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THE INDUSTRY’S LEADING PUBLICATION
46TH ANNUAL
Raw material costsadded to the extreme
volatility in the consumertire market. – Ludwig
January 2012 | Vol. 93, No. 1 | $30 | A Bobit Publication | www.moderntiredealer.com
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THE INDUSTRY’S LEADING PUBLICATION
FACTSISSUE:
2012
46TH ANNUAL
Raw material costs added to the extreme
volatility in the consumer tire market. – Ludwig
January 2012 | Vol. 93, No. 1 | $30 | A Bobit Publication | www.moderntiredealer.com
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Quik-Link: 800-687-1557 ext. 11101
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3www.moderntiredealer.com
Feature16 Extra sensory perception
Analyst Saul Ludwig not only looks back at the roller coaster year that was 2011, but also looks
ahead to a (seemingly) bright future
46th annual Facts Section24 Shipments
It was one heck of a roller coaster ride! —
In 2011, shipments ebbed and fl owed, while prices
only went one way: up
28 Market shareMajor brands continue to
gain market share: Th ey account for nearly 180
million in passenger and light truck tire shipments
34 Sales and pricing$82 billion in tires for just
the top 3 tire makers!
36 Tire dealer profi leIndependent tire dealers dominate: Th ey own 61% of the
retail market and even more when they wholesale
40 Plant capacityCapacity falls 3.2%, but help is on the way
42 CommercialEveryone scrambles for usable truck tires: More than
32 million new and retreaded truck tires weren’t enough
46 Index46th annual MTD Facts Section Index
4 Editorial3 things to ignore in 2012
6 OnlineTraffi c report — Here’s what’s popular on MTD’s website
8 News/viewsPromotions pay off for Toyo: UFC sponsorship, Ultimate Ride Sweepstakes are showcased
22 Ludwig ReportEconomic signs are pointing to better sales for retail tire dealers
48 Business insightSelling your business: Advance planning is needed to get your best deal
56 Counter intelligenceStop, look and listen: It’s time to examine your business to discover areas where a complete revamp would create new opportunities’
59 Business insightOnline appointment scheduling: Catering to customers who prefer to use the Internet
60 Focus on industry‘Let’s Go’ brand building: Kumho promises dealers better fi ll rates, more targeted ads
62 Focus on industryAAPEX 2011: Target buyers hit the mark —Attendance was up 17% from 2010, say offi cials
64 TPMSJeep Liberty: Proper positioning protects TPMS sensors
73 Your turnBanding together will tip the world of tires back toward level
66 Products68 Quik-Link70 Classifi ed
Th e Industry’s Leading Publication January 2012, Volume 93, Number 1
Modern Tire Dealer is a proud member of:
Departments
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MTD January 2012
Every year, industry experts try to predict what will become the
hott est items on the market, or what the latest advancements will be. I think the proper word is “futurecasting.”
No industry is immune. Toys, fashion, stocks — you name it, and the pundits will come out in full force at the beginning of the year. Here’s one I’ve already heard: Re-tailers will be able to target smartphones with consumer-specifi c advertising as potential customers walk by their stores!
Th at probably doesn’t aff ect stand-alone tire outlets because consumers don’t have much opportunity to casually walk by them. But what if one day, you can send tailor-made ads to car owners as they drive by your store?
“Hey, Bob, your 2010 Ford Focus will need tires soon, and we happen to have plenty of size P195/60TR15 tires in stock! Swing back around and buy them now, or set up an appointment! And say ‘hi’ to your wife, Tris, for us!”
I’m going to do a litt le futurecasting myself, but not in the usual way. Here are three things that, as tire dealers, you will not have to pay much att ention to in 2012. Maybe one day they will become hot items or trends, but not this year.
1. Run-flat tires. You might think their time has fi nally arrived, with talk of vehicle manufacturers wanting to get rid of spare tires, but you would be wrong.
Run-fl ats have not made much of a dent in the aft er-market because they tend to ride rougher and are more expensive than standard tires.
New run-fl at technology is targeting ride comfort (don’t tell that to BMW owners with their original equipment run-fl ats). At a “Drive and Learn” event last year, Bridgestone Americas Tire Operations LLC let me drive on the new Potenza RE960AS Pole Position RFT with the left front tire at 0 psi, right aft er the non-run-fl at 960AS. Both rode comfortably at low speeds.
Expense remains a big issue. Safety, on the other hand, is not as much of a factor. Th e durability of a standard tire and the popularity of in-vehicle safety, security and communications services such as OnStar make run-fl ats less necessary.
At the very least, thanks to wholesale distributors you don’t have to stock run-fl ats, even if you promote yourself as a BMW repair expert.
2. Electric vehicles. Th e best-selling electric vehicle in the U.S. last year was the Nissan Leaf. Nissan dealers sold 9,600 Leafs, compared to 7,600 for the next-best selling electric vehicle, the Chevy Volt. (Th e Volt may have sold a few more vehicles if not for the bad publicity surrounding alleged post-crash batt ery fi res.)
Th at’s not a lot of vehicles, and they are still under warranty. According to R.L. Polk & Co., electric and the more popular hybrid vehicles combined represent less than 1% of the domestic vehicles in operation.
A friend of mine at a local General Motors dealership told me the technicians have to tie themselves to a pole when working on electric vehicles in case they are shocked and thrown from the electrical source.
Even with federal tax credits, electric vehicle prices fall into the $28,000 to $32,000 range, not inexpensive, but not cost prohibitive if you want 100% zero emissions. If you want a 220-volt instead of a 110-volt charger, however, you will have to pay more.
Nissan North America Inc., in collaboration with Sumitomo Corp., is bringing a low-cost DC quick charger for electric cars to the U.S. market early this year. Th e
starting price of the DC quick charger is $9,900.
Accenture Inc. forecasts 1.5 million electric vehicles will be in operation by the end of 2014. Th e new Ford Focus Electric will add to the numbers, but let’s face it, few EVs will be coming into your service bays in 2012.
That doesn’t mean you shouldn’t be prepared to service one if it comes in. Just have that pole ready.
3. Sept. 26, 2012. That is the date the three-year-old tariff s added to passenger and light truck tire imports from China back in 2009 are scheduled to end. I’m not saying you should ignore the tariff s, which are at 29%. I’m saying you should ignore the cutoff date, because I think they will be continued at that rate for another year.
It is my understanding that President Barack Obama has the right to extend the tariff s for one year. With the presidential election less than six weeks aft er the tariff s are set to expire, and the United Steelworkers expected to ask for the extension, he will want to show his “support” for such a rabid group of voters.
Th ere you have it, three things to ignore in 2012. If you do, I believe it will help you focus on what you can’t ignore: customer satisfaction. ■
If you have questions or comments, please e-mail me at [email protected].
Editorial
3 things to ignore in 2012
By Bob Ulrich
At the very least, thanks to whole-sale distributors
you don’t have to stock run-fl ats.
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MTD January 2012
Online
Traffi c reportHere’s what’s popular
on MTD’s website
Your competitors, tire price hikes and Cooper Tire & Rubber Co. vs. the United Steelworkers were popular topics on our website during December 2011. Here were our most popular posts:
1. “Will 14 of Sears Auto Centers close?” Th is item from December 29 was a lead-in to Editor Bob Ulrich’s blog, “Sears Auto Centers may be in a state of fl ux.” He put the news of Sears Holdings Corp.’s announced closing of more than 100 Kmart
and Sears full-line stores in context with a look at how the closings might affect the company’s 788 auto centers.
2. “Are tire prices to o h i g h ? L e t u s know!” Many people read this December 20 item and clicked through to Ulrich’s editorial from our December issue. And they also left their own opinions on the subject!
3. On December 5 we posted “Lockout will have litt le eff ect in 4Q, says Ludwig.” We quoted industry analyst
Saul Ludwig, a managing director at Northcoast Research Holdings LLC, concerning how Cooper Tire and United Steelworkers (USW) Local 207L were unable to reach an agreement, leading to a lockout at the company’s Findlay, Ohio, plant. We wanted to know how the lockout will aff ect Cooper’s fi nancial outlook.
4. Also popular was our post on December 19 on the same subject, titled “Stalemate between Cooper and USW continues.” For the convenience of our Web readers, we included links to additional information on both Cooper’s and the USW’s side of the issue.
5. “Acquisitions improve Pep Boys’ fi nancial results,” we wrote on December 6. Th e company’s fi nancial report was bolstered by the addition of six Service & Tire Centers in the third quarter, increasing its total to 159 outlets.
View these news items, readers’ comments and handy links for additional informa-tion on www.moderntiredealer.com. And be sure to add your own your comments!
3515 Massillon Road, Suite 350Uniontown, Ohio 44685(330) 899-2200, fax (330) 899-2209 Web site htt p://www.moderntiredealer.com
Editor: ROBERT J. ULRICH [email protected] Managing Editor: LORI L. MAVRIGIAN [email protected] Editor: BOB [email protected]
Contributors: Auto Service/Technical: MIKE MAVRIGIANTraining/Tire Service: KEVIN ROHLWINGIndustry Analyst: SAUL LUDWIG
Art Director: NEAL WEINGART [email protected] Production Manager: KA REN [email protected]
Publisher: GREG SMITH [email protected]
South and Texas: GREG SMITH [email protected](330) 899-2200, fax (330) 899-2209
Midwest: MICHELE VARGO [email protected](330) 899-2200, fax (330) 899-2209
West Coast: JOHN DYAL Th e Dyal [email protected] (760) 451-5026, fax (760) 451-5039
West Coast: MARIANNE DYAL Th e Dyal [email protected](760) 451-9216, fax (760) 451-9292
Automotive Aft ermarket: DAN [email protected](734) 676-9135, mobile (313) 410-0945fax (734) 675-6744
Classifi ed Sales: DONNA STEWART [email protected](405) 513-6794, fax (360) 406-7576
Reprint Sales: KA REN RUNION [email protected](330) 899-2200, fax (330) 899-2209
Customer/Subscription Service: (888) 239-2455, fax (888) 274-4580
Modern Tire Dealer is a Bobit PublicationExecutive offi ces: 3520 Challenger St. Torrance, CA 90503Chairman: Edward J. BobitCEO & President: Ty F. BobitChief Financial Offi cer: Richard E. Johnson
News from industry analyst Saul Ludwig (here being in-terviewed by MTD Editor Bob Ulrich), is always popular.
Total access — totally freewww.moderntiredealer.com
MODERN TIRE DEALER (ISSN 00268496) (CDN IPM #40013413) (USPS #369-170) is published monthly by Bobit Business Media, 3520 Challenger St., Torrance, California 90503-1640. Periodicals postage paid at Torrance, CA 90503-9998 and additional mailing offi ces. POSTMASTER: Send address changes to MODERN TIRE DEALER, P.O. Box 1068, Skokie, IL 60076-8068. Please allow 6 to 8 weeks for address changes to take effect. Subscriptions in the U.S. and its possessions, $65; Canadian, $99; Int’l surface mail, $99; Int’l airmail, $198. Single copies, $10, except the January Facts Issue, $30. Address all subscription correspondence to MODERN TIRE DEALER, P.O. Box 1068, Skokie, IL 60076-8068. Please allow 6 to 8 weeks to receive your fi rst issue. Please address Editorial and Advertising correspondence to MODERN TIRE DEALER, 3515 Massillon Road, Suite 350, Uniontown, OH 44685-6217. The contents of this publication may not be reproduced either in whole or in part without consent of Bobit Business Media. All statements made, although based on information believed to be reliable and accurate, cannot be guaranteed and no fault or liability can be accepted for error or omission. For your information: We sometimes make our subscriber information (i.e. fax, e-mail or mailing address) available to carefully screened organizations whose products and services may be of interest to you. If you prefer not to have your information made available, please write MODERN TIRE DEALER, P.O. Box 1068, Skokie, IL 60076-8068.
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MTD January 2012
By Bob Bissler
Sports marketing has been gaining momentum among tire companies in recent years. Toyo Tire U.S.A. Corp. is a perfect example.
In 2011, Toyo sponsored the Pacifi c 10 (Pac-10) Track & Field Championships, Pac-10 basketball and football, and also the Pac-10 Scholar-Athlete of the Year.
But the company’s big sports marketing news in 2011 was that Toyo Tires returned as a spon-sor and offi cial tire of the Ultimate Fighting Championship (UFC). UFC programming reaches 354 million homes worldwide in 19 diff erent languages.
Toyo was the offi cial tire of the UFC from 2006 to 2008. And then in 2011, Toyo’s name once again adorned the sides of “The Octagon” during six live UFC Pay-Per-View events.
But it was the UFC name that adorned Toyo’s booth at the Specialty Equipment Market Association (SEMA) Show, Nov. 1-4, 2011, in Las Vegas, Nev. And while 2011 was the year that Toyo returned as a UFC sponsor, it was also the year Toyo was back exhibiting at the SEMA Show.
“Our big news at SEMA is we’re back,” says Amy Coleman, senior director of marketing, Toyo Tire U.S.A. Corp. “We’ve been gone for two years
and now we’re back in a big way. We have our UFC fighters here to draw more attention. Our sponsorship with them has been very ef-fective for us.”
Toyo had several fi ght-ers signing autographs at its booth during SEMA, including UFC light heavyweight Brandon “Th e Truth” Vera, Strike-force women’s welter-weight champion Miesha “Take-Down” Tate, UFC featherweight Chad “Money” Mendes, UFC lightweight Anthony “Showtime” Pett is and UFC light heavyweight champion Quinton “Rampage” Jackson.
Th e booth also served as a showcase for the company’s biggest promotion ever, the Toyo Tires Ultimate Ride Sweepstakes with the grand prize of a custom Dodge Durango. Th e 2011 Mineral Gray Metallic Dodge Durango Heat Edition 4x4 has custom features including a set of Toyo Proxes ST II high performance tires and a T-REX four-piece fl at black mesh grill fi tt ed with the UFC logo.
While the promotion ran from Sept. 6, 2011, through Jan. 2, 2012, the Ultimate
Ride Sweepstakes awarded a set of Toyo tires to one winner each week.
Soon Toyo will announce the Grand Prize winner who will drive away with the Dodge Durango.
Last year was also a good time for Toyo to return to the SEMA Show, as the company plans to grow quite a bit over the next fi ve years.
“We’ve got a new factory that is being built in Malaysia,” says John
Hagan, senior director of sales, Toyo Tire U.S.A. Corp. “We purchased
another factory that’s fully Toyo-owned and controlled so Toyo quality is coming
out of it. It’s coming on line and we’re beginning to get supply. We purchased another factory in China and we’ll be gett ing some product supply from that
factory as well. So those things give me a lot of confi dence that we’ll be able to support the growth.”
Hagan says Toyo still views the United States as a major growth area for the company. Many tire company execu-tives say the biggest area of growth for the tire industry is Asia. Hagan says for Toyo it is Asia and North America.
Toyo’s latest tire, the Proxes T1 Sport UHP summer tire, was launched in the U.S. market in August. It off ers optimum cornering performance due to a new high stiff -ness compound. Th e tire is available in 42 sizes.
Th e Proxes T1 Sport isn’t the only product news at Toyo.“We also have a couple of product launches in 2012
that we’re excited about,” Hagan reveals.Hagan says the biggest reason Toyo is back is because
the economy has improved. Th e company is also back as far as supply, which was disrupted by the March 11, 2011, earthquake and tsunami in Japan.
“Supply issues have been industry-wide and we had a tougher time than most,” Hagan explains. “Th e disaster in Japan made it even more diffi cult. We’re through that and the Sendai plant in Miyagi Prefecture has been running at 100% since May. But there’s still that recovery period for the lost production, as well as lost tires in the warehouse in Sendai. But we’re back, and we’re back strong.” ■
News/views
Promotions pay off for Toyo UFC sponsorship, Ultimate Ride Sweepstakes are showcased
SEMA Show attendee Mingo Rivero, owner of Mingo Motorworks in Crestview, Fla., meets UFC fi ghter Quinton “Rampage” Jackson at Toyo’s booth during the SEMA Show.
Toyo showcased its latest tire at SEMA, the Proxes T1 Sport UHP summer tire.
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MTD January 2012
News/views
Michelin debuts long-life Defender passenger tireMichelin North America Inc. introduced its Defender all-season passenger tire. It will be available on April 1 and will cover 93% of standard passenger car vehicles in the marketplace with 38 sizes ranging from 175/70R13 to 225/50R18.
“Th e Michelin Defender will re-place two existing lines: the Michelin HydroEdge and the Michelin Harmony lines,” says Pete Selleck, Michelin’s new North American chairman and presi-dent. “In so doing, the dealer should be able to cover the breadth of all needs. In the past he needed about 117 SKUs to do that. With this new launch, he should be able to do it with only 57 SKUs.”
