Proceeding with caution

Aug. 16, 2010

Cautiously optimistic is probably the best way to describe the mood of independent commercial truck tire dealers as the domestic truck tire market rumbles into the remaining months of the year.

Among the positives, dealers list a steady uptick in freight movement, larger sales tickets, and the promise, no matter how remote, of economic recovery.

However, profitability, pricing and the increase in the general cost of doing business remain major areas of concern.

And what will happen to replacement tire supply if the original equipment truck market rebounds? Will there be enough units to adequately supply all channels?

Commercial Tire Dealer recently spoke with some of the country’s leading commercial truck tire dealers to get their take on the state of the market and what they expect to see as the year continues. Here’s what they had to say.


Dennis Dickson, president, Indy Tire Centers, Indianapolis, Ind.: “We’re seeing an uptick in units. The question is, ‘Is our gross profit where we want it to be and are we fighting for it?’ No, gross profit is not where we want it to be, but yes, we are fighting for it.

“We’re starting to see larger purchases. Usually the national account guys come back first, but we’re starting to have other customers order in excess of 100 units, and these are people who have not done a tremendous amount with us over the last 12 to 18 months.

“Our challenge right now is profitability because of the margins we have to sell at. But we’re positive moving forward. If the current trends continue, we’ll end up better than we did in 2009.

“However, to move the ticker, you need to have pretty good sales.

“Our sales manager is doing a good job in terms of going out and helping our guys secure new business, either in the form of added sales from our current customers or snagging completely new business.”

Lewis Wexler Sr., CEO and president, Free Service Tire Co. Inc., Johnson City, Tenn.: “I think the market is poised to come back. Of course, it went way, way down in 2009. Original equipment was terrible and replacement was way down simply as a reflection of the economic situation.

“With the problems we’re facing in the U.S. and talk of a double-dip recession, I hope the market is ready to bounce back.


“I still don’t see people going crazy and buying trucks. That just hasn’t happened yet. But we are busier, and where we’ve been busiest is in truck service: Department of Transportation inspections, brakes, alignments, those types of things. That business has been pretty good.”

Art LeBlanc, vice president and general manager, Pete’s Tire Barns Inc., Orange, Mass.: “We haven’t opened any new stores or anything in the last 12 to16 months, so I’m looking at total number of units at Pete’s Tire Barns, and they’re up. We didn’t do anything in terms of new distribution to make that happen — it’s the same sales teams and the same stores — so we are seeing an increase.

“I think (market recovery) is going to be a long, slow process, just like real estate. If you had a $400,000 home and it’s now worth $300,000, it’s not going to go back to $400,000 in six months. It’s going to take time. And I think the truck tire market will be the same way.

“It was going gang busters for us, and then it slowed down to a crawl, went into reverse for a short period of time — maybe four or five months — (but) looking at my numbers, we’ve been going forward now for the fifth straight month.

“I think it’s going to be good. We’re expecting a pretty decent fall season, actually.”

Charles Marshall, president, Grismer Tire Co., Dayton, Ohio: “May and June were decent (for our customers), but in July it slowed up again. Our customers who are busy are having a tough time finding people and a lot of trucks are still sitting.

“I still think there is over-capacity in motor transport. Fleets are being careful with expenses.

“We have more and more people who are interested in using retreads in an attempt to save dollars. They’re trying to do more with less. Companies that have not used retreads in the past are buying them now.

“I think truck tire manufacturers may have been a little too aggressive with their price increases. They’ve cut back on production and now have tires on back order.”


Gary Van Blaricom, CEO and president, Eastern Iowa Tire Co., Davenport, Iowa: “National account purchases are down considerably. I think demand has not increased greatly, based on what I’ve seen. All of our truck tire suppliers are experiencing back orders on what we call ‘main line tires.’ When you have popular tread designs going on back order, it makes it difficult to manage any kind of inventory.

“One bright spot for us has been retreading. It has improved fairly well, and I think that will continue through early fall.

“I don’t anticipate an increase in demand for national account purchases. That seems to be the toughest area of all right now.

“I think the second half of the year will be considerably better than the first half. Last year, we were down a few points. I believe we’ll see a slight increase in business during the second half.”

Rick Stewart, president, Action Tire Co., Forest Park, Ga.: “We’re seeing an increase in business from last year to this year — really, I would say from March 2010 on. I’d say it’s 5% to 10% over what it was last year.

