Unit drain, the impact of BRIC and offshore comes ashore: Yokohama's Nash discusses how the OTR tire shortage is transforming the North American market
"In my 40 years in the tire industry -- 20 of that in OTR -- I have never seen a demand that's been so strong both in the U.S. and globally," says Gary Nash, director of OTR sales, Yokohama Tire Corp.
Attention large OTR tire dealers: Don't expect the current supply problem to improve anytime soon.
"This shortage is for real and is expected to last for another two to three years," says Gary Nash, director of OTR tire sales for Yokohama Tire Corp.
In this exclusive interview with Commercial Tire Dealer, Nash discusses OTR supply levels in 2006 versus 2005, the impact of offshore OTR tires that are being brought into North America to bridge the supply gap, and other subjects related to the large OTR tire shortage.
He also provides an update on Yokohama's efforts to alleviate supply pressure. "We've built a factory (in Japan) that's exclusively for radial OTR tires. This factory came on-line in November 2005 and we've added equipment each month. By mid-2007, we should be up to par with this new factory."
CTD: What was large OTR tire supply like in North America during 2006?
Nash: It was worse than in 2005. I think it's mainly due to the fact that there's still such a strong demand in the BRIC (Brazil, Russia, India and China) countries. When you're a global company, any amount of tires that goes to any of these countries definitely impacts us here.
At Yokohama, we've been able to improve our production (capacity) at our big factory in Onomichi, Japan, by something like 15%. However, we had some glitches in our system last year. Our Banbury machine was down for three or four days.
Anytime you're set back even for a few days, it definitely impacts your production.
CTD: What's the biggest problem facing large OTR tire manufacturers?
Nash: All of this started in 2003, about mid-year. That's when all manufacturers' inventories were at an all-time low. This demand was never really recognized because there had been so many peaks and valleys in the OTR industry before that. There had been five years of good business, five years of bad business... manufacturers could never spend the money that it would take to face a situation like the one we're faced with now.
CTD: Various OTR tire manufacturers have been allocating tires to customers. Has this been effective?
Nash: You have to take care of those customers who brought you to the party. You have customers who've been with you for many years; they count on you to be a major supplier to them. You have to allocate to them based on their previous year purchases.
CTD: This has to impact the pursuit of new customers and accounts if there are only so many units to go around...
Nash: It's impossible, really, to sign new business. You have to take what you've got. Right now there's no overflow at all. As a matter of fact, we're still working off back orders that are dated back as far as two years.
CTD: We've talked to with OTR tire dealers -- including some very large dealers -- who report that in order to fill supply holes they've had to bring in tires from China, Russia and other countries. Do you think that supply problems on the part of established OTR tire manufacturers have inadvertently helped offshore suppliers gain a foothold in the North American market?
Nash: It definitely has helped. We've definitely opened the door to Chinese, Taiwanese and Russian manufacturers who are now shipping tires into the U.S. in large quantities. And it's not only small and medium-sized tires. We're also seeing large tires surface in the U.S.
CTD: Do you foresee a day when offshore manufacturers will give established OTR tire manufacturers like Yokohama, Bridgestone, Goodyear, Michelin and others a run for their money in terms of market share?
Nash: I don't ever see that happening because U.S.-based dealers and users are so in tune with having a quality product. I don't think they could ever (duplicate) the quality of U.S.- and Japan-based manufacturers.
We've built our base on having a good servicing dealer to help our products last longer. We don't want to have a dealer who doesn't perform good service with a good maintenance program and a good retreading program. It's really sold by the dealer, not the manufacturer.
CTD: What can OTR dealers do to bridge the supply gap we're seeing in the North American market?
Nash: I think they have to be kind to every manufacturer they buy from. We don't see (large OTR tire supply) catching up for several years. I think there's been a learning curve between manufacturers, dealers and end users. We're all in this together. Relationships have improved dramatically.
'Best practices will extend the product': What OTR tiremakers are up against -- and how dealers can help
"Everyone is playing catch-up" when it comes to manufacturing large OTR tires, says Gary Nash, director of OTR tire sales for Yokohama Tire Corp. In light of the on-going OTR tire shortage, we asked top executives from several OTR tire manufacturers:
1. What's the biggest problem facing OTR tire manufacturers right now?
2. What can OTR tire dealers do to bridge the supply gap we're seeing?
Shawn Rasey, executive director, North American sales and marketing, Bridgestone/Firestone Off-Road Products: 1. "One is the on-going battle with raw material costs. It's been tremendously difficult to manage over the last few years. We're hoping to see relief in 2007. The second issue is trying to balance supply and demand. We've been investing significantly in the future, but capacity expansion in OTR takes longer than in other segments." 2. "We've been trying to encourage our dealers to work in concert with us to develop best practice programs for the end user. (The shortage) is an opportunity to deliver value-added services that demonstrate to end users why the dealer is such a valued link in the supply chain."
Tim Good, manager, global accounts, off-road tires, Goodyear Tire & Rubber Co.: 1. "The industry still can't produce enough tires to meet industry demand. Demand still exceeds production capabilities by far. We continue to look for ways to enhance our production and increase output at our plants." 2. "A lot of dealers have looked at ways to increase tire life. They've looked at retreading and pulling tires in time so they can be retreaded. Also, when a lot of times they've been running radials, they're now looking at bias-ply tires. There aren't enough radials to go around."
Jorge Paramo, vice president, sales and marketing, Michelin Earthmover Tires: 1. “Market growth has outstripped current industry capacity. That's why Michelin took action in 2005 to add new permanent capacity by expanding our Lexington, S.C., earthmover tire facility and building a new facility in Brazil. New capacity will be phased in during 2007.” 2. “Squeezing the longest possible life out of each and every OTR tire is more important than ever. By working with end users to maintain tire pressures, repair minor damage quickly and by giving advice on avoiding damage in the first place, dealers are on the front lines.”
Jeff Vasichek, vice president of sales and marketing, Titan International Inc.: 1. "Capacity to manufacture large OTR tires. We're trying to rationalize production between our three plants: Bryan, Ohio; Freeport, Ill.; and Des Moines, Iowa. We have the capability in Freeport and Des Moines to manufacture OTR tires. We have plans to increase our production by 50%. And we've boosted our radial production substantially." 2. "They have to get very close to the end user and put in place practices to extend the life of the tire. Best practices will extend the product, which will ultimately give a lower price per hour. At the same time, they need to get close to the manufacturers to help assess what their needs are."