Selleck says the Defender meets the demands of customers who are looking for safe, fuel-effi cient tires with long tread life and good value for the money. It has earned the Michelin Green X designation and has 17% less rolling resistance than the previous generation Michelin product.
Th e Defender also incorporates Michelin’s IntelliSipe tech-nology that combines 3D active sipes and variable thickness sipes to provide additional grip for braking. Further adding to its safety features, the Defender maintains the same wet handling as the previous generation Michelin HydroEdge tire while achieving 15% increased snow traction.
Th e Defender is backed by the Michelin Promise Plan, a comprehensive tire service package, and a 90,000-mile warranty.
MTD helps sponsor TIA ATS trainingTh e Tire Industry Association (TIA) has announced sponsors for the upcoming 2012 Certifi ed Automotive Tire Service (ATS) Instructor Training Tour.
Th e Certifi ed ATS Program is designed to create a network of certifi ed instructors who can then train and certify technicians in the fi eld. By holding 28 classes in 28 diff erent cities around the country, the association says this valuable program will be more accessible for retailers of any size.
Th e sponsors for the 2012 ATS Instructor Tour are: 1800Ev-eryRim, AME International, American Tire Distributors, ATEQ Inc., BADA Hennessy Industries, Bartec USA LLC, Continental Automotive Systems US Inc., Dill Air Controls, Group 31, Ingersoll-Rand, Mighty Auto Parts, Modern Tire Dealer, Mohawk Rubber Sales, Myers Tire Supply, NAPA Tire Hardware, Patch Rubber, Plombco Inc., REMA Tip Top, Tech International, Tiremetrix and Tuff y Manufacturing.
“Th e response from the supplier community for the upcoming ATS Instructor Tour has been incredible,” says Kevin Rohlwing, TIA senior vice president of training.
For more information on TIA’s 2012 Certifi ed ATS Instruc-tor Tour, visit www.tireindustry.org or contact TIA Director of Training Chris Marnett at (800) 876-8372, ext. 106, or cmarnett @tireindustry.org.
Michelin is backing its Defender all-season passenger tire with a 90,000-mile warranty.
Quik-Link: 800-687-1557 ext. 1110510
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MTD January 2012
News/views
ATD awards Harley motorcycle Jimmy Hosay of McKay’s Service Center in Pulaski, Tenn., was the grand prize winner in the American Tire Distributors Inc. (ATD) 2011 “Harley Davidson Giveaway” promotion. Hosay, the dealership’s owner, won a new Harley Davidson motorcycle valued at $16,000. ATD dealers earned entries based on purchases of Bada wheel weights.
Dempster Tire earns awardContinental Tire the Americas LLC recently presented Dempster Tire, Middletown, Ohio, with an award for 70 years of commitment to the General brand. Dempster Tire, a family-owned company, has been serving its community since 1941 when Russell Dempster started the business. In 1972 Russel’s son Dick purchased the business. In early 2009, Richie Dempster took over for his father Dick and now runs the company.
Johnson’s Tire: 5 stores in 2012 By the end of 2012, the owners of Johnson’s Tire Service expect to have five outlets in Alaska. The Anchorage-based dealership will break ground on a new store in South Anchorage in the spring of 2012. Then it will relocate operations at its Anchorage store. Johnson’s also has stores in Eagle River, Wasilla and Soldotna. The new South Anchorage store is scheduled to open in August 2012.
Hogan Tire opens new store Hogan Tire Co. recently opened its seventh store in Massachusetts. The new 5,500-square-foot Hogan Tire & Auto Service Centers outlet is located in Hudson, Mass. The dealership features six full-service repair bays. Woburn-based Hogan Tire operates stores throughout central and eastern Massachusetts. It also is a Tire Pros dealer.
Used truck volumes slide Reported volumes of used Classes 3-8 truck sales continued their slide into negative territory in November 2011, according to ACT Research. Volumes were mixed on a channel-by-channel basis, with auction dealers able to obtain and sell more equipment. This offset some of the softness in the retail and wholesale markets.
bites Cooper honors late colleague Winkle receives award for ‘making a difference’
Cooper Tire & Rubber Co.’s Rodney Winkle, 54, of Findlay, Ohio, died Sept. 17, 2011, from injuries sustained in a motorcycle accident.
To honor his memory and his many ac-complishments, the company recently chose him as its latest “Cooper Iron Man,” a pres-tigious award for employees who far exceed expectations in all levels of performance. It is among the highest forms of recognition that any Cooper employee can achieve.
To qualify for this award, the high level of performance is not based on one year but represents sustained years of excellence and extraordinary impact to Cooper’s busi-ness, customers and community.
“Rod Winkle’s impact to our organization has left an indelible mark on everybody who had the pleasure to work with him,” says Phil Caris, Cooper’s vice president of sales. “He represented all of the best qualities that we, as Cooper people, hope to achieve. Rod was the epitome of the ‘Iron Man,’ and we will always remember him for his passion for making a difference in each of our lives.”
Winkle was a 1979 graduate of Bowling Green State University (BGSU) with a Bachelor of Science in Education degree. He also received his Masters of Educa-tion in 1984 and a Masters of Organization Development in 1991 from BGSU. He was employed at Cooper 25 years; most recently, he was the director of organizational develop-ment and training.
“Rod had an amazing way of connecting with everyone in the room, not just business own-ers,” says Bob Murphy, business development manager for Cooper’s western division, who Winkle hired in 1993. “Rod treated everyone with respect, which fostered a training envi-ronment that allowed for an open environment to exchange ideas.”
Winkle was deeply involved in his community and was active with the Blanchard Valley Regional Health Center Board, board of directors of Virtual Technologies Group, University of Findlay-College of Business Advisory Board, United Way, Fraternal Order of the Eagles, Moose Lodge, Hancock Leadership, Habitat for Humanity, Liberty Benton School and Noon Rotary. He was also a Red Cross blood donor.
He is survived by his mother Joann (Zeisloft) Winkle; his wife of 29 years, Joan; and daughters, Melissa (Chad) Moore and Angela Winkle. “He was a true-blue Cooper Tire employee,” Joan says. “He loved his job, loved what he did. He (also) had a great desire for community service.”
Cooper Tire’s Phil Caris (center) honored the late Rod Winkle on Dec. 8, 2011, at the Cooper National Sales Meeting. Pictured left to right are Chad Moore, Missy Winkle Moore, Joann Winkle, Caris, Joan Winkle, Angie Winkle and Joel Waldman.
Winkle received the Cooper Iron Man Award posthumously.
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MTD January 2012
News/views
Bridgestone develops airless tireBridgestone Corp. unveiled a non-pneumatic (airless) con-cept tire at the Tokyo Motor Show held late last year. Th e company says the tire could prove to be a viable and more environmentally friendly alternative to conventional tires in the future.
It outlines the company’s goal to help contribute to a more sustainable society, with particular emphasis on three areas — ecological conservation, resource conservation and reduction of carbon emissions.
Bridgestone says non-pneumatic tires have a lesser impact on the environment than today’s conventional tires, but previously such concept tires have been impractical to produce for the mass market.
A unique structure of spokes stretching along the inner sides of the puncture-proof tire supports vehicle weight. Th e spoke structure is made from reusable thermoplastic resin.
Bjorklund named Car Care Council’s Aftermarket Woman of the YearTh e Car Care Council Women’s Board (WB) has named Deborah Bjorklund as its Aft ermarket Woman of the Year. Th e eighth annual award, which recognizes exceptional women in the aft ermarket with an emphasis on dedicated service, was presented at the WB award reception during the 2011 Automotive Aft ermarket Products Expo.
Bjorklund is president of Th e Main Resource (TMR), a manufacturer and distributor of aft ermarket parts to repair shops. Since she purchased the company in 2005, it has doubled in size.
Winterton, Kane receive major promotions at GoodyearGoodyear Tire & Rubber Co. has announced several key leadership succession moves in the company’s North American Tire business, eff ective immediately.
John “Jack” Winterton has been appointed president of the company’s North American Tire consumer business unit. He succeeds Steve McClellan, who was promoted to president of Goodyear North American Tire in August 2011.
Phillip Kane has been appointed vice president of Good-year’s North American Tire commercial tire business. Kane succeeds Joe Copeland, who has left the company.
“As one of the architects of our North American consumer business strategy, (Winterton) will drive execution within our brand-focused, market-back approach and map our plan for the future,” says McClellan.
Since 2002, Winterton has helped develop and execute the strategic direction for Goodyear’s North American Tire consumer business. For the last year, Kane has been president of Wingfoot Commercial Tire Systems.
Paul Wanstreet has been named to replace Kane as president of Wingfoot. Wanstreet was vice president of operations for Goodyear’s consumer retail business, a position that remains open at this time.
Copeland had held his position as vice president of Goodyear’s Commercial Tire Systems since 2008. He joined the company in 2000.
McClellan expressed thanks to Copeland for his leadership during his tenure in North American Tire. “Joe made important contributions to several businesses at Goodyear, providing leadership in the face of some signifi cant challenges. We thank him for his contributions and wish him success in the future.” ■
Hankook Hungary: 25 million! Hankook Tire Europe announced that the 25 millionth tire rolled off the production line in November 2011 at its plant in Hungary. Hankook Tire invested 550 million euros to build the Hungary facility. The company says it recently reached full capacity at the plant, and now it produces up to 12 million tires per year and employs 2,000 workers.
SAG orients dealersAt Strategic Alliance Group Inc.’s (SAG) orientation meeting Dec. 5-6, 2011, prospective and signed members learned all about the SAG concept. The first meeting of the newly formed Commercial Tire Dealer Twenty (20) Group has been scheduled for March 19-21, 2012, in Tulare, Calif. To attend, visit www.sagtwentygroup.com and fill out an application on the “Membership” tab.
Bridgestone: 2,200 stores Bridgestone Retail Operations LLC opened its 49th Firestone Complete Auto Care store in Riverview, Fla., on Dec. 16, 2011, giving the company nearly 2,200 company-owned retail stores across the country. More openings are planned for 2012, says Bridgestone. At the store’s grand opening, racing legend Mario Andretti was on hand to sign autographs.
Nitto has a million fans According to Nitto Tire U.S.A. Inc., the company has reached a social media milestone, becoming the first tire company to reach one million fans on its Facebook fan page. The achievement comes on the heels of Nitto being named one of the top 10 fastest growing Facebook pages in the month of November by InsideFacebook.com.
Titan promotes twoTitan International Inc. has promoted William Campbell to chairman of Titan Tire Corp. and executive vice president of the parent company. Campbell has been Titan Tire’s president for the last 12 years. He will work with Maurice Taylor, chairman and CEO of Titan International, on acquisitions. Steve Briggs, who has been executive vice president of Titan Tire, will take over as president.
bites
In support of Bridge-stone’s Environmental Mission Statement, the company has de-veloped a non-pneu-matic (airless) tire.
Deborah Bjorklund was named Car Care Council Women’s Board Aftermarket Woman of the Year.
John “Jack” Winterton
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MTD January 2012
By Bob Ulrich
Saul Ludwig has a sixth sense of sorts, which comes in handy when you are the pre-eminent analyst in the tire
industry. He can see not only what is hap-pening inside and outside the marketplace, but also how that aff ects the future.
In essence, he combines an acute att en-tion to detail with the ability to see the “big picture.”
He knows, for example, that because raw material prices rose dramatically this year, Cooper Tire & Rubber Co.’s profi ts were negatively aff ected because it follows the LIFO (last in, fi rst out) accounting method. Goodyear Tire & Rubber Co., however, reaped benefi ts from managing its inventory using the FIFO (fi rst in, fi rst out) method.
Th at doesn’t mean he is always right. As he likes to say, an analyst “is oft en wrong, but never in doubt!”
Ludwig focuses on the tire and chemical industries as a managing director at Northcoast Research Holdings LLC. Th is is the 40th consecutive Facts Issue that has featured Ludwig’s in-depth analysis of the tire industry.
MTD: How do you explain the roller coaster — some might say schizophrenic — year we’ve had with consumer tire shipments quarter to quarter?
Ludwig: Th e year began with dealer consumer tire inventories very low, so they bought heavily in the fi rst quarter of 2011.
And because fi ll rates were a problem, they double-ordered tires. So shipments increased by 9% in the quarter compared to the fi rst quarter of 2010.
In April, however, gasoline jumped to over $4 a gallon, and purchases fell. Dealers purchased 7% fewer tires in the second quarter than they did the previous year.
Shipments were fl at at best during the summer through September, when publicity about a weakening economy and an increasing unemployment rate did nothing to jump-start tire sales. By the fourth quarter, as raw material costs began to subside, dealers pulled in purchases believing that tire prices would go down. Th ey didn’t want inventory that was potentially devalued. Th at added to extreme volatility in the consumer tire business throughout the year. As a result, consumer tire shipments were down a couple of percentage points in the last
Ludwig interview
Extra sensory perceptionAnalyst Saul Ludwig not only looks back at the roller coaster year that was 2011, but also looks ahead to a (seemingly)bright future
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17www.moderntiredealer.com
three months. In contrast, demand for truck tires remained fi rm most of the year, but tailed off a bit in the fourth quarter.
MTD: We are in the third year of the tariff s enacted on Sept. 26, 2009. How much of an eff ect do Chinese consumer tire imports to the U.S. have on the marketplace at this time?
Ludwig: I don’t think the tariff s had much eff ect on the market. Th rough September, Chinese passenger tire imports fell 14%, but imports from elsewhere rose 11%. Overall, total imports actually increased 3%. Because domestic tire shipments were fl at, imports gained a litt le market share.
As far as tire prices are concerned, the tariff alone possibly accounted for a small percentage of the increase, but the main infl uence on prices was the 26% increase in raw material costs. Th e tariff s had no eff ect on jobs, in my opinion, as other imports more than made up for a fall off in Chinese imports.
MTD: What do you think will happen on Sept. 26, 2012, when the 25% tariff is removed? Will the government try to keep some sort of tariff in place?
Ludwig: I do not expect the government to extend the tariff . It has bigger batt les to fi ght than this one. What will happen then? Chinese tire manufacturers will resume ship-ping to the U.S., and imports from other countries will likely decline. Prices might come down a bit — assuming no change in raw material costs — but it won’t be dramatic. Chinese labor costs continue to rise, as does shipping costs, and the Chinese government will stop giving Chinese tire manufactur-ers subsidies. Overall, imports will probably continue to gain share versus domestically produced tires. I think having free trade without the tariff is appropriate.
MTD: Will there be any more plant closings in North America in the next few years?
Ludwig: I do not expect any more plants to be closed in the U.S. in 2012. But longer term, there are still some older, less effi cient plants that may be closed. Multi-million dollar expansions in the U.S. by Continental, Bridgestone and Mitas, plus Titan’s purchase of a closed Goodyear plant, are a welcome reversal of what was a long-term decline in U.S. tire manufacturing. Th e Kumho plant is still on the back burner.
MTD: What were the defi ning moments in the industry in 2011?Ludwig: I can think of three.
1. Goodyear’s much improved profi tability. In 2010, Good-year’s segment operating income, that is, income from its day-to-day operations before subtracting interest, taxes, corporate items and special expenses, was $917 million. In 2011, it could be close to $1.5 billion — a rather dramatic improvement.
2. Surging raw material costs were met with multiple increases in tire selling prices.
3. Th e major capacity expansions in the U.S. noted above were unexpected when 2011 began.
MTD: What were the U.S. replacement shipment highlights in 2011 vs. 2010 for passenger, light truck and medium truck tires?
Ludwig: In 2011, passenger tire shipments were flat, while light truck tire shipments were up about 3%, to 29.6
4 on the fl oor in 2012Ludwig says pay attention to
these critical issuesWhen asked, “What are your top matters of concern or interest to watch out for in 2012?” tire industry analyst Saul Ludwig, a managing director at Northcoast Research Hold-ings LLC, answered as follows.
1. Price decreases. “With raw material costs having subsided, will there be much price give back by the tire manufacturers?”
2. Too much capacity? “There are currently 30 new con-sumer tire plants and 10 medium truck tire plants being constructed someplace in the world. About 45% of that new capacity will be in China, but expansions are actually underway in 15 countries, and this new capacity will come on stream beginning in 2012 and continue through 2017.
“Dealer inventories are close to normal right now. While I believe that new supply will closely match new demand, the possibility of having too much new capacity before it is needed is always a concern. I will be monitoring these developments very closely.”
3. Elimination of tariffs on Chinese imports. “Will my post tariff expectations play out as expected? Might the Chinese government give local manufacturers who export tires to the U.S. some early, but temporary, incentives so as to get the plants operating sooner than would otherwise be the case? And if so, might we see a surge of low priced tires enter our country soon?”