“The other trend I see is people buying less-expensive products. We used to always say we had three tiers; I would almost say we have a fourth tier now.

“More and more stuff is coming from offshore and as it comes in, you either get too much or you don’t have enough. My biggest challenge is keeping adequate inventory in my third-tier line.”


Steve Hubicz, director of sales, Ziegler Tire & Supply Co., Massillon, Ohio: “We see trucks moving a little bit more, but fleets are still watching pennies. It’s still tough for tire dealers.

“Pricing is definitely (an issue). The price increases are out of control at this point. I think manufacturers are saying, ‘Sales have been so bad the last couple of years. Now we have some business and need to capitalize on it.’

“It puts us in a jam. We’re the ones who are out there beating the streets every day.

“The biggest thing I see is whereas over the last couple of years people were looking to buy the cheapest tire out there, they’re now looking to buy premium products. In that respect, we’re fortunate because we sell a lot of premium products.

“We look for a promising 2011. Overall, it seems like fleets are running. They’re starting to buy some tires, but they’re buying as needed.”

Garry Heintschel, president, Heintschel Tire & Service Inc., Texarkana, Texas: “Our sales have been stronger the last 60 days and look to be getting stronger every month compared to one year ago. Our suppliers’ inventories seem to be adequate.

“A year ago, the market was down. People weren’t buying and they were parking equipment. Now we have customers who are actually buying and are actually running short on equipment. Everybody also is operating at much lower inventories. We have to work with our suppliers much more closely than in the past. We’re all trying to operate on lower inventories, so it’s a balancing act.

“The only unknown is that OE is getting stronger and if OE picks back up, I don’t know if that’s going to take a lot of replacement tires out (of circulation). One reason why our fill rates have been good is that the OE portion of the business has been down.

“In the past, when OE was at a high level, the replacement market would suffer. As more tires go to OE manufacturers, we may see some shortages.”


Scott Bennett, vice president of sales, Service Tire Truck Centers, Bethlehem, Pa.: “We’re finding (the truck tire market) to be strong right now. I think we all adjusted from 2008 to 2009 from a standpoint of resources and head count.

“But I don’t think anyone was prepared for the return and how quickly it came, as far as people needing and replacing tires. We’re seeing strong double-digit growth both from a retreading standpoint and a new replacement tire sales standpoint.

“In new tires, we’re starting to see some shortages. Manufacturers geared their plants for an output that was based on low single-digit growth for 2010. It’s almost made-to-order.

“We’re adding capacity at all of our retread plants. We’re working overtime to maintain a consistent return time on our retreads. We’ve been trying to hire additional bodies for service work. Service has been extremely strong.

“I think we’re going to see another round of (new truck tire) price increases, which will be driven by a couple of things: the tightening of carriers, and freight rates continuing to go up.

“If you bring any imports in from Asia or anywhere outside the U.S., the cost of transportation continues to escalate. We anticipate that the new tire manufacturers will pass along price increases.”

Jim Smith, president, Exit 11 Truck Tire Service Inc., Richfield, Ohio: “I think the market is a little stronger than it was a year ago. Gross sales have increased slightly, but I think that’s due to the increase in the cost of tires. Our costs have gone up and we’ve passed that on, so sales have increased, but the bottom line hasn’t.

“We’re working hard on the cost side of things to try to maintain the bottom line. We’re trying to do more with fewer people. I’m positive about the second half.”   ■


Help wanted -- Dealer laments lack of applicants

Dennis Dickson, president of Indy Tire Centers in Indianapolis, Ind., says one of his biggest challenges during the second half of the year will be finding not only qualified employees, but people who want to work, period.

“It’s amazing the lack of people pounding the pavement looking for physical labor. At one of our truck tire centers, we’re down two good truck tire service people and probably one general service guy.”

Dickson says he will continue to use the Internet to recruit employees. “We’re using, and other methods. If we can find someone else to advertise with, we’ll probably do it, too. We pretty much stay away from the old print newspaper model” due to declining daily readership.

Vital stats --  A commercial tire dealer profile

The average commercial tire dealer handles 6.5 different brands of truck tires, according to recent Modern Tire Dealer research. Here’s some more revealing information. Respondents to MTD’s 2010 Truck Tire Survey said they:

• have a median number of two locations.

• sell an average number of 233 truck tires per location, per month.

In addition, 18% of respondents to the survey said they plan to add or drop a truck tire line or lines in 2010.