Prevailing thought has always been when fleet budgets are stretched thin, retreads — and the cost savings they represent — become that much more attractive.
That’s still true, but conditions in the commercial tire market are much tougher than they’ve been in many years. Freight movement, while showing tiny month-over-month increases, remains below healthy levels. Many trucks continue to sit, unused. And fleets continue to cannibalize their own equipment, pulling tires off idle trucks and putting them on the trucks they’re still running. It’s a challenging situation by anyone’s standards.
In this edition of Commercial Tire Dealer, executives from the four largest truck tire retread companies in the United States — Bridgestone Bandag Tire Solutions, Goodyear Tire & Rubber Co., Michelin Retread Technologies Inc. and Marangoni Tread North America — discuss how their respective firms are trying to meet the many challenges facing the U.S. retread market. (Together, these companies hold 96.5% of the U.S. truck tire retread market, according to Modern Tire Dealer research.)
Executives also discuss what 2010 will bring, as well as the development of new technologies, the viability of environmentally friendly retread products, and other hot topics.
The series begins with an interview with Scott Damon, vice president of marketing for Bridgestone Bandag Tire Solutions, the country’s biggest retread company.
Nearly three years after Bridgestone Americas Inc.’s billion-dollar acquisition of Bandag Inc. and two years after the merger of Bandag’s North American retread operations with Bridgestone’s North American truck tire sales and marketing group to form a new entity, Bridgestone Bandag Tire Solutions (BBTS), Bandag remains the U.S. truck tire retread leader with 42% market share, Modern Tire Dealer research shows.
Despite its size, BBTS was not immune to the problems that plagued the commercial tire market in 2009. “We were able to maintain our position in the industry,” says Scott Damon, vice president of marketing for BBTS, “but since the overall industry was down, we were also down to the same degree.”
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CTD: Last year was a particularly difficult one for the commercial tire sector. What was BBTS’ retread business like in 2009? What challenges did you face?
Damon: 2009 was a challenging year for the tire industry. I think we were in a good position. But we’re part of a chain of what happens out there, and it all starts with the consumer. On the tail end of it, truckers and fleets are facing difficult times and are running things more tightly. That affects us. Our challenge is, “How do we help them reduce costs?” I think we’ve been pretty successful at doing that. We’re seeing fleets that are looking to retread more than they have in the past. We’re seeing some fleets that have started retreading. Those are positive things for us.
CTD: It appears to be a very competitive time in the retread industry with a lot of retreaders changing their supplier allegiances.
Damon: Bridgestone, Michelin and Goodyear represent more than 90% of the retread industry, so it’s a very, very competitive environment. But that’s been the nature of our business for quite a while now.
CTD: Is it a case of the major players fighting over a smaller pie?
Damon: I don’t look at it that way. With the three major players offering both retreads and new tires, you have an overall market for tire products that’s going to grow over time. It’s mature, so we may not have hyper growth, but it will grow.
And the mix between new truck tires and retreads is going to fluctuate within that overall growth. It’s a function of the economy and what fleets are doing.
[PAGEBREAK]CTD: Do you see a rebound on the retread side this year?
Damon: I don’t have a crystal ball, so when the market rebounds is really anyone’s guess. The indications are that the economy is going to start turning around if it hasn’t started already, but it’s going to happen very slowly. If people have some degree of confidence and start spending money again, trucks will start moving more, and when they start moving more, our business will follow suit.
CTD: It looks like freight movement is increasing month-over-month, albeit slightly.
Damon: We track that. The thing we also watch is the capacity situation in the trucking industry. If there’s still over-capacity, which there is, you have a lot of trucks sitting idle, and that will offset tonnage increases.
CTD: Bandag remains the market share leader in truck tire retreading. How many Bandag shops are there in the U.S. and Canada?
Damon: About 300 (157 franchise owners).
CTD: How many franchisees do you plan to sign this year? Do you have an objective?
Damon: No objective. Those decisions, in my mind, are driven from the customer back to us.
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CTD: What are trucking fleets looking for these days?
Damon: They’re looking for ways to lower their overall cost. They want to partner with the right distributors who can provide not only quality products, but the right services and management programs.
It has to be delivered efficiently when they need it and where they need it.
There’s been consolidation for years in the trucking industry. Fleets want to work with dealers and manufacturers who work together and can provide (products and services) with consistency.
We recognize that the independent dealer is a critical piece in delivering whatever it is we want to offer a fleet.
Independent dealers, being independent, will certainly make their own best decisions as to who they are aligned with. It’s incumbent on BBTS to make their decision easier.
CTD: Going green has become a hot trend in the commercial tire market. Does BBTS see a viable, long-term market for eco-friendly retreads? Is “green” a fad or something that will be a long-term part of the industry?
Damon: It’s certainly a hot topic. There’s a part of me that looks at that and is a little amused because retreading has always been environmentally friendly. With all the focus on making fuel efficient products or reducing rolling resistance, the biggest thing a fleet can do environmentally is still to retread. If someone is interested in going green, either retreading or retreading more can be the first step regardless of the other things that are incremental to that.
Going green is a good thing, but fleets and customers still expect it to make financial sense. What trade-offs are they going to accept to go green? ■