4. Campaign promises. “With the economy being the most important aspect of the coming election in 2012, comments and promises of the candidates could impact business decisions during the year. This is an uncertainty that could impact both business and consumer decisions on spending. I cannot predict how this will unfold, but it certainly bears close watching as we move through the year.”
Continental Tire the Americas LLC is investing $224 million to expand its Mount Vernon, Ill., facility by four million passenger and light truck tires per year. It also is building a new truck tire plant in Sumter, S.C.
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MTD January 2012
Ludwig interview
million units. Consumer shipments this year were less than I expected at the beginning of the year, although not by much, and that was because of high gasoline prices. I predict modest increases in 2012.
Medium truck tire shipments actually fi nished lower than I predicted, although at 16.5 million units, they were still more than 4% higher than in 2010. Truck tire ship-ments will be comparatively fl at in 2012.
MTD: In the original equipment tire segment, how did the consumer and commercial numbers shake out in 2011?
Ludwig: I would say my 2011 OE predictions made last year were prett y close. Passenger tire shipments came in at 35 million, just as I estimated. Light truck and medium truck tire shipments fi nished a litt le higher: 4.1 million and 3.9 million units, respectively. Vehicle manufacturing will continue to rebound from 2009 levels, and OE shipments in all three categories will follow suit.
MTD: How will political uncertainty in Washington, D.C.,
entering an election year aff ect our industry?Ludwig: One key will be whether or not the tariff s are al-
lowed to expire and as stated herein I expect that they will. I would view an extension of the tariff s detrimental to the U.S.
tire industry, and some of the capacity expansions recently announced could be at risk. Th e inability of Congress to work together and thus, leaving uncertainty about future taxes and legislation, is viewed negatively by most observers.
While it’s hard to make the connection defi nitively, manufac-
turers have been reluctant to recall previously laid-off workers, and the unemployment rate has remained high. Agencies who place temp workers have boomed as manufacturers have gone that direction versus rehiring permanent staff . On one hand, the auto industry has seen a surprising resurgence, yet consumer replacement tire sales have not recovered, even though as a general rule, if the OE segment is strong, that bodes positively for replacement shipments. Despite historically low interest rates, housing is still limping along. Certainly a more cooperative political climate would be a big plus.
MTD: How did raw material costs in 2011 compare to
‘I think the tariff s had zero eff ect on jobs because
imports actually rose.’
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MTD January 2012
Ludwig interview
2010? How will raw material costs in 2012 compare to 2011?Ludwig: Tire raw material costs increased an average of
26.6% in 2011 compared to 2010. Th at’s on top of an average 25% increase in 2010 vs. 2009. In particular, butadiene and natural rubber pricing skyrocketed. However, we’re ending the
year with prices lower than the average for the year — 12% lower. Will they remain at the year-end level? I don’t know.
MTD: Tire wholesalers seem to be jockeying for position. In addition to American Tire Distributors (ATD), Terry’s Tire
Town has made major moves. And Michelin’s TCi wholesale division is adding distribution centers. How has this aff ected our industry? Do you think this regional/national trend will continue?
Ludwig: Yes, there was a major consolidation and expansion of wholesalers in 2011. ATD is the most aggressive in opening several new distribution centers, but Carroll Tire (owned by TBC Corp.), TCi (owned by Michelin North America Inc.), and TDW (owned by Hercules Tire & Rubber Co.) also have grown. Terry’s Tire Town acquired two competitors. Regional wholesalers such a Capital Tire in Toledo, Ohio, Sullivan Tire in Boston, Albert Tire in New Jersey and Kauff man Tire in Atlanta, just to name a few, also have expanded.
Th e proliferation of tire brands, names and sizes has made it impossible for the average retail dealer to carry every tire a customer might need. Many years ago when retailers were consolidating at a rapid pace, some wholesalers sold their businesses fearing that tire dealers
“It was inevitable that Conti would enter truck retreading in a serious way,” says Saul Ludwig (left, pictured with MTD Editor Bob Ulrich).
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would buy more of their tires directly from the manufacturer.
But the opposite has occurred and even the largest tire retailers in the country have to buy some tires from wholesalers because of the variety of products that have been introduced by the OE auto companies.
Wholesalers had to grow. Th e trend toward wholesalers’ gaining share of tire distribution is likely to continue, so manufacturers must be diligent with whom they align as this trend proliferates.
MTD: What are your thoughts on Pep Boys – Manny, Moe & Jack and its movement in the aft ermarket?
Ludwig: Under the leadership of CEO Mike Odell, Pep Boys has made very good progress reshaping a company that was under-managed for several years. He inherited a mess. Turning around a large organization like Pep Boys takes time; it had some stores where they had no competitive advantage and other stores
that were too large relative to the business being done.
Th ey have made good progress turn-ing the company around, yet more work remains to be done. Management and its board feels now is the time to leverage its business base. Pep Boys acquired about 100 stores in 2011 to augment its Dec. 2010 store count of 700, and opened about 20 new stores on its own. And more acquisitions are being aggressively pursued — Mike Odell told me that he is in negotiations with 10 retailers. All acquired stores will be renamed Pep Boys to leverage advertising and the broad con-sumer awareness of its name. Pep Boys also introduced major brand tires in addition to its historical private brand off erings of Futura, Cornell and Defi nity tires that are produced by Cooper and Hankook. It is too soon to claim victory, but it does appear that progress is being made.
MTD: As always, thanks for the insight, Saul! ■
Raw material cost changes, year-to-year(in U.S. dollars per pound)
Raw material 2010 avg. 2011 avg. % change Dec. 2011Natural rubber 1.62 2.20 35.8% 1.50Styrene 0.55 0.65 18.2% 0.60Butadiene 0.85 1.35 58.8% 1.15Carbon black 0.40 0.46 15.0% 0.52Zinc oxide 1.00 0.90 -10.0% 0.75Steel belt 1.25 1.25 0.0% 1.25Source: Northcoast Research Holdings LLC
Domestic tire shipments, 2010-2012(in millions of units)
Replacement 2010 2011 % change 2012 (est.)Passenger 200.6 200.0 -0.3% 202.0Light truck 28.7 29.6 3.1% 30.0Truck 15.8 16.5 4.4% 16.5Total 245.1 246.1 0.4% 248.5
Original equipmentPassenger 33.1 35.0 5.7% 37.0Light truck 3.6 4.1 13.9% 4.3Truck 3.2 3.9 21.9% 4.3Total 39.9 43.0 7.8% 45.6Source: Northcoast Research Holdings LLC
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MTD January 2012
For sure, the retail consumer tire business was rather lack-luster in 2011 as the combina-
tion of high gasoline prices (that led to a decline in miles driven), high unemployment and low consumer confi dence led to tire buying defer-ral. But quite surprisingly, why didn’t those same pressures thwart sales of new cars which increased about 10% even as the earthquake and tsunami in Japan limited availability of cars and supplies? Th e U.S. auto industry made great strides in exciting consumers with innovative products and low cost fi nancing and most forecasters expect new car sales to increase again in 2012 — possibly by 6% or more. Contrary to one’s intuition, replacement tire sales are usually stronger in years when new car sales are strong (and conversely, are weaker when new car sales are down). For 2012, I am projecting that replacement consumer tire sales may increase 1% to 2%, but if the projection for new car sales turns out to be correct, I could be too conservative in my thinking.
Monthly surveyA number of independent tire dealers were
surveyed concerning current business trends. Except for tire prices and costs, the results of the November 2011 survey are compared with those of November 2010.
Dealer outlooks remained optimistic, but less so Roughly 33% of passenger tire dealers believe business will
improve over the next six months while 53% believe it will stay about the same. Fourteen percent believe it will worsen. As for truck tire dealers surveyed, 67% see business staying level while 25% see business improving. Eight percent see business gett ing worse. Manufacturer raw material costs will begin to come down in the not too distant future. However, for now, volumes and margins are being pressured. Passenger volumes were positive , truck volumes fl at
According to dealer reports, on average, retail sales of new replacement passenger tires were up 1% when compared with November 2010. Although this seems positive, most dealers indicated that volumes were weak with a few outlets growing unit sales by over 20% and bumping up the overall average. Truck tire sales continued to show signs of slowing as volumes were fl at, but maybe more important is that 67% of truck tire dealers surveyed had negative year-over-year growth. Retreaded tire sales were strong, growing 5%.
Th e gap widens between major and private brand prices In comparing the month of November 2011 with October
2011, average costs for size 215/60R16 major brand tires were up 1% while selling prices were up 2%. Th e average cost for a 215/60R16 private brand tire was up less than 1% while selling prices were down roughly 2%. Th e gap continues to widen between major and private brand tire prices.
Truck pricing again seen as very fi rmIn November 2011, 40% of passenger tire dealers saw pric-
ing as normal while 40% saw it as aggressive. Th e remaining dealers (20%) saw pricing as normal. On the other hand, 58% of truck tire dealers saw pricing as very fi rm as dealer inventories of truck tires remain fairly low and manufacturers are able to pass along higher prices. Twenty-fi ve percent of the surveyed truck tire dealers saw pricing as aggressive while the remaining 17% saw pricing as normal.
Inventories levels were just about right Th e survey indicated that 60% of passenger tire dealers believed
inventories were in line with current business levels, with the remaining dealers equally split between viewing inventories as too high and too low for current demand. Roughly 50% of truck tire dealers we surveyed indicated inventories were in line with current business levels, while 42% felt inventories were too low. Th e remaining dealers (8%) felt inventories were too high. Dealers continue to manage inventories well.
Service business stayed strong in otherwise slow market Dealers who provide automotive service reported that 38%
of revenues, on average, were generated by service during November. Dealers indicated that service business grew by 7% in November 2011 vs. November 2010. Th e diversity of service revenue is aiding dealers in an otherwise slow growth market. ■
Analyst Saul Ludwig is a managing director with Northcoast Research Holdings LLC based in Cleveland, Ohio. He concentrates on the tire and chemical industries. He has been writing for Modern Tire Dealer since April 1975.
Ludwig Report
Economic signs are pointing to better sales for retail tire dealers
By Saul Ludwig
How dealers view their near-term businessDealers JUL AUG SEP OCT(R) NOV(P) NOV(10)
Passenger tireWill improve 23% 36% 50% 43% 33% 17%Will worsen 54% 18% 8% 0% 14% 50%Will stay level 23% 46% 42% 57% 53% 33%
Truck tireWill improve 50% 36% 45% 38% 25% 0%Will worsen 10% 9% 9% 0% 8% 33%Will stay level 40% 55% 46% 62% 67% 67%R-Revised P-Preliminary
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MTD January 2012
By Bob Ulrich
Tire shipments were up. Tire shipments were down. Tire shipments leveled off. Dealer
inventories — full of winter tires at year’s end — followed the same patt ern.
Th ere was an earthquake, then a tsu-nami in Japan that not only slowed tire production but also led to a vehicle parts shortage. Massive fl ooding in Th ailand in October also limited imports, although the country still increased its consumer tire exports to the U.S. by more than 23% (see Chart 5 on page 26).
Say “goodbye” to 2011, a year when the fl ickering economy combined with Mother Nature to give retailers one heck of a roller coaster ride. Still, many of the 30,000 independent tire dealers adapted and fared well where it counted: their bott om lines.
Modern Tire Dealer’s exclusive “State-of-the-Industry Survey” is conducted on a quarterly basis. Aft er the fi rst quarter, 45% of the independent tire retailers and 61.2% of the independent tire wholesalers said unit sales were up.
After the first half, those numbers dropped to 40.2% and 52%, respectively, as demand plummeted. However, thanks to price hikes, many more dealers were up in dollar sales year over year. And with drivers holding on to their vehicles longer, necessary automotive service work helped the bott om line profi tability of many retail dealers.
Nine months into the year, inventories were full, demand had leveled off and wholesaler distributors in particular were suff ering. Dealers seemed split between optimism and pessimism.
When asked, “How do you project your full-year tire sales in units to be?”
only 48.1% of the wholesalers believed their sales would be up. Th e percentage among retail respondents was slightly less.
When the 2011 ride was over, replace-ment consumer tire shipments were fl at. However, they totaled a record $30.1 billion in sales, up more than 15% from the previous year (see Chart 1).
A 2.1% increase in light truck tire shipments and a 13% increase in truck tire shipments helped increase sales (see Chart 2; for Canadian shipments, which trended similarly, see Chart 3 on page 26). But skyrocketing prices were the key.
Passenger tire prices were up an average of 15% last year, while light truck tire prices were up 16%. Medium truck tire pricing rose 24%.
According to tire and chemical indus-tries analyst Saul Ludwig, they had to go up because the estimated raw material cost per tire increased an average of 26.6%!
And the final total doesn’t include retreading; truck tire retreading alone accounted for $3.8 billion in 2011.
What about shipments in 2012?Ludwig, a managing director at North-
coast Research Holdings LLC, predicts growth in consumer tire shipments in 2012 (Ludwig’s shipment numbers for 2011 and estimates for 2012 appear on page 21). Th ere will be slight growth in replacement passenger and light truck tire shipments, 1% and 1.4%, respectively.
Growth in original equipment ship-ments will be more signifi cant. He projects OE passenger tire shipments will increase 5.7%, to 37 million units, while LT ship-ments will grow 4.9%, to 4.1 million units.
Aft er a 4.4% increase in 2011, according to Ludwig, medium truck tire shipments will remain at 16.5 million units this year. At OE, they will grow by 10.3%.
Facts section: Shipments
It was one heck of a roller coaster ride!In 2011, shipments ebbed and fl owed, while prices only went one way: up
Chart 12011 U.S. REPLACEMENT
TIRE SALES(a $38.4 billion industry)
Passenger tires: $ 25.0 billion
Light truck tires: $ 5.1 billion
Truck tires: $ 7.2 billionFarm tires: $593 millionOTR tires $553 million
In 2010, U.S. replacement tire sales totaled $32.1 billion.
Chart 2U.S. UNITS SHIPPED
2007-2011 (in millions)
PASSENGER TIRES
Year Replacement OE
2011 198.0 36.0
2010 198.7 34.6
2009 184.0 25.0
2008 195.0 39.0
2007 205.0 48.0
LIGHT TRUCK TIRES
2011 28.6 4.1
2010 28.0 3.5
2009 26.0 2.6
2008 30.0 3.0
2007 35.7 4.9
MEDIUM/HEAVY TRUCK TIRES
2011 17.3 4.7
2010 15.3 3.0
2009 12.7 2.1
2008 15.5 4.3
2007 16.7 5.0
All fi gures in the 13-page Facts Section are Modern Tire Dealer fi gures unless otherwise noted. For all market share charts: Because numbers are rounded to the nearest one-half percent, the total may not equal 100%.
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MTD January 2012
Facts section: Shipments
Th e Rubber Manufacturers Association (RMA) is guardedly optimistic about its predictions for 2012 because U.S. economic growth is anticipated to remain slow. Overall tire shipments are forecasted to increase by more than 2%, reaching a total of more than 290 million units.
“Persistently high fuel costs, a de-crease in miles driven by consumers plus moderating growth in the commercial replacement tire sector have led to a restrained outlook,” says the RMA’s Tire Market Analysis Committ ee.
Here are the RMA’s domestic tire shipment predictions, in millions of units, for 2012.
Replacement 2012 2011 % changePassenger 196.0 197.0 0.5% Light truck 28.1 28.1 0.0%Truck 17.7 16.9 4.7%
Th e RMA forecast for OE passenger tire shipments is nearly 40 million units, up approximately 13% from 2011.
In contrast, OE LT tire shipments are projected to decrease by 7%, from 4.2 million units to 3.9 million units. Th e drop “is a consequence of a trend towards light trucks built on car-based platforms instead of truck-based platforms, owing to increased vehicle fuel mileage standards and consumer demand.”
Original equipment truck tires are forecast to increase 10% in 2012 to nearly 5 million units.
Chinese imports and tariff sIn 2008, prior to the implementation
of a 35% tariff , 46.5 million consumer tires were exported from China to the U.S. Th e addition of the tariff , which increased duties on passenger and light truck tires from 4% to 39% in the fi rst year, has reduced imports from China by 41% (see Chart 4). On Sept. 26, 2011, the tariff fell to 29%, but shipments still reached their lowest total since 2006.
Overall consumer tire imports to the U.S., however, have increased by 3.5%
over the same period. The top 10 exporting countries, including China, accounted for more than 90% of the total consumer tire imports.
Seven of the top 10 countries were up in
consumer tire exports to the U.S. last year (see Chart 5).
