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MRTI 'will not expand forever,' says exec

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MRTI 'will not expand forever,' says exec

Michelin Retread Technologies Inc. (MRTI) is "very close to the total number of plants that we were targeting for Mexico, Canada and the U.S.," says Marc Laferriere, vice president of marketing for Michelin Americas Truck Tires.

"Our goal is not to expand forever and ever in terms of numbers of clients."

In this full-length interview, Laferriere discusses where the MTRI program currently stands, Michelin's efforts to ensure that its retread technology mirrors its new truck tire technology, and more.

This interview is the last in a series of in-depth question-and-answer sessions with executives from the country’s four largest retread companies – Michelin, Bridgestone Bandag Tire Solutions, Goodyear Tire & Rubber Co. and Marangoni Tread North America – exclusively available on www.moderntiredealer.com. Abbreviated versions of the same interviews can be found in the April 2010 edition of Modern Tire Dealer.

MTD: You’ve signed some major retreaders over the last couple of years. What’s on the books for 2010?

Laferriere: If I had to break it down, I’d say we’re pursuing two key objectives, which is to serve the end user and to also serve the dealer. When you develop a franchise, you have to keep those aspects in mind: how will the franchise bring value to the end user? And here we’re talking about making sure we bring in new tread designs, improving the turnaround time, etc. And then, to make sure the franchise is attractive, you need to bring value to the franchisee, making sure the franchisee can find the necessary profit margin. And that’s a matter of improving the process and making sure we stay competitive in terms of overall production cost.

The business model of MRTI is still based on relatively large plants that are very efficient in terms of process, turnaround time and production costs. We also need to be efficient in terms of logistics. We need to have those large plants strategically located so we can serve key markets.

MTD: When you say “large plants,” do you have certain criteria, like volume of rubber processed per year? How do you look at it?

Laferriere: It has to be more than 20,000 of 30,000 tires a year. You do realize we have complementary business models between MRTI and Oliver (Note: Michelin acquired Oliver Rubber Co. from Cooper Tire & Rubber Co. in 2007. - Ed.) A smaller plant that’s in a more rural area is going to be a better fit for the Oliver license, and a larger plant that’s in a bigger metropolitan area will be a better fit for MRTI.

We’ve had the ability to prove that we can put, on the retread side, similar technologies that we (build into new tires), by making retreads for the X One, for instance, and by making retreads with what we call Michelin Durable Technologies. And that brings a lot of value to the end user.

The end user also wants to have a reasonable turnaround time. They don’t want to send their casings off for three weeks or a month. So that forces us to have the right plants in the right locations.

Our process has been very rigorous from the beginning. All the plants are identical. When we make an improvement at one, we make an improvement at all the plants. I think our current franchisees are the best spokespeople for the process.

MTD: Can MRTI franchisees also use the Oliver process, or are the systems mutually exclusive?

Laferriere: There are certain treads at Oliver that are made available to the MTRI franchises, but it’s very limited in terms of volume… right now, the volumes are very, very small.

MTD: There are 80 MRTI shops in the U.S. How many Oliver shops do you have?

Laferriere: 81 in the U.S.

MTD: Are you where you want to be with the Oliver program? Are you investing significantly in it or is Oliver a fairly mature program?

Laferriere: We’re pretty much where we want to be. I think Oliver is showing signs of growth in certain markets. Oliver is not the place where we’re going to gain the most market share, but we definitely want to hang onto the market share we have with Oliver. Like I said, I think we need to respect the complementary nature of the two systems and not cannibalize ourselves.

MTD: If you’re an MTRI retreader, does Michelin require you to only sell new Michelin or BFG brand truck tires? Or can you sell new truck tires made by other companies?

Laferriere: No, we don’t have an exclusivity requirement on new tires. There’s no obligation of exclusivity associated with new tires at MRTI.

What I can tell you is our product plan is going to be very active, and the retread plan is in lock-step with our new tire plan. What you’re going to see from Michelin in the next couple of years is parallel or almost simultaneous introductions of new tire technologies and the retread technologies to go along with them.

What we’ve found is there is a tremendous buzz associated with the introduction of a new product. But the customer wants to know, ‘What am I going to do on the retread side?’ And it’s a fair question. Right now, if we give them sort of a one-generation-behind solution on the retreads, they find they kind of sacrifice some of the technology. So what we want to do is capitalize on the new technology (in our new tires) and do it very quickly on the retread side, as well. That one-two punch will be very impactful.

We’re going to work on more introductions of new products. We’ll see some additional dimensions -- wider treads in some of our more popular designs. Those are all maintenance-related issues, but they’re very critical for us.

MTD: What’s your take on the general state of the retread market?

Laferriere: We’re planning for the market to have a little bit of a bounce-back on the new tire side. The retread business has been a lot more stable, so the reduction (in units) has been less than we’ve seen in new tire units. However, we’re bracing ourselves for the fact we’re now entering a third year of record low influx of new tires at OE and a slow replacement market. We might be chasing some casings this year.

I think we’re in a good position for the first half of the year. If the market picks up during the second half of the year, I think we’re going to see a lot of customers re-equip some equipment they’ve parked over the last 12 months, and of course, they’re going to be looking to buy some retreads.

So on one hand, we may see some customers consider a second retread where they did not do a second retread before. That’s good for business, and it’s also good for a business that can guarantee the quality of the casing through inspection. We think we have an advantage there.

MTD: How long will it take to get back to where the market was in 2005 and 2006?

Laferriere: It’s going to take a couple of years. For one thing, we need OE to go back up and inject some casings. We need replacement to go back up and inject some casings. And then I think we’ll be back to the 14-million retread unit range. We’re not close to it now.

For previous interviews in the series, see:

Bridgestone Bandag discusses 'green' retreads

Goodyear happy with retread network's stability

Exclusive! Marangoni CEO expects rebound

 

 

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