brand giant OTR tires.)

The only problem is that many end users who stocked up on large OTR tires when they could obtain them over the last few years are choosing to deplete their existing inventories before purchasing new products.

“They would buy their own inventory and then sit on it,” he explains. “I might get several service calls a day” but his company is mounting end users’ previously purchased tires instead of new products in many cases.

Despite these and other challenges, Stanley believes that the economy — and as a result, his OTR tire sales — eventually will turn around.

“The bright spot is the stimulus money” promised by the federal government. “They’ve only let a small percentage out so far, but it stands to reason that if they release more money, our construction tire sales will come back. That’s something to look forward to.”    ■

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