Truck tire imports from China increased from 4.2 million to 5.5 million units (see Chart 6). ■
Chart 4 U.S. CONSUMER TIRE IMPORTS FROM CHINA
(in millions)
Year Units Yr./yr. change
2011 27.3 -11.9%
2010 31.0 -27.9%
2009 43.0 -7.5%
2008 46.5 +14.8%
2007 40.5 +50.0%
Sources: U.S. government, MTD fi gures
Chart 5U.S. CONSUMER TIRE IMPORTS BY COUNTRY
2011 Rank/country 2010 rank
% change vs. 2010
1. China 1 -11.9%
2. S. Korea 3 +4.6%
3. Canada 2 +1.5%
4. Japan 4 -9.2%
5. Indonesia 5 +15.1%
6. Mexico 7 +35.3%
7. Thailand 6 +23.3%
8. Taiwan 9 +8.7%
9. Brazil 8 -26.0%
10. Germany 10 +28.0%
The top 10 countries account for 90.6% of all consumer tire imports in the U.S.
Chart 6 2011 U.S. TRUCK TIRE IMPORTS FROM CHINA
Sources: U.S. government, MTD fi gures
Chart 3CANADIAN TIRE UNITS SHIPPED
2007-2011 (in millions)PASSENGER TIRE
Year Replacement OE2011 16.0 7.92010 16.5 8.02009 20.0 6.02008 19.0 8.12007 17.4 10.7
LIGHT TRUCK TIRE2011 3.0 .102010 2.7 .022009 2.8 .012008 2.6 .042007 2.7 .75
MEDIUM/HEAVY TRUCK TIRE2011 1.8 .192010 1.4 .152009 1.4 .132008 1.3 .302007 1.4 .38Sources: Rubber Association of
Canada; MTD estimates
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MTD January 2012
Facts section: Market share
Major brands gained consumer tire market share in the U.S. at the expense of both private and associate brands in 2011 vs.
2010. Major brands jumped from 78.2% to 79.4%, while private brands fell from 11.9% to 10.8%. As-sociate brands dropped one-tenth of a percentage point (see Chart 7).
A number of factors contributed to the increase, despite the loss of overall market share by the Big Th ree manufacturers (see Chart 8). Th ey included:
• the removal of low-cost tire production in the U.S. over the last 10 years. Labor costs made it hard for domestic tire makers to profi tably manufacture low-cost radials here. So they farmed that segment out to countries with less expensive labor costs, and emphasized their fl agship brands.
Chart 92011 U.S. REPLACEMENT CONSUMER TIRE
BRAND SHARES
PASSENGER TIRES(based on 198.0 million units)
LIGHT TRUCK TIRES(based on 28.6 million)
Brand % of total Brand % of total
Goodyear 14.0% Goodyear 11.5%
Michelin 8.5% BFGoodrich 9.0%
Bridgestone 8.0% Bridgestone 8.0%
Firestone 7.0% Michelin 7.0%
BFGoodrich 5.0% Firestone 6.5%
Cooper 5.0% Cooper 6.0%
Hankook 5.0% Multi-Mile 4.5%
General 3.5% General 4.0%
Yokohama 3.5% Yokohama 4.0%
Falken 3.0% Hankook 3.5%
Kumho 3.0% Toyo 3.5%
Pirelli 2.5% Falken 3.0%
Uniroyal 2.5% Kumho 2.5%
Continental 2.0% Uniroyal 2.5%
Dayton 2.0% Cordovan 2.0%
Dunlop 2.0% Kelly 2.0%
Hercules 2.0% Mastercraft 2.0%
Kelly 2.0% Nexen 2.0%
Multi-Mile 2.0% Pirelli 2.0%
Nexen 2.0% Continental 1.5%
Toyo 2.0% Dayton 1.5%
Cordovan 1.5% Dunlop 1.5%
Mastercraft 1.5% Hercules 1.5%
Sigma 1.5% Maxxis 1.5%
Big O 1.0% Big O 1.0%
Delta 1.0% Delta 1.0%
Fuzion 1.0% Eldorado 1.0%
Nitto 1.0% Pro Comp 1.0%
Sumitomo 1.0% Sigma 1.0%
Others 6.5% Others 4.5%
Major brands continue to gain market shareTh ey account for nearly 180 million in passenger and light truck tire shipments
Chart 82011 U.S. CONSUMER TIRE
MARKET SHARE(by company, three top brands; based on
226.6 million units)
Chart 72011 U.S. CONSUMER TIRE
BRAND SHARE(by type; based on 226.6 million units)
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MTD January 2012
Facts section: Market share
• rising raw material costs, which led to double-digit price increases and made all tires much more expensive. How many people simply said, “Well, as long as I’m spending this kind of money, I might as well spring for (fi ll in major brand here) tires”?
• tire tariff s, which signifi cantly reduced consumer tire imports from China. A 35% tariff on passenger and light truck tire prices was added to the existing 4% duty on Sept. 26, 2009. Th e additional tariff has since dropped to 25%, and is scheduled to disappear on Sept. 26, 2012.
Since the tariff was implemented, Chinese passenger and light truck tire shipments to the U.S. have dropped 36.5%. It took awhile for other countries to pick up the slack (not all the Chinese imports were low-cost radials), but consumer tire imports to the U.S. reached a record 144 million units last year, up 2% from the previous year.
China had the tariff s to blame for its decrease in imports. Japan had a natural disaster, the Great East Japan Earthquake, and a strong yen versus the U.S. dollar with which to deal. Th e result was a 9.2% decrease in consumer tire imports from the Land of the Rising Sun.
Yokohama Tire Corp. was able to in-crease market share anyway, thanks to added capacity at its Salem, Va., plant. Th e Bridgestone brand gained share as Bridgestone Americas Inc. grabbed from Peter (Firestone) to pay Paul (Bridges-tone). Toyo Tire U.S.A. Corp. struggled with supply (see Chart 9 on page 28 for U.S. market share by brand).
Survival of the fi tt estPrivate brands are defined as tires
marketed and owned by a company or organization other than the one that manufacturers them. (A gray area exists where a tire manufacturer and private brand marketer market the same generic tire. This is more prevalent with less popular sizes or smaller market seg-ments because it is cost-eff ective to the private brand company that wants to fi ll out its line.)
In 2011, they had a 10.8% replacement consumer tire market share in the U.S., broken out as follows: 10.5% passenger, 13% light truck.
In 1991, private brands accounted for 27.5% of the passenger tire market.
Th e largest private brand was Sears, with 5.5%, and that was down from 11% in 1978. Last year, Sears private brand tires held less than a 1% share of the market.
As major brands have increased in strength — 11% since 2007 — private brands has suff ered. Here is the combined passenger and light truck tire market share diff erential over the last four years.
Major vs. private: U.S. market shareBrands 2008 2009 2010 2011Major 72.6% 73.8% 78.2% 79.4%Private 14.4% 13.8% 11.9% 10.8%
Th e four largest domestic private brand marketers have increased their brand share since 1991. Th ey are TBC Corp. (Multi-Mile, Cordovan, Sigma, Big O), Treadways Corp. (Eldorado, Jetzon, Telstar), Hercules Tire & Rubber Co. (Hercules, Ironman) and Del-Nat Tire Corp. (Delta, National). TBC and Tread-ways, although run as separate units, are owned by Sumitomo Corp. of America, the largest wholly-owned subsidiary of Sumitomo Corp.
OE market shareJust to keep up with market share at the
original equipment level, an OE supplier had to increase its shipments in the U.S. and Canada by 4.3% last year. In the U.S. alone, it was 5.2%.
Th e major OE brand share gainers in 2011 were Michelin, Bridgestone, Continental, Firestone, Hankook and Kumho (see Chart 10).
As part of its Industrial Plan and Vision to 2015, Pirelli & Cie SpA has changed its approach to supplying OEMs in North America. Th e new strategy is to slightly increase brand share by taking a selective approach to European OEM transplants while reducing sales to mass market vehicles.
Our “2011 Retail Tire Customer Sur-vey” addressed the original equipment loyalty issue brand by brand for both the fi rst and second replacement sets.
Michelin is number one in customer loyalty. Vehicle owners replace Michelin OE tires with the same brand 32.3% of the time for the fi rst replacement. No other OE brand in our study received loyalty ratings close to that percentage.
Goodyear is second at 24.3%, meaning nearly one-quarter of domestic vehicle owners replace their Goodyear OE tires with the same brand the fi rst time around.
Bridgestone is third at nearly 23%, fol-lowed by Firestone (19%), BFGoodrich (17.6%), Yokohama (13.2%), Continental (12.7%) and Toyo (11.8%).
Rounding out the OE brands are Han-kook (11.1%), Dunlop (11%), Pirelli (10.2%), Kumho (10.2%) and General (9.1%).
When customers replace their tires for the second time, all the OE brand loyalty percentages are lower — except for Hankook (11.7%) and General (9.3%).
Light vehicle salesLight vehicle sales in the U.S. totaled
close to 12.7 million units in 2011, up 10% from the year before. LMC Automotive, part of LMC International Ltd., projects sales to reach 13.8 million in 2012.
Tim Rogers, president of the Polk busi-ness unit of R.L. Polk & Co., told 2011 SEMA (Specialty Equipment Market Association) Show att endees that light vehicle sales will grow to nearly 16 million units by 2015.
“We believe the relatively new CUV segment — the crossover SUVs like
Chart 102011 U.S./CANADIAN OE CONSUMER TIRE
BRAND SHARE(excluding imported vehicles; based on 48.1 million units)
Brand 2011 2010
Goodyear 27.5% 28.8%
Michelin 22.9% 22.2%
Bridgestone 14.5% 14.3%
Continental 9.9% 9.8%
BFGoodrich 5.5% 5.8%
Firestone 5.0% 4.9%
Hankook 4.3% 3.9%
Pirelli 3.4% 3.4%
General 2.5% 3.0%
Kumho 2.0% 1.5%
Dunlop 1.2% 1.2%
Others* 1.3% 1.2%
* “Others” includes Yokohama (Chrysler, Mercedes-Benz),
Uniroyal (General Motors), Nexen (Kia) and Toyo (Toyota).
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Facts section: Market share
the Chevy Equinox or the Ford Edge, will be a main part of what drives new vehicle sales over the next several years. Not only do these vehicles meet the size requirements of the typical family, but technology changes in four-cylinder engines gives the owner the desired fuel effi ciency while not sacrifi cing much in the way of power.”
Despite the increase in new vehicle sales, Rogers said the aft ermarket stands to gain more than $3 billion in do-it-for-me business over the next three to four years, in part because vehicles are outlasting their warranties.
“Even as new vehicle sales come back, there are simply fewer cars and light trucks on the road likely to be repaired in the OEM channel.”
According to the Na-tional Automobile Deal-ers Association, General Motors Corp. was the sales leader with 19.7% of the market.
Ford Motor Co. was second at 15.9%, although the Ford F-Series pickup once again was the best-selling light truck with sales of nearly 585,000 vehicles. Toyota Motor North America Inc. was third, with the Camry the best-selling car in 2011.
Here are some other fast-facts from NADA:
• Th e CUV segment was the largest segment in the industry at 24.6% on sales of 3.1 million. Volume increased 10.3% for the year.
• Th e SUV segment ex-perienced the largest volume increase: 24.6% on sales of 998,000 units (led by the new Ford Explorer and the Jeep Grand Cherokee).
• BMW for the fi rst time claimed the title as the largest luxury brand with sales of 247,907, edging out Mercedes by just more than 2,000 units. Lexus had been the top-selling brand for the last 11 years.
Canadian shipments: down Aft er a 5.5% increase in 2009 com-
pared to 2008, Canadian replacement consumer tire shipments decreased 15.8% in 2010 and 1% in 2011. Passenger tire shipments fell 3% last year, with winter tires accounting for about 35% of the 16 million units shipped. Light truck tire shipments rose 11.1%
Motomaster, a private brand produced for Canadian Tire Corp., is the most popu-lar replacement brand in Canada (see Chart 11). It owns 13% of the passenger and 10% of the light truck tire market share.
Canadian Tire is one of two mass
merchandisers in Canada that sell tires. Each of its 485 stores is operated by an independent business owner. In addition to Motomaster, Canadian Tire off ers 10 brands: Goodyear, Michelin, Continental, Pirelli, BFGoodrich, Dunlop, General, Uniroyal, Hankook and Fierce.
Walmart Canada Corp. has approxi-mately 300 outlets that sell tires, including 156 Super Centres with Tire & Lube Express Auto Centres. Walmart Canada promotes six brands: Nexen, Firestone, Goodyear, Dunlop, Bridgestone and Rovelo, a winter tire from Dynamic Tire Corp.
Costco Wholesale Canada Ltd. has 82 outlets in Canada. It became the only warehouse membership club in the country when Walmart closed its six Sam’s Club warehouses in 2009. Costco off ers three brands: Michelin, BFGoodrich and Bridgestone.
Th e largest indepen-dent dealer in Canada is Kal Tire Inc., with more than 230 locations. Kal Tire offers 13 passen-ger and light truck tire brands: BFGoodrich, Bridgestone, Falken, Firestone, Goodride, Mi-chelin, Multi-Mile, Nitt o, Nokian, Pirelli, Sonny, Uniroyal and Yokohama. It also sells Bridgestone, Continental, Double Coin, Firestone, Kumho, Michelin and Yokohama truck tires.
Th e largest indepen-dent tire dealer group in Canada is OK Tire Stores Inc., with more than 270 outlets. Each store is in-dividually owned and operated. OK Tire sells 13 brands: Bridgestone, Continental, Dayton, D u r u n , Fi re s to n e, Fuzion, General, Han-kook, Kumho, Pirelli, Primewell, Winterquest (TBC) and Toyo.
The next largest in-dependent tire dealer groups are Alliance Tire Professionals, a Canadian network of certifi ed Michelin locally
owned independent dealers (more than 160 stores; Michelin, BFGoodrich and Uniroyal brands) and Fountain Tire Ltd. (148 stores, including three in Ontario; Goodyear, Dunlop and Kelly brands). Goodyear Canada Inc. has a minority interest in Fountain Tire. ■
Chart 112011 CANADIAN REPLACEMENT
CONSUMER TIRE BRAND SHARESPASSENGER TIRE
(based on 16.0 million units)LIGHT TRUCK TIRE
(based on 3.0 million units)Brand % of total Brand % of total Motomaster 13.0% Goodyear 16.0%Michelin 12.0% Michelin 12.0%Goodyear 10.0% Motomaster 10.0%Bridgestone 8.0% BFGoodrich 9.0%BFGoodrich 6.0% Bridgestone 8.5%Hankook 6.0% Firestone 5.5%General 4.0% Yokohama 5.5%Firestone 3.5% Hankook 5.0%Nexen 3.5% General 4.5%Toyo 3.5% Toyo 4.0%Yokohama 3.5% Kumho 3.0%Cooper 3.0% Uniroyal 3.0%Kumho 3.0% Dayton 2.0%Uniroyal 3.0% Hercules 2.0%Continental 2.5% Kelly 2.0%Dayton 2.0% Pirelli 2.0%Dunlop 2.0% Dunlop 1.5%Falken 2.0% Continental 1.0%Hercules 2.0% Multi-Mile 1.0%Kelly 1.5% Others 4.0%Nokian 1.5% Motomaster is the largest pri-
vate brand tire in Canada, with 13.4% of the replacement con-sumer tire market. It is sold by
Canadian Tire Corp.
Delta 1.0%Pirelli 1.0%Others 4.0%
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Facts section: Sales and pricing
There are more than 150 consumer tire brands sold in the U.S. aft ermarket. Th at
number increases when adding in dedicated truck tire brands.
But when ranking the tire compa-nies that manufacture those brands, three stand out because of their size. Th at is why Bridgestone Corp., Groupe Michelin and Goodyear Tire & Rubber Co. are oft en referred to as the Big Th ree.
Together, they account for nearly $82 billion tires sold, more than the next nine manufacturers, at $53 billion, combined (see Chart 12). Th ey also are the Big Th ree in North America, especially in the U.S. and Canada.
Perhaps notably missing from the list of top 12 manufacturers is Hangzhou Zhongce Rubber Co. Ltd. Based in Hangzhou, China, the company produces the Goodride
and Westlake brands. MTD was unable to verify the company’s global tire sales for 2011 at presstime.
On its website, the company forecast it would have total sales revenue of $4 billion in 2011. If so, Hangzhou Zhongce Rubber may have reached number 11 on the list.
Tire pricing: no more ‘4 for $99’
Skyrocketing tire prices were a big reason all the global players’ signifcantly increased sales in 2011. Here were the average tire prices (see sidebar) in 2011:
Passenger: $126.16.Light truck: $179.15.Truck: $416.18.
Th e good, bett er, best advertised tire prices for size P225/60R16 in 2010 were $65.99, $94.65 and $136.36, respectively. ■
$82 billionin tires!Th at’s just thetop 3 tire makers
Chart 12WORLD LEADERS IN NEW TIRE SALES
(fi scal year 2011; in billions of U.S. dollars)
Company 2011 20101. Bridgestone Corp.
$31.2 $27.0
2. Groupe Michelin
$28.3 $22.2
3. Goodyear Tire & Rubber Co.
$22.3 $18.4
4. Continental AG $11.9 $9.35. Pirelli & C. SpA $7.8 $6.36. Sumitomo Rub-ber Industries Ltd.
$7.3 $5.8
7. Hankook Tire Co. $5.9 $4.78. Yokohama Rubber Co.1
$5.7 $4.5
9. Cooper Tire & Rubber Co.
$4.0 $3.4
10. Cheng Shin Rubber Ind. Co. Ltd.2
$3.9 $3.1
11. Kumho Tire Co. Inc.
$3.4 $3.0
12. Toyo Tire & Rubber Co. Ltd.3
$3.0 $2.4
U.S./CANADIAN LEADERS IN NEW TIRE SALES
(fi scal year 2011; in billions of U.S. dollars)
Company 2011 20101. Bridgestone Firestone
$11.1 $9.6
2. Goodyear $9.3 $7.73. Michelin North America
$8.5 $6.7
4. Cooper Tire $2.7 $2.35. Continental Tire the Americas
$2.6 $2.0
6. Yokohama Tire Corp.1
$1.5 $1.1
7. Sumitomo Rubber Industries4
$1.3 $1.1
8. Hankook Tire America Corp.
$1.2 $1.0
9. Toyo Tire Holdings of Americas Inc.3
$1.0 $.84
10. Kumho Tire U.S.A. Inc.
$.81 $.73
11. Pirelli Tire North America
$.61 $.49
1Yokohama’s fi scal 2011 was nine months long so it could change to a January-December fi s-cal year in 2012. Totals include January-March
2011 sales.2Doing business as Maxxis International.
3Fiscal year ending March 31, 2011.4Sumitomo Corp. of America is run indepen-
dently of Sumitomo Rubber Industries.
‘$155 a tire? I wish!’Pricing hurts deep in the heart of Texas
Average tire prices in 2011 took into account both the amount of the increases and the time they became effective.
For example, Michelin implemented its fi rst consumer tire price increase of 2011 on Feb 1. It was up to 8%. A second increase up to 8.5% went into effect on May 1.
On October 3, a third increase raised prices up to 9%. At their most liberal, the price increases totaled 25.5%. So a Michelin passenger or light truck tire may have cost 25.5% more at the end of the year than it did at the beginning of the year.
The average pricing for the year, however, would have been much less, even if all the price increases stuck completely.
It’s also a nationwide average. When I wrote in an editorial last year that the average price of a replacement LT tire was $155 in 2010, a dealer from Texas was amused.
“Please tell me where light truck tires retail for an average of $155,” Todd Schindler, owner of Texas Tire & Accessory LLP in Hallettsville, Texas, wrote back. “I need to fi nd out who their distributors are. In Texas, that is our average cost!” Perhaps he’s happier this year. — Bob Ulrich
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Facts section: Tire dealer profi le
The replacement consumer tire market is worth $30.1 billion. A breakdown of the distribution
channels through which those tires were sold shows signfi cant movement in 2011 compared to 2010.
Independent tire dealers, tire company-owned stores and auto dealerships gained market share at the expense of mass mer-chandisers, warehouse clubs and service stations (see Chart 13). Tire dealers com-mand 61% of the passenger tire market, up from 54% 20 years ago. Th at’s more than $18.3 billion in replacement sales.
Single-store owners make up 68% of the 30,000 independent retail, wholesale and commercial tire dealer locations in the U.S. In 2011, more than ever, the mid-size dealers, both retail and wholesale, felt profi tability pressure brought on by the combination of a struggling economy and the aggression of the larger retailers targeting them.
Auto dealerships again gained market share last year, continuing a trend that began in 1999. Since then, their market share has more than quadrupled, despite a corresponding 21% drop in franchised dealerships, according to the National Au-tomobile Dealers Association (NADA). Ford Motor Co. has been particularly active courting the tire-buying public,
not only at its dealerships, but also at its more than 600 Quick Lane Tire & Auto Centers.
Th rough October, NADA data shows service and parts sales at the average car dealership are up 7.8%. Saul Ludwig, a managing director at Northcoast Research Holdings LLC, says car dealers have been particularly aggressive in selling tires.
“Because cars have improved and need less service work, auto dealers are trying to get more revenue from their service departments. Th ey have intensifi ed their efforts to sell tires and other related products and services.”
When you take wholesaling into ac-count, independent tire dealers have an even greater share: 77% (see Chart 14). Th at is because they are the main suppliers to car dealer franchisees (think Dealer Tire LLC), muffl er shops and service stations.
Wholesale distributors represent 13% of the 30,000 dealers.
Independent tire dealers help the tire-buying customer choose the brand 79% of the time, according to MTD’s most recent “Retail Tire Customer Survey.” As you might expect, the percentage of customers requesting and sticking with the original equipment brand is higher for the fi rst replacement set of tires than it is for subsequent sets.
Oil changes average $20.55According to DesRosiers Automotive
Consultants Inc., oil changes drive the aft ermarket, particularly tire sales.
“If the (car dealer) or independent does the oil change, they get the tire work, and it doesn’t matter what age of vehicle they service,” says President Dennis DesRosiers.
Some 80% of independent tire dealers off er oil and lube service. Th ey average 133 jobs a month.
Th e advertised cost of a standard oil (synthetic blend), lube and fi lter was $20.55, up 2% from last year ($20.16) and 21% from fi ve years ago.
Service 2011 2009 2007Oil change $20.55 $19.83 $16.98
Tire dealers in the U.S. perform more than $20 million a year in automotive services (mounting and balancing is the most popular service). Th ey employ almost 150,000 technicians, more than 50% of whom are ASE-certifi ed. Th ey also average six bays per store, which means they control 180,000 service bays.
Independent retailers average between $1.9 million and $2 million per outlet. Auto service accounts for 47% of their sales and 44% of their profi ts.
Chart 14CONSUMER TIRE DISTRIBUTION CHANNEL
MARKET SHARE
Initial channel 2011 2009 2007 2005
Independent tire dealers
77.0% 75.0% 74.0% 74.0%
Tire company stores
8.0% 8.5% 8.5% 8.0%
Miscellaneous* 15.0% 16.5% 17.5% 18.0%
* “Miscellaneous” includes mass merchandisers, warehouse clubs, car dealers, auto parts chains and oil
companies/service stations.
Chart 13U.S. CONSUMER TIRE RETAIL MARKET SHARE
(based on retail sales)
Distribution channel 2011 2010
Independent tire dealers 61.0% 60.0%
Mass merchandisers 14.0% 14.5%
Warehouse clubs 8.5% 9.5%
Tire company-owned stores
7.5% 7.0%
Auto dealerships 6.5% 6.0%
Miscellaneous outlets 2.5% 3.0%
Independent tire dealers dominate Th ey own 61% of the retail marketand even more when they wholesale
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Facts section: Tire dealer profi le
Tires and tire sizesA typical tire dealer handles 11.4 dif-
ferent brands, which is in line with what dealers on the Modern Tire Dealer 100 list off er (see Chart 15). He or she sells an average of 15 to 16 tires a day per outlet.
Successful retail tire dealers turn their tire inventories at least seven times a year, according to Norm Gaither, president of Dealer Strategic Planning Inc. Th e best way to determine tire inventory turns “is to take the annual cost of sales and divide them by the average inventory,” he says.
Average inventory is determined by adding the inventory at the beginning of the year to the inventory at the end of the year and dividing by two.
Probably the biggest single issue for dealers is SKU count. Although earch dealer purchases tires from an average of fi ve wholesale distributors, knowing the most popular sizes remains crucial.
Th e top 10 P-metric original equipment tire sizes in 2010 accounted for 36% of total sizes, according to the RMA. Th at is down from 41.2% in 2009. In contrast,
the top 10 OE LT sizes represented 86.8% of the total, down from 90.7% in 2009.
Th e most popular OE P-metric and LT sizes for 2010 and 2009 are listed in Chart 16 to give tire dealers a bett er idea of what to look for and stock in 2012. For example, dealers will continue to see vehicles with size P215/60R16 roll into their dealerships over the next few years.
Th at size has been the most popular P-metric OE size since 2004. It also nearly doubled its growth at the replace-ment level in 2011, and is the second most popular replacement size, next to P225/60R16 (see Chart 17).
“Th e 215/60R16 has been around awhile,” says Rick Brennan, vice president of marketing for Kumho Tire U.S.A. Inc. “In the early to late ’90’s, it was used on large American sedans like the Buick LeSabre and Park Avenue, Pontiac Bonn-eville, Grand Prix and Olds Ninety-Eight.
“In 2002 it began life on the Camry and still is the base (i.e., stripped down) Camry OE tire size. It is also used on the Nissan Altima base model and the Chevy Cruze in 2011.
“Expect this size to hang around for a while until the base model cars move to the 17-inch option size: 215/55R17!”
Th ere wasn’t much movement in the P-metric OE sizes in 2011 except for P225/50R17, which jumped from seventh to third. Also, P245/70R17 entered the top 10. In the replacement segment, P195/65R15, made a litt le noise, moving into the top fi ve.
Size LT245/75R16 was the top OE LT size for 18 consecutive years entering 2011. However, size LT245/75R17 had been trending upward for years, and was a close second in 2010. Now the 17-inch size is number one (see Chart 18).
The top t wo replacement LT sizes remained LT245/75R16 and LT265/75R16.
Th e top OE and replacement medium truck tire size was 295/75R22.5, followed by 11R22.5 and 11R24.5. ■
Chart 16MOST POPULAR DOMESTIC
OE PASSENGER AND LT TIRE SIZES
2010 OE P-Metric/metric
Size % of total
P215/60R16 7.0%
P265/70R17 5.8%
P215/55R17 4.1%
P235/70R16 3.5%
P275/55R20 3.1%
2009 OE P-Metric/metric
Size % of total
P215/60R16 9.0%
P265/70R17 5.5%
P235/70R16 4.5%
P215/55R17 4.2%
P225/50R17 3.4%
2010 OE Light truck (LT)
Size % of total
LT245/75R16 19.5%
LT245/75R17 18.4%
LT225/75R16 11.7%
LT275/65R18 8.2%
LT265/70R17 7.9%
2009 OE Light truck (LT)
Size % of total
LT245/75R16 23.4%
LT245/75R17 13.8%
LT225/75R16 11.6%
LT265/70R17 10.5%
LT275/70R18 9.2%
Source: Rubber Manufacturers Association
Chart 17TOP U.S. PASSENGER
TIRE SIZES, 2011
Replacement OE
1. P225/60R16 1. P215/60R16
2. P215/60R16 1. P265/70R17
3. P265/70R17 3. P225/50R17
4. P235/75R15 4. P215/55R17
5. P195/65R15 5. P235/70R16
Chart 18TOP U.S. LIGHT TRUCK TIRE
SIZES, 2011
Replacement OE
1. LT245/75R16 1. LT245/75R17
2. LT265/75R16 1. LT245/75R16
3. LT265/70R17 3. LT265/70R17
4. LT235/85R16 4. LT225/75R16
5. LT225/75R16 5. LT265/70R18
Chart 15BRANDS LISTED AS BEING
OFFERED BY MTD 100(Total outlets: 5,296)
Rank by number of dealers
# dealers2011 (2010)
1. Michelin 85 (83)
2. Goodyear 77 (71)
3. BFGoodrich 72 (70)
4. Bridgestone 66 (62)
5. Continental 56 (55)
6. Firestone 55 (44)
7. Dunlop 52 (52)
7. Uniroyal 52 (47)
7. Yokohama 52 (46)
10. General 46 (48)
11. Cooper 44 (40)
11. Kelly 44 (36)
13. Pirelli 40 (34)
14. Hankook 36 (32)
15. Toyo 34 (35)
16. Falken 29 (20)
16. Kumho 29 (18)
18. Fuzion 16 (13)
Source: Modern Tire Dealer 100, 2010-2011
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Facts section: Plant capacity
Capacity falls 3.2%But help is on
the way
Tire capacity, not produc-tion, in North America totaled 307.5 million
tires at 51 plants as of Jan. 1, 2012. That’s down 3.2% compared to 12 months ago. (Th e total does not include race or aviation tires.)
U.S. capacity is 246.7 million tires, a 4.5% decrease over last year and 80.2% of total North American capacity. Th e majority of the decrease can be att ributed to the closing of Goodyear’s Union City, Tenn., plant last July. (Titan International Inc. purchased the facility last November, and plans to utilize it as a mixing plant for farm and OTR tire production.)
Th ere are 36 tire manufacturing facilities in the U.S., down from 48 plants in 2001. Less than half of them are unionized (see Chart 19).
Canadian tire plant capacity is 27.7 million tires, a slight year-to-year decrease. In contrast, Mexican plant capacity entered 2012 at 33 million tires, 4.6% higher than it was a year ago. Th e opening of Pirelli Tire North America Inc.’s plant in Guanajuato, Mexico, added 4,000 tires a day to the country’s capacity.
Premium consumer, truck and OTR tire capacity in North America is expected to increase signifi cantly in the near future.
Chart 19NORTH AMERICAN TIRE PLANT CAPACITIESas of January 1, 2012 (in thousands of units)
Plant location/Year constructed
Non-union ISO1 QS2
Passen-ger
per day:
Light truck per day:
Truck per day:
Others per day: Total
Bridgestone Americas Inc.
La Vergne, Tenn., 1972 x x 7.1 2.3 6.2 0.0 15.6Warren County, Tenn., 1990 x x 0.0 0.0 8.0 0.0 8.0Bloomington, Ill., 1965 x x 0.0 0.0 0.0 0.26 0.26Des Moines, Iowa, 1945 x x 0.0 0.0 0.0 4.5 4.5Wilson City, N.C., 1974 x x x 33.1 0.0 0.0 0.0 33.1Aiken County, S.C., 1999 x x x 17.3 7.7 0.0 0.0 25.0Joliette, Quebec, 1966 x x 9.3 7.2 0.0 0.0 16.5Monterrey, Mexico, 2007 x 7.0 0.0 0.0 0.0 7.0Cuernavaca, Mexico, 1980 x x 11.0 4.4 0.0 0.0 15.4Total: 84.8 21.6 14.2 4.76 125.36
Carlisle Tire & Wheel Co.Jackson, Tenn., 2009 x 0.0 0.0 0.0 26.0 26.0Clinton, Tenn. (Dico), 1974 x x 0.0 0.0 0.0 15.0 15.0Total: 0.0 0.0 0.0 41.0 41.0
Continental Tire the Americas LLCMount Vernon, Ill., 1973 x x x 28.0 3.0 5.0 0.0 36.0Total: 28.0 3.0 5.0 0.0 36.0
Cooper Tire & Rubber Co.Findlay, Ohio, 1917 x 7.0 16.0 0.0 0.0 23.0Texarkana, Ark., 1964 x 24.0 8.0 0.0 0.0 32.0Tupelo, Miss., 1984/1960 x x 42.0 0.0 0.0 0.0 42.0Total: 73.0 24.0 0.0 0.0 97.0
Goodyear Tire & Rubber Co.Buffalo, N.Y., 1923 x 4.3 5.4 1.75 4.55 16.0Danville, Va., 1966 x x 0.0 0.0 10.0 0.0 10.0Fayetteville, N.C., 1969 x x 30.5 10.5 0.0 0.0 41.0Gadsden, Ala., 1928 x x 15.0 12.0 0.0 0.0 27.0Lawton, Okla., 1978 x x x 70.0 0.0 0.0 0.0 70.0Topeka, Kan., 1945 x x 0.0 1.0 5.5 1.6 8.1Medicine Hat, Alberta, 1960 x x 14.0 0.0 0.0 0.0 14.0Napanee, Ontario, 1990 x x x 19.0 0.0 0.0 0.0 19.0Total: 152.8 28.9 17.25 6.15 205.1
GTY (General/Yokohama)Mount Vernon, Ill., 1988 x x x 0.0 0.0 3.9 0.0 3.9Total: 0.0 0.0 3.9 0.0 3.9
Michelin North America Inc.Ardmore, Okla., 1969 x x x 40.5 3.5 0.0 0.0 44.0Dothan, Ala., 1979 x x 1.0 4.0 0.0 0.0 5.0Fort Wayne, Ind., 1961 21.0 9.5 0.0 0.0 30.5Greenville, S.C., 1975 x x 28.0 0.0 0.0 0.0 28.0Greenville, S.C. (C3M), 1997 x x x 7.0 0.0 0.0 0.0 7.0Lexington, S.C., 1981 x x 19.0 0.0 0.0 0.0 19.0Lexington, S.C., 1998 x x 0.0 0.0 0.0 0.09 0.09Spartanburg, S.C., 1978 x x 0.0 0.0 7.0 0.0 7.0Tuscaloosa, Ala., 1945 x 23.0 7.0 0.0 0.0 30.0
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41www.moderntiredealer.com
Bridgestone will invest $1.2 billion in U.S. tire production in South Carolina over the next four years. That includes a new OTR tire facility near its existing consumer tire plant in Aiken County, S.C.
Th e fi rst OTR tire will roll off the assembly line in the fi rst quarter of 2014. Th e plant tentatively will be completed by 2016.
Plant expansions at the Aiken County plant will increase capacity by more than 50%, from 25,000 passenger and light truck tires per day to 37,750 tires a day in 2015.
Bridgestone is investing an ad-ditional $36.6 million in its Warren County, Tenn., truck tire plant. Th e expansion will expand capacity by more than 11%, or 900 truck tires per day.
Mitas Tires North America Inc., a subsidiary of Mitas a.s., soon will begin producing radial agricultural tires at its new plant in Charles City, Iowa. When the facility reaches full capacity late in 2013, it will be able to produce close to 500 ag tires a day, according to MTD estimates. “Th e reason for building the new tire factory in Iowa is the proximity to original equipment manufacturers such as Case IH,” says Project Director Vladimir Dusanek.
Pirelli says its new consumer tire factory in Mexico will have a production capacity of fi ve million high and ultra-high performance tires a year for light vehicles by 2016.
Continental expects to begin construction of its $500 million consumer tire plant in Sumter, S.C., in mid-2012 and complete the facility in 2013. Continental also is investing $224 million to expand its Mount Vernon, Ill., facility by four million passenger and light truck tires per year in three years.
Michelin is investing $200 million in its Lexington, S.C., consumer tire plant. All the new equipment will be installed by the second half of 2013.
Construction of Kumho Tire U.S.A. Inc.’s plant in Macon, Ga., which began in 2008, remains on hold, says the company. ■
Plant location/Year constructed
Non-union ISO1 QS2
Passen-ger
per day:
Light truck per day:
Truck per day:
Others per day: Total
Bridgewater, Nova Scotia, Canada, 1973 x x 11.0 3.0 0.0 0.0 14.0New Glasgow, Nova Scotia, Canada, 1971 x x 7.0 1.0 0.0 0.0 8.0Waterville, Nova Scotia, Canada, 1982 x x 0.0 0.0 0.0 4.5 4.5Queretaro, Mexico x 6.0 0.0 0.0 0.0 6.0Total: 163.5 28.0 7.0 4.59 203.09
Pirelli Tire North America Inc.Rome, Ga., (MIRS), 2002 x x 1.2 0.5 0.0 0.0 1.7Guanajuato, Mexico, 2011 x 2.8 1.2 0.0 0.0 4.0Total: 4.0 1.7 0.0 0.0 5.7
Specialty Tires of America Inc.Indiana, Pa., 1915 x 0.0 0.4 0.0 4.6 5.0Unicoi, Tenn., 1997 x 0.0 0.0 0.0 1.6 1.6Total: 0.0 0.4 0.0 6.2 6.6
Titan Tire Corp.Bryan, Ohio, 1967 x x 0.0 0.0 0.0 0.33 0.33Des Moines, Iowa, 1943 x 0.0 0.0 0.0 11.25 11.25Freeport, Ill., 1964 x x 0.0 0.0 0.0 8.1 8.1Total: 0.0 0.0 0.0 19.68 19.68
Toyo Tire North America Manufacturing Inc.White, Ga., 2005 x x 12.2 2.0 0.0 0.0 14.2Total: 12.2 2.0 0.0 0.0 14.2
Yokohama Tire Corp.Salem, Va., 1968 25.7 1.1 0.0 0.0 26.8Total: 25.7 1.1 0.0 0.0 26.8
Grupo Carso/Euzkadi (Continental AG)San Luis Potosi, Mexico 15.0 5.0 0.0 0.0 20.0Total: 15.0 5.0 0.0 0.00 20.0
JK Tyre & Industries (formerly CIA Hulera Tornel)Mexico City, Mexico 0.5 1.0 1.5 0.64 3.64Tultitlan, Mexico 7.0 1.5 0.5 0.4 9.4Tacuba, Mexico 2.5 2.5 0.0 0.0 5.0Total: 10.0 5.0 2.0 1.04 18.04
Corporacion de Occidente SA de CV (Cooper Tire)Guadalajara, Mexico, 2005 x x x 10.0 7.2 2.8 0.0 20.0Total: 10.0 7.2 2.8 0.00 20.0
U.S. Totals 456.9 93.9 47.35 77.88 676.03Canadian Totals 60.3 11.2 0.0 4.5 76.0Mexican Totals 61.8 22.8 4.8 1.04 90.44TOTAL: 579.0 127.9 52.15 83.42 842.47
2011 vs. 2012 -3% -6.7% -0.7% 0% -3.2%2010 vs. 2011 +0.6% +2.4% 0.0% -1.2% +0.8%Footnotes: 1 Plants that are ISO (International Organization for Standardization) 9001:2000 certifi ed (www. iso.org). 2 QS (Quality System) 9000 certifi cation, required by suppliers to Ford Motor Co., General Motors Corp. and Chrysler LLC (www.qscertifi cation.com).
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Facts section: Commercial
New vs. retreaded truck tires was not so much a compe-tition in 2011 as a cry for
supply. Th ere was a shortage of new truck tires in the U.S. because demand dictated it. Original equipment ship-ments alone were up more than 56%!
More truck tires were imported compared to 2010 — 22% more. In addition, domestic production was stretched to the limit. Continental, for one, increased its truck tire capac-ity at its Mount Vernon, Ill., plants, including its GTY (“G” for General, “T” for Toyo and “Y” for Yokohama) joint venture facility.
(As of the end of the year, Toyo is no longer part of the joint venture. Th at gives Continental and Yokohama another 280,000 tires to split between themselves.)
Th e result was a 13% year-to-year increase in replacement truck tire ship-ments in the U.S., from 15.3 million to 17.3 million.
Down the road, the increase in Class 8 commercial vehicles (ACT Research Co. estimates 252,000 were produced
last year, up 63%) and replacement truck tire shipments bode well for casing availability.
Retreaded truck tires: up 7%However, casings were in short
supply last year, particularly out of Japan. Still, 15.3 million truck tires worth $3.8 billion were retreaded in 2011, up from 14.3 million in 2010. Th e average price of a retreaded truck tire, including the cost of the casing, was $247.55, compared to $416.18 for a new truck tire.
Until 2003, more retreaded truck tires were produced annually than new truck tires. At that point, their trend lines crossed. Since then, new truck tires have outnumbered retreads six of the last eight years. (In 2003, nearly 16.5 million retreaded truck tires were produced.)
The retreaders on Modern Tire Dealer’s “Top 100 Retreaders in the U.S.” list, which appeared in our April 2011 issue, represent 304 of the esti-mated 680 retreading plants in the U.S.
In 2010, they accounted for 89% of
the total truck tire retreads produced. Th e top 25 retreaders accounted for more than half (59.2%)of the indus-try’s output.
Bridgetone Commercial Solutions Group, which oversees Bandag retread-ing, owns 42% of the domestic truck tire retreading market share, down from 45% in 2005 (see Chart 20). Bandag retreads are sold through 1,600 outlets throughout North America.
Goodyear is the second largest
Chart 212011 U.S. REPLACEMENT MEDIUM/HEAVY TRUCKTIRE BRAND SHARES
(Based on 17.3 million units)
Brand 2010
Michelin 18.0%
Bridgestone 17.0%
Goodyear 14.0%
Yokohama 9.0%
Firestone 7.5%
Continental 5.5%
General 4.0%
Double Coin 3.5%
Hankook 3.0%
Dunlop 2.5%
BFGoodrich 2.0%
Dynatrac 2.0%
Hercules 2.0%
Kelly 2.0%
Roadmaster 2.0%
Toyo 2.0%
Gladiator 1.0%
Kumho 1.0%
Sumitomo 1.0%
Others 3.0%
Everyone scrambles for usable truck tiresMore than 32 million new and retreaded truck tires weren’t enough
Chart 20 2011 U.S. MARKET SHARE, RETREADED TRUCK TIRES
(based on 15.3 million units)
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MTD January 2012
Facts section: Commercial
retreader with a 28% market share, fol-lowed by Michelin (which includes the Oliver brand) at 23%. Marangoni Tread N.A. Inc. is fourth with 4% of the market.
Continental, which introduced its ContiTread retread products in 2009, signed its fi rst licensee in the U.S. last September: King Tire Service Inc. in Bluefi eld, W.Va. Th e tire manufacturer is looking to expand its ContiTread
distribution network, according to Clif Armstrong, director of marketing for Continental commercial vehicle tires.
With the addition of a major player in the retread market and the demand for retreads increasing, will there be a new retread event in the U.S.? According to TRIB Managing Director David Stevens, the possibility exists.
At the TRIB (Tire Retread & Repair Information Bureau) fall membership meeting in Las Vegas, Nev., on Oct. 31, 2011, Stevens said a recent membership survey revealed that 65% of the respon-dents favored a retread conference tied to another trade show. “We just need to fi nd the right venue.” ■
REAR RADIAL (293,000 units)Goodyear 29.0%Firestone 27.0%BKT 19.5%Michelin 10.5%Titan 7.0%Alliance 3.0%Trelleborg 2.5%Others 1.5%REAR BIAS (480,000 units)
BKT 31.0%Firestone 26.0%Goodyear 18.0%Titan 13.0%Harvest King 2.5%Alliance 2.0%American Farmer
2.0%
Trelleborg 2.0%Akuret 1.5%Others 2.0%
SMALL FARM (1.37 million units)Firestone 28.5%Goodyear 19.0%BKT 15.5%Titan 15.5%Am. Farmer 6.0%Harvest King 4.5%Alliance 3.0%Carlisle 3.0%Trelleborg 2.0%Akuret 1.0%Others 2.0%
Chart 232011 U.S. OE REAR FARM
TIRE MARKET SHARE(653,000 radial and bias units)
Firestone 41.1%
Goodyear 36.3%
Titan 13.9%
Others 8.7%
Chart 22 2011 U.S. REPLACEMENT FARM TIRE MARKET SHARES
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MTD January 2012
Facts section: Index
AAssociate brands... 28Automotive service stats... 36
BBrands, number of... 34
CCanada... 26, 32, 40-41 Chinese imports... 26, 30
DDistribution, Canada... 32 Distribution, U.S.... 36
FFarm tires, OE market share... 44Farm tires, replacement market share... 44
GGlobal tire sales... 34
IImports, consumer tires... 26Imports, truck tires... 26, 42Inventory... 38
MMajor brand market share... 28, 30Market share, Canada... 32Market share, by company... 28Market share, OE... 30Market share, retail distribution... 36Market share, retreading... 42
Market share, U.S. farm... 44Market share, U.S. consumer... 28Market share, U.S. truck... 42Market share, wholesale distribution... 36Mexico... 40-41
OOE tire shipments, Canada... 26, 30OE tire shipments, U.S.... 24, 30 Oil changes... 36
PPlant capacities, North America... 40-41, 42Plant certifi cation... 41Plant investment... 41Pricing, consumer tires... 24, 34Pricing, oil changes... 36Pricing, retreading... 42Pricing, truck tires... 34, 42Private brands, Canada... 32Private brands, U.S.... 28, 30
RReplacement tire sales... 24Retread plants... 42Retreading, market share... 42Retreading, shipments... 24, 42RMA forecasts... 26
SSales, tires... 24Service bays... 36Shipments, 2012... 24, 26
Shipments, consumer... 24, 26Shipments, commercial... 24, 26, 42, 44Survey, State of the Industry... 24Survey, Retail Tire Customer... 30, 36Survey, wholesalers... 24
TTariffs, China... 26, 30Technicians per store... 36Tire brands, MTD 100... 38Tire brands, U.S.... 34Tire plants, North America... 40-41Tire sales, global... 34Tire pricing... 34Tire sales, units... 24, 26Tire sales, U.S./Canada... 34 Tire shipments, Canada... 26, 32Tire shipments, U.S.... 24, 26Tire sizes, replacement... 38Tire sizes, OE... 38Truck tires, imports... 26, 42Truck tires, market share... 42Truck tires, retreading... 24, 42Truck tires, shipments... 24, 42
UUnionized plants... 40-41
VVehicle manufacturers... 30, 32, 36Vehicle sales... 30, 32Vehicle shipments, trucks... 42
WWholesale distribution... 24, 36, 38
46th annual MTD Facts Section IndexEverything you wanted to know about 2011, from A to ZIn order to make our 46th annual Facts Section more user-friendly, we have created a corresponding index of all the information, from
the charts to the text! And it is al-phabetical, to boot! Check out the beginning of our 12-page section on page 24.
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MTD January 2012
By Norm Gaither
Y ou have had a hard day. Two employees did not show up for work. Customers demand the impossible and then argue about the price. Fill
rates from your tire suppliers are poor and you have to call several sources to just get tires. Last year was the worst year in business and you lost $87,809. You are frustrated and tired of the hassle. Why not just sell the business and enjoy retirement?
Hold on, take a deep breath. Now would be the worst time for you to make this decision.
Selling any business takes a lot of preparation. Th is is not something you do on the spur of a moment. Th ere are many legitimate reasons to sell your business: health problems, divorce, competition, fi nancial losses and
economic downturn. Th ese are all logical reasons to sell, but here is the big question: Is it the right time? As a business broker for more than 25 years, I’ve seen quite a few owners sell their business prematurely and they suff ered the consequence of lower value. Th e biggest problem with selling too early is that you will not make the best deal and will, for sure, leave money on the table.
Plan in advanceLong before you decide to sell your business, you
should start planning. My recommendation is at least three years in advance. You should also consult your accountant, att orney and a business broker. You need these key advisors to guide you through a very tough process. With the current economy, you may have had losses for the past several years and think it’s time to cash out. Th is would be the worst time for anyone to sell a business. Would you buy a company that is losing money? Sometimes it takes up to fi ve years to get your company in order.
Your accountant can give you the fi nancial results
on your company for the past three years. Anyone interested in purchasing your company will need this information as well as the last three years’ tax returns.
How much is your business worth?
Many times business owners think of these factors to determine the price tag for their business: 1) they’ve been in business for 25 years, 2) they have annual sales of $1,000,000 or more; and 3) they have a large customer base.
Some, if not all, of these variables will help, but the real value of your company is your profi tability.
Profi ts determine selling priceIf your company is showing a loss for the last several
years you will most likely not get the top dollar for your business. Put yourself in a buyer’s shoes. If you are looking to invest your money in something, wouldn’t you want the largest return on your investment? Buyers are not interested in how much you sell. Th ey are only interested in how much you take to the bank. Now that you understand the reality, let’s have a look at an example of one company’s experience.
Example #1 income statement (see page 52). Th e company for the past three years has lost money but the seller wants to sell the business for $1,200,000. Most people arrive at their asking price based on how much they need to retire, not what the company is worth. Why does the seller think his business is worth this amount? From his perspective: 1) he has assets of $750,000; 2) he has been in business for 25 years, and 3) he thinks he deserves $450,000 of goodwill.
Sadly, this is how many tire store owners price out their business. Th ey think just because they have been around for 25 years they should get a lot of money for goodwill. Th e problem with this thinking is most buy-ers won’t pay this price. Th e buyer can buy these assets anywhere and the equipment and inventory would be in bett er shape. As for goodwill, if a business is losing money why would any buyer pay a premium? It all comes down to how much profi t your company will make. If you spend the next three years gett ing your company in shape and making profi ts, then someone may pay your asking price.
First, fi x the companyLet’s try to fi x this company and see if we can make
the kind of profi ts we need to get the sellers’ asking price. In the New Year One (example #1A, page 54), the owner makes a few changes to his sales and gross profi t, and then decreases some of his expenses. Look at
Business insight
Selling your businessAdvance planning is needed to get your best deal
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MTD January 2012
Business insight
the diff erence in the bott om line! (To be fair, making changes to your business is not easy.)
When Dealer Strategic Planning 20 group members convene three times a year, they discuss the actual steps you can take to decrease expenses, increase sales and, thus, increase profi tability. It is much easier when you have peer support to make these changes. Several tire dealers join our groups just to make these improvements before they put their businesses up for sale.
We now get to New Year Two and continue to make improve-ments. By making these improvements, the profi t increases exponentially and the business price tag increases. Finally, in New Year Th ree we have fi xed the company. Now, let’s see what someone may be willing to pay for it.
Formula for sellersMany buyers who have purchased tire stores in the past as
well as any banker, accountant or broker will use a method to determine how much a business is worth called EBITDA or earnings before interest, taxes, depreciation and amortization. Th is is simply the most accepted way to value a business. Th e
only other consideration would be for owner’s adjustments or onetime expenses.
This is again why you should always have professionals help you when selling a business. Your advisors are very familiar with this term and know how it works to determine how much your business is worth.
Here’s another important point: value the business but not the real estate. You can decide to keep the real estate and lease it back to the buyer or if you want to sell the property and building separately, have a professional commercial real estate broker value your building so that you can get
the maximum value for the property. Maybe your location is bett er suited for a restaurant and they might be willing to pay a premium for the real estate.
Now that we know what the process is to value the business only (no real estate), let’s apply it to the company starting with the Income Statement for Old Year #3 (example #1, page 52):
Earnings $(87,809)Interest $ 11,518Depreciation $ 8,555Amortization $ - 0 -Owner adjust:Salary $ 40,000Travel $ 9,845Vehicle $ 4,000EBITDA $(13,891)
Most people will pay a “multiple” of EBITDA for a business. Four years ago many tire dealers were able to get fi ve times EBITDA when selling their business if, of course, they made a profi t. In the current climate, many buyers are only willing to pay three times EBITDA. Even if you make a profi t, you may want to wait until the market changes for the bett er, maybe then you will be able to get fi ve times EBITDA. If we apply three or fi ve times to this business it won’t matt er because it’s
not worth much. Th is is why you must take three to fi ve years gett ing your fi nancial house in order.
Th ree years laterIt has been three years for this tire dealer trying to fi x his
business. Maybe he joined a 20 group to take advantage of experienced store owners to help him identify and make changes. Look at the Income Statement for New Year #3 (example #1A). As you can see, he added sales incentives and his sales went up a litt le. He pushed his gross profi t up only 1% each year. He had a store manager who was not doing the job so he let him go. Th e owner decided to get back into the business and run it himself. All of these changes would have been made by a new owner, so by making them the current owner has not only increased his profi ts, but he has increased the value of the sale of this business. Th e EBITDA value of the business on New Year #3 will be:
Earnings $147,323Interest $ 7,800Depreciation $ 8,555Amortization $ - 0 -Owner Adjust:Salary $ 40,000Travel $ 9,845Vehicle $ 4,000EBITDA $217,523
WOW! Just by gett ing back into the business on a day-to-day basis and making small changes to his business, the owner has now made it att ractive for purchase. If the market is right and he could sell this tire store at a fi ve times EBITDA (not count-ing real estate or the building), he could make $1,087,615.
Liabilities stay with the sellerNow the next most important thing in selling a business is
to remember that you are still responsible for the liabilities of the company. Th e new buyers will pay a price that they think is fair, but only for the assets of the company, not the liabilities. Originally the seller wanted to sell his business three years ago for $1,200,000. Now, at best, he can get close to $1,100,000 before paying off the liabilities. Another surprise may be by selling the company for $1,100,000 there may be some tax liability from the sale. Always check with your accountant early so he/she can decide what, if any, taxes will be due from the sale of your company.
So let’s review. Th e fi rst thing we do once we decide to sell is get our fi nancial house in order. Be sure to contact your accountant, att orney and a business broker. Th is process will take at least three years or longer, if you are not making a profi t. If you own real estate, get a commercial realtor to value the building. Oft en a business broker can help sell the company and value the real estate. Once you have taken these steps you are ready to sell and enjoy the fruits of your labor. ■
Norm Gaither is president of Dealer Strategic Planning Inc. (DSP), a company that promotes “20 groups” in multiple industries. He is a well-known consultant in the automotive aft ermarket and has owned his own fi rm since 1984.
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Business insight
EXAMPLE #1 YOUR COMPANY NAME INCOME STATEMENT FOR THE YEAR ENDING — 12/31/XX
OLD YR. #1 OLD YR. #2 OLD YR. #3
SALES $1,500,000 100.0% $1,450,000 100.0% $1,400,000 100.0%
COST OF SALES 825,000 55.0% 812,000 56.0% 798,000 57.0%
GROSS PROFIT 675,000 45.0% 638,000 44.0% 602,000 43.0%
EXPENSES:
SALARIES/STORE 200,000 13.3% 200,000 13.8% 200,000 14.3%
SALARIES/OFFICE 40,000 2.7% 40,000 2.8% 40,000 2.9%
SALARIES/OWNER 87,500 5.8% 87,500 6.0% 87,500 6.3%
PAYROLL TAXES 44,602 3.0% 44,602 3.1% 44,602 3.2%
BENEFITS 51,915 3.5% 51,915 3.6% 51,915 3.7%
RENT 57,000 3.8% 57,000 3.9% 57,000 4.1%
INSURANCE 26,715 1.8% 26,715 1.8% 26,715 1.9%
GENERAL TAXES 18,901 1.3% 18,901 1.3% 18,901 1.4%
LEGAL & ACCOUNTING 3,800 0.3% 3,800 0.3% 3,800 0.3%
SUPPLIES 15,745 1.0% 15,745 1.1% 15,745 1.1%
DEPRECIATION 8,555 0.6% 8,555 0.6% 8,555 0.6%
GAS, OIL & REPAIRS 38,519 2.6% 38,519 2.7% 38,519 2.8%
MAINTENANCE 4,619 0.3% 4,619 0.3% 4,619 0.3%
ADVERTISING 25,000 1.7% 25,000 1.7% 25,000 1.8%
UTILITIES 18,503 1.2% 18,503 1.3% 18,503 1.3%
TELEPHONE 8,805 0.6% 8,805 0.6% 8,805 0.6%
DATA PROCESSING 12,503 0.8% 12,503 0.9% 12,503 0.9%
INTEREST 11,518 0.8% 11,518 0.8% 11,518 0.8%
TRAVEL & ENTERTAINMENT 9,845 0.7% 9,845 0.7% 9,845 0.7%
MISCELLANEOUS 5,764 0.4% 5,764 0.4% 5,764 0.4%
TOTAL EXPENSES 689,809 46.0% 689,809 47.6% 689,809 49.3%
NET PROFIT BEFORE TAXES (14,809) -1.0% (51,809) -3.6% (87,809) -6.3%
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Business insight
EXAMPLE #1AYOUR COMPANY NAME INCOME STATEMENT FOR THE YEAR ENDING — 12/31/XX
NEW YR. #1 NEW YR. #2 NEW YR. #3
SALES $1,450,000 100.0% $1,500,000 100.0% $1,575,000 100.0%
COST OF SALES 797,500 55.0% 810,000 54.0% 834,750 53.0%
GROSS PROFIT 652,500 45.0% 690,000 46.0% 740,250 47.0%
EXPENSES:
SALARIES/STORE 170,000 11.7% 180,000 12.0% 180,000 11.4%
SALARIES/OFFICE 35,000 2.4% 35,000 2.3% 35,000 2.2%
SALARIES/OWNER 87,500 6.0% 87,500 5.8% 87,500 5.6%
PAYROLL TAXES 25,000 1.7% 25,000 1.7% 25,000 1.6%
BENEFITS 35,000 2.4% 35,000 2.3% 35,000 2.2%
RENT 63,000 4.3% 63,000 4.2% 63,000 4.0%
INSURANCE 22,000 1.5% 22,000 1.5% 22,000 1.4%
GENERAL TAXES 16,000 1.1% 16,000 1.1% 16,000 1.0%
LEGAL & ACCTOUNTING 3,800 0.3% 3,800 0.3% 3,800 0.2%
SUPPLIES 14,000 1.0% 14,000 0.9% 14,000 0.9%
DEPRECIATION 8,555 0.6% 8,555 0.6% 8,555 0.5%
GAS, OIL & REPAIRS 23,000 1.6% 23,000 1.5% 23,000 1.5%
MAINTENANCE 4,619 0.3% 4,619 0.3% 4,619 0.3%
ADVERTISING 19,000 1.3% 19,000 1.3% 19,000 1.2%
UTILITIES 18,503 1.3% 18,503 1.2% 18,503 1.2%
TELEPHONE 8,805 0.6% 8,805 0.6% 8,805 0.6%
DATA PROCESSING 8,500 0.6% 8,500 0.6% 8,500 0.5%
INTEREST 7,800 0.5% 7,800 0.5% 7,800 0.5%
TRAVEL & ENTERTAINMENT 9,845 0.7% 9,845 0.7% 9,845 0.6%
MISCELLANEOUS 3,000 0.2% 3,000 0.2% 3,000 0.2%
TOTAL EXPENSES 582,927 40.2% 592,927 39.5% 592,927 37.6%
NET PROFIT BEFORE TAXES 69,573 4.8% 97,073 6.5% 147,323 9.4%
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MTD January 2012
By Wayne Williams
The most rewarding part of my 35-year experi-ence in the automotive
aft ermarket has been people. I love cars. I love wheels, tires, service and customers. I love the interaction of connecting the dots to satisfy the needs within our industry. Manufac-turers build ’em, distributors move ’em around, retailers sell ’em to the public, and the cycle continues. People make it happen. Our business is a “people” business. People buy from people. Yes, the Internet has become a powerful “infl uencer” with its wide variety of ways to search and fi nd information, but statistics show that customer/people research online and buy local, from local provider/people.
At the Specialty Equipment Market Association (SEMA) Show in Las Vegas last November, I spoke with many people in our industry. Like I said, I love cars and trucks and bikes, etc. Th e SEMA Show is like no other event; it is truly a “show.”
For me, however, the best part is the people. Th is year, three teams of people stick out in my mind. Th ey were
excited to be at the show. Th ey were excited to share their ideas, their discoveries, and their fresh commitments to serving the customer/people.
Th ese three provider/people represent the core mes-sage of my article this month, dealers who have “stopped, looked and listened” and are making changes to their businesses aft er taking time to bett er understand how they might improve their business. All three are paying close att ention to hearing and understanding their customers, two are revising their incoming phone call procedures.
All in the familyOne team of two brothers by all standards operates one
of the best full-service tire and repair outlets in California. Th eir approach is nothing short of “total customer care” from start to fi nish to follow-up. Th ey have seemingly been unaff ected by the economic downturn and continue to redefi ne new, higher levels of service.
I can barely express their enthusiasm as they described to me their complete overhaul of their approach to incom-ing phone calls. Th ey have hired an expert, a specialist in teaching sales staff s to really listen, to truly hear and understand and respond to customer requests in ways that build trust and confi dence and sales revenue. Th ey are listening daily to phone calls from the previous day and are measuring their performance against their training and
Counter intelligence
Stop, look and listenIt’s time to examine your business to discover areas where a complete revamp would create new opportunities
By Wayne Williams
Quik-Link: 800-687-1557 ext. 1113056
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MTD January 2012
Business insight
new standards. Th ese brothers/owner/people could not have been more excited and pleased with the results. Th e brothers/owner/people and the employee/people and the customer/people are all benefi ting.
Buddy systemTh e next team I spoke with is a pair of buddies who worked
together as teenagers mounting tires in a shop, and then started their own tire shop in 1989. Partners now for over 22 years and also highly successful, these owner/people are embracing the new digital age. Not only are they upgrading their website, but are partnering with their longtime distributor/supplier/
people with a variety of digital initiatives that have been proved successful.
Independently, they have hired a phone service pro-
vider that is recording incoming phone calls.
This is a fam-ily business, and the fam-ily team has
e v a l u a t e d their phone s k i l l s a n d openly agreed
t h a t t h e y
needed to improve. Th ey have revamped their approach and are completely sold on and committ ed to providing the best phone procedures to improve their customers’ experience. Th eir excitement is contagious, and the results thus far are outstanding.
Like father, like sonTh irdly is a father and son team who provide specialty
services to a narrow and specifi c niche in the automotive aft ermarket. Th eir specialty is tires and wheels. Th ey know there are a variety of online providers and local options to meet the needs of their clients.
Th e father and son enjoy a relationship that allows them to speak openly about the details of their business, and the company is growing and expanding because they have agreed to listen to the customer, and they have decided to off er extreme customer service.
As much as off ering wheels and tires, they off er specifi c solutions with personalized service that exceeds the ordinary. Th ey have a knack, especially the son, for spott ing trends that allow them to off er unique solutions. Th ey do this through carefully listening to the nuances and concerns of each and every individual client.
At your service For all the talk about change in today’s business environ-
ment, and yes there is plenty of change, unrelenting fast-paced changes that can be wearisome, it’s good to hear provider/people who are carefully listening to customer/people and responding to their needs and concerns. Th is people business of ours is the best business of all, fi lled with opportunity. If you’re a people person, then you never tire of serving people.
Successful people are taking the time to “stop, look and listen,” looking, listening, understanding and responding, and they are excited beyond words about the results they are gett ing.
All I’m saying is to take a look at your business, cut a piece of it out and completely revamp it.
Th is will be good for all the people who your business touches! ■
Wayne Williams is president of ExSell Marketing Inc., a “counter intelligence” fi rm based in La Habra, Calif. He can be reached at [email protected].
As much as off ering wheels and tires, they off er specifi c solutions
with personalized service that exceeds
the ordinary.
Quik-Link: 800-687-1557 ext. 1113258
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59www.moderntiredealer.com
By Wayne Croswell
Do you offer online scheduling for service ap-pointments? Why not? It’s easy, inexpensive, and it gives your customers a convenient way to
do business with you. Have you ever heard of the Golden Rule? I am not referring to the one that says, “He who has the gold ... rules.” I mean, “Treat others as you would want to be treated.”
For the most part, this rule will suffice in everyday business. However, it’s not always the best methodology when dealing with customers. People don’t always want to be treated the way you want to be treated. In general, it’s not a bad axiom. But, sometimes it’s bett er to employ the “Platinum Rule.” Th e Platinum Rule suggests that you “Treat others the way they want to be treated.”
Simply stated, not everyone is the same, and what might appeal to you might not appeal to every customer. So, it’s smart business to off er choices.
Th e choice is theirsTh is is where online appointment
scheduling fi ts into the picture. Some people like to call a shop and talk with a human and some simply do not. An online appointment scheduling system affords the customers who prefer to use the Internet the option to book an appointment with one of your shops for a day and time that is convenient for them — quickly and easily, and without having to pick up the phone. An online system allows them to see what time-slots are open, it lets them choose what service they are coming in for, and schedule the service for when they would like to come in.
What are the capabilities?A really good online appointment system will provide
your customers with a list of services. Based on what they select, it will schedule the necessary time the appointment will take. Th e system will alert you (the service provider) and the customer that the appointment has been confi rmed, remind them in advance about the service, and thank them when the service is complete.
Simple appointments for oil changes and the like don’t need to take up valuable phone time with your staff . An online appointment scheduling system frees-up staff to service the customers standing at the counter. Custom-ers who use your online appointment scheduler get the bonus of immediate service — they don’t need to wait for
someone to pick up the phone, and they can do things on their time. Many dealers off er a promotional coupon for making the appointment online to encourage the practice.
Th e basicsWhenever possible, the online booking system you
choose should provide an estimate for the cost of service. If you have to provide a range, go ahead. Customers booking online want to get an idea of what the cost will be before they commit to an appointment.
When the service requires a more comprehensive quote, or possibly an inspection before work can begin, let them know that through the system in advance. No one likes surprises when it comes to price, unless of course the surprise is a lower fi nal cost.
Also, the customer should be able to dictate the method of communication regarding an appointment. Th e online ap-pointment system you employ should provide the customer with choices. Do they prefer e-mail? Do they want text mes-sages? Let the customer decide.
Remember the “Platinum Rule.” It should be eff ortless for them to make an appoint-ment, and it should be just as eff ortless for you to manage the scheduling process. A good automated system can provide that for you.
An online appointment scheduling system will show you the time-slots that are reserved and the services that are being requested. A good system also will manage your bays and allow you to set up service appointments in the proper time increments.
In addition, some systems can interface to popular point-of-sale systems; this makes the scheduling system even more powerful. With an integrated model, not only are you allowing your customers to schedule their own appointments, the appointments are also being entered as work orders into your POS system. You can then man-age the process, but don’t have to re-key anything — this eliminates errors and increases productivity.
Th is technology is simple to install, easy to implement, and available today. ■
As CEO and president of WECnology LLC (see website www.wecnology.com), Wayne Croswell is a “complimentary technology advisor” for independent tire dealers. Croswell can be reached at [email protected] or (603) 249-5530.
Business insight
Online appointment schedulingCatering to customers who prefer to use the Internet
A good online service bay scheduling sys-tem will help you manage your bays better by using your techs’ time effi ciently.
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MTD January 2012
Focus on industry
By Bob Bissler
Despite an uncertain economy, Kumho Tire CEOs were optimistic about business next year at the 2012 Kumho Tire Dealer Meeting in Costa Rica,
Central America, Dec. 8-12, 2011.While plans for a U.S. facility are on hold, the company
has taken steps to improve fi ll rates by consolidating its fi ve U.S. warehouses down to three locations — Atlanta, Ga., Chicago, Ill., and Rancho Cucamonga, Calif.
Th e company originally broke ground for the 1.3 million-square-foot tire plant in Macon, Ga., in May 2008. Th e recession forced Kumho to postpone the project.
“Th ere is one investment we had to decide to delay: our factory in Georgia. Th is project will be pushed back as we deal with the uncertainty of the economy and the Chinese tariff situation,” says J.H. Kim, global CEO of Kumho Tire. “We will continue to focus our resources on providing you, our most dedicated customers, with the highest fi ll rates and the highest quality product in the coming year.”
“We are going to improve delivery service in 2012,” says J.B. Kim, president and CEO of parent company Kumho Tire Co. Ltd.’s Kumho Tire North America division. “In 2010 we began a new focus on sports marketing, and our commitment to change is not over.”
J.H. Kim said the company continues to progress through the debt workout situation of the company’s umbrella conglomerate, Kumho Asiana Group. He stressed that Kumho Tire is fully committ ed to the North American and South American markets.
“Th e outlook for 2012 includes much uncertainty for the global economy as well as the tire industry,” says J.H. Kim. “But one thing is certain: we will see more change in 2012. Th is change will bring challenge and opportunity for all of us next year.”
J.H. Kim has seen many changes since he was named global CEO in 2009. Most notable is the company’s focus on sports marketing. He said that in addition to sports marketing, Kumho is also investing more in advertising and focusing on the brand’s core consumer — college-educated male decision makers. Th e company’s sports marketing eff orts have improved the brand’s awareness, and demand has gone up in the past year.
“Our sports marketing initiative is not just about sig-nage,” says David Koh, pricing manager for Kumho Tire. “It has to be relevant, memorable, interactive and have an emotional connection. Sports marketing is elevating the Kumho brand.”
Koh outlined some of Kumho’s initiatives for 2012, including dealer and retailer communications, point-of-sale
materials, social media and promotions. Kumho’s latest rebate program “Let’s Go!” will last through this month. Th e previous $50 mail-in rebate program was introduced for the new Ecsta 4X. Th e new program features both the Ecsta 4X and Ecsta LX Platinum tire lines. Kumho also has various Ecsta 4X point-of-purchase materials available to dealers that feature a removable decal advertising the rebate promotion.
Rick Brennan, vice president of marketing, told the dealers in att endance that electronics, especially cell phones, are changing the world and changing the way people shop. As a result, Kumho is looking at ways to tap into that as a retailing tool. He also says a number of things bode well for tire dealers.
“Consumer confi dence in the economy is going up. November 2011 was the best auto sales month since the ‘Cash for Clunkers’ program in August 2009. Th e U.S. economy grew 2% in 2011, and the same is expected for 2012.”
Brennan added that the number of SKUs is going up, “and people are keeping their cars longer,” which are also positives for dealers. He said Kumho’s marketing eff orts are evolving. Th e company plans to continue relying on sports marketing in a big way in 2012.
“Our new focus on sports marketing has placed the Kumho brand with some of the most well-known and popular sports teams in the U.S.A,” says J.B. Kim. “Our commitment to change is not over. Our theme for this year’s meeting is ‘Let’s Go.’ We want to stress our partnership with you and your strong success in 2012.” ■
‘ Let’s Go’ brand buildingKumho promises dealers better fi ll rates, more targeted ads in 2012
Kumho Tire Global CEO J.H. Kim (left), with President and CEO of Kumho Tire North America J.B. Kim, says the uncertain economy forced the company to post-pone a planned U.S. tire plant in Georgia.
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MTD January 2012
By Bob Bissler
The 2011 Automotive Aftermarket Products Expo (AAPEX) had strong participation in key target buyer categories. Th e exposition, held Nov. 1-3 in Las Vegas,
Nev., had 2,292 exhibitors, 230 more than in 2010.Overall, buyer att endance during Automotive Aft ermarket
Industry Week, which includes both AAPEX and the SEMA (Specialty Equipment Market Asso-ciation) Show, increased by 17% over 2010.
AAPEX 2012 takes place Oct. 30-Nov. 1 at the Sands Expo Center in Las Vegas.
Bosch: Wipers chase storms, fl uid exchange portfolio debuts
Robert Bosch LLC promoted its ICON beam
wiper blades and introduced a new series of fl uid exchange products at AAPEX 2011.
Last year Bosch partnered with Discovery Channel’s popular “Storm Chasers” TV series. Th ree sets of Bosch ICON wiper blades are used on the show’s storm chasing vehicle, Th e Dominator, which was on display in the Bosch booth at AAPEX.
On hand to show off the vehicle was show star Reed Tim-mer, owner and lead storm chaser for TornadoVideos.net.
Two Bosch TV spots feature Timmer and Th e Dominator 2. More than 400 spots are airing nationwide on Discovery and Science Channel programming through February 2012.
Bosch also introduced a new series of fl uid exchange prod-ucts. Th e series consists of the Bosch Automatic Transmission Fluid Exchanger, the Engine Coolant Exchanger, the Brake Fluid Exchanger, the Power Steering Fluid Exchanger and the Diff erential Fluid Exchanger.
DENSO celebrates new division, 40th anniversaryDENSO Corp. announced at AAPEX that it has formed a
new aft ermarket division based at the headquarters in Kariya, Aichi, Japan.
“This establishes a structure where the aftermarket is operated as an independent business entity apart from our original equipment business,” says Toshiaki Fujii, head of the new DENSO Aft ermarket Business Unit.
In addition, Fujii announced a signifi cant anniversary for the company. “Th is year is the 40th anniversary of NIPPONDENSO of Los Angeles, the predecessor of DENSO Sales California,” says Fujii. “Forty years ago, DENSO Sales California was established as DENSO’s fi rst overseas subsidiary.”
SPX unveils brake drum puller, tech scopeSPX Corp. launched two new products at AAPEX, the
Heavy-Duty Brake Drum and Rotor Puller (No. 6980), and the OTC Tech-Scope (No. 3857).
Th e Heavy-Duty Brake Drum and Rotor Puller was designed to off er automotive technicians the ability to handle large compo-nent pulls such as brake drums, rotors, drive wheels, gears, fl y-wheels and pulleys.
The OTC Tech-Scope is a stand-alone two-channel high-speed lab and ignition oscil-loscope with a multimeter. Th e tool includes an ignition scope and a digital multimeter with an ohm meter.
Gabriel expands ReadyMount lineGabriel Ride Control LLC had a lot to share
with AAPEX 2011 att endees. Th e new Gabriel website features an enhanced parts search and a mobile parts search, and the com-pany’s new Facebook page promotes the advantages of the expanded ReadyMount strut line.
“We know customers have a lot riding on the preassembled struts they choose, so we precision-engineer and extensively test our ReadyMount assemblies and components,” says Christine Fisher, the company’s marketing and communications manager.
Gabriel now off ers 140 new ReadyMount fully assembled SKUs. Th e expansion brings Gabriel ReadyMount coverage to 105 million vehicles with 2,000 applications. ■
Focus on industry
AAPEX 2011: Target buyers hit the markAttendance was up 17% from 2010, say offi cials
Gabriel Ride Control LLC’s expanding line of Ready-Mount struts now covers 105 million vehicles.
SPX launched the OTC Brake Drum and Rotor Puller at the 2011 AAPEX show.
Left to right: the VCX 400, the BFX 200 Brake Flush System, the Bosch Multi Coolant Exchanger, the Bosch ATX 200 Automatic Transmission Fluid Exchanger, and the Bosch PSX 300.
Storm-chasing vehicle “The Domina-tor” features three sets of ICON wiper blades from Robert Bosch LLC.
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MTD January 2012
TPMS
SUBJECT VEHICLE: 2005-07 Jeep Liberty.RESET PROCEDURE? Yes, directions follow.SPECIAL TOOLS NEEDED? Yes, a thin-walled socket.
The tire pressure monitoring system (TPMS) on the 2005-07 Jeep Liberty uses radio and sensor technology to monitor tire air pressure levels. Sensors, mounted
to each road wheel as part of the valve stem, monitor tire pressure, air temperature inside the tires, wheel acceleration and the sensor internal batt ery status for all four active road tires and the spare (in vehicles equipped with a full-size spare).
Th e sensor will broadcast this informa-tion, along with a unique 32-bit ID, to a central receiver circuit located inside the Wireless Control Module (WCM).
If a warning or fault condition exists, the
WCM will send a message that illuminates the low pressure warning light and sounds a chime. If a system fault is detected, the indicator light will fl ash on/off for 10 to 60 seconds, once every 10 minutes.
To remove a faulty sensor, follow these steps. CAUTION: Wheels and tires are match-mounted at the factory. Before demounting a tire from its wheel, a reference mark should be placed on the tire at the valve stem location.
1. Remove the tire and
wheel assembly. 2. Demount the tire from
the wheel following the tire changer manufacturer’s in-structions. Pay special att en-tion to the following:
a. When breaking front and rear tire beads loose from
Jeep Liberty: Proper positioning protects TPMS sensorsInstall original valve stem caps to keep sensors dry
Figure 1
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65www.moderntiredealer.com
the wheel rim, avoid using the bead breaker near the sensor.
b. When preparing to demount the tire from the wheel, carefully insert the mounting/demounting tool at the valve stem +/-10 degrees, and then proceed to demount the tire from the wheel.
3. Using a thin-walled socket, remove the special nut retaining the sensor to the wheel. While removing the nut, hold pressure against the rear of the metal valve stem to keep it from pushing rearward, which could damage the antenna strap.
4. Remove the sensor from the wheel. See Figure 2.
To install a new sensor, follow these steps. NOTE: Before reinstalling an existing tire pressure sensor, replace the seal and the metal washer at the base of the valve stem to ensure proper sealing. See Figure 1.
1. Wipe the area clean around the sensor/valve stem mount-ing hole in the wheel. Make sure the surface of the wheel is not damaged.
CAUTION: To avoid damaging the sensor antenna strap, hold pressure against the rear of the metal valve stem while the sensor is inserted through the wheel mounting hole and the nut is installed. See Figure 2.
2. Insert the sensor through the wheel, keeping pressure against the rear of the metal valve stem. Th e pott ed side of the sensor is to be positioned toward the wheel. Do not att empt to mount the sensor otherwise, or damage may occur. Install the sensor nut (with pressed-in washer) by hand. See Figure 2 and Figure 3. NOTE: Before tightening the sensor nut, push downward on the sensor housing in an att empt to make it fl ush with the interior contour of the wheel
3. Using a thin-walled socket, install the sensor nut. While holding the sensor in position, tighten the sensor nut to 58 in.-lbs. (6.5 N.m).
4. Mount the tire on the wheel following the tire changer manufacturer’s instructions, paying special att ention to the following to avoid damaging the tire pressure sensor.
a. Rotating wheel tire changers — once the wheel is mounted to the changer, position the sensor valve stem 210 degrees from the head of the changer in a clockwise direction before rotating the wheel (also in a clockwise direction) to mount the tire. Use this procedure on both the upper and lower tire beads.
b. Rotating tool tire changers — posi-tion the wheel on the changer so that the sensor valve stem is 210 degrees from the head of the changer in a clockwise
direction from the mounting end of the tool. Make sure the sensor is clear of the lower bead breaker area to avoid damaging the sensor when the breaker rises. Rotate the tool in a counterclock-wise direction to mount the tire. Use this procedure on both the upper and lower tire beads.
5. Adjust the air pressure to specifi ca-tions. Make sure the original style valve stem cap is securely installed to keep moisture out of the sensor. Install the wheel and tire assembly on the vehicle.
6. Drive the vehicle for a minimum of 10 minutes while maintaining a con-tinuous speed above 15 mph. During this time, the system will learn the new sensor ID code and will clear any DTCs automatically.
Now you are ready to retrain the sensors. NOTE: If a tire pressure sensor has been replaced, the TPMS needs to relearn the tire pressure sensor IDs.
Using an RF signal, each sensor transmits tire pressure data once every minute. Each sensor’s (transmitt er) broadcast is uniquely coded so that the WCM can monitor the state of each of the sensors on the four rotating road wheels. Th e WCM automatically learns and stores the sensor’s ID while driving, aft er a sensor has been replaced. Th ere is no formal retraining procedure necessary.
On 2005-06 models, drive the vehicle for a minimum of 10 minutes while maintaining a continuous speed above 20 mph. On 2007 models, drive the vehicle for a minimum of 10 minutes while maintaining a continuous speed above 15 mph. On all models during this time, the system will learn the new sensor ID code and will clear any DTCs automatically. If a sensor cannot be trained, see the appropriate manufacturer service information. ■
Information for this column comes from Mitchell 1’s ”Tire Pressure Monitoring Systems Guide” for domestic and import vehicles through 2010. Headquartered in Poway, Calif., Mitchell 1 has provided quality repair information solutions to the automotive industry for more than 80 years. For more information, visit www.mitchell1.com.
Figure 2
Figure 3
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Banding together will tip the world of tires back toward levelDear Editor:
Your recent article “How to level an unlevel playing fi eld” (editorial, August 2011) is a topic I can’t leave alone.
As a greater Detroit area two-store independent tire dealer for the past 39 years, I can empathize with the dealer whose despairing comments prompted the article. How oft en have we independents dreamed of what it would be like to buy at the deep price level the big guys buy at? In the cutt hroat world of tires, margins are a thin 30% (if you’re lucky), and handing any margin advantage off to your prime competitors is devastating. What a diff erence it would make!
Th e title grabbed my att ention as it suggested that you might reveal a new and improved sling-shot of advice to slay the Goliaths of our world — or at least some savory advice on how to live among them. But if you meant to lift the spirits of we Davids of the tire world (under a dozen stores by my own defi nition), by my reckon-ing it missed the mark. Th inking I cruised a litt le hastily through the piece and missed the moment of enlightenment, I read it again... and again visualizing the emotions of my fellow comrades.
I’m sure that leveling the playing fi eld references the obvi-ous large/small dealer cost of goods diff erential, and as you inferred, it’s not a matt er of fairness, and I agree. Fundamentally, the world of business has nothing to do with fairness and everything to do with managing eff ort and investment for maximum return, hopefully in an ethical manner, but generally at someone else’s expense. So it’s no surprise that tire suppliers will pander to the bigger players like warehouse distributors, who are set up to promote and sell large quantities of their product. While tire wholesalers are needful, trying to keep pace by purchasing tires predominately from them is more and more becoming a losing batt le.
For the fi rst 25 years in the tire business I was at the mercy of local wholesalers, who in some cases had a retail presence in my market, and who would distribute the same products to all my competitors. Th e biggest local tire wholesaler would even sell directly to my customers, who would in turn show up at my doorstep to have them installed.
Of late, wholesale distributors and manufacturers have gott en creative as they have teamed together to sign their “select” customers (virtually anyone) to a manufacturer’s associate program, administered by the wholesaler. Th is is possibly a bett er arrangement for a small dealer as it aff ords limited protection in his market, and pricing may be a bit bet-ter — but it truly misses the mark when it comes to leveling the playing fi eld with big dealers.
But as big is a relative term (from a personal vantage point that I will later explain), even a 50-store retailer would recog-nize his bargaining power as insignifi cant and would belong to multiple tire buying groups. But don’t let this notion of buying group confuse you. It’s not a buying group that your local wholesaler has put together, nor is it a pseudo direct deal with a tire manufacturer with a fancy program label att ached. Th ese guys are in an exclusive club with other immortals in buying groups purchasing up to several million tires a year. In short, they don’t put their pants on one leg at a time as we
would like to think. In 1998 I read about a buying group
called the Tire Alliance Groupe (TAG) on the Internet. Th ey were then, and likely still are, the biggest tire buying cooperative in the na-tion and I decided that I needed to join. I only wish I had recorded the conversation with then President Dan Beach when I expressed my interest and answered his fi rst logi-cal question: how many stores? I well remember the friendly
laughter — it lasted a litt le longer than I could comprehend at the moment. He informed me that the smallest TAG member had 38 stores, and the biggest had over 500 stores.
So, I was put back in my place, but aft er a week or so I had an idea and called Mr. Beach back and pitched it. I pointed out that the group had no Michigan presence and asked why I could not form a legal partnership of Michigan tire dealers, and then in turn the partnership would belong to the TAG group. He had never thought of it and promised to get back to me aft er running the idea past the board members. To shorten the story, he accepted the off er and promised to journey to Michigan once I had assembled about a dozen promising candidates.
In the ensuing weeks I used my precious free time to make cold calls to fellow dealers, and it didn’t go well. I got a cool and oft en rude reception, and seldom made it to fi rst base. I remember thinking that we really deserved to have the hell beat out of us every day.
Well, quitt ing has never been an att ribute you’d assign to me, and I draft ed a lett er naming a date and place for a buying group formation meeting, had my att orney at my own expense draft a partnership agreement for the Great Lakes Tire Group (offi cers and members to be named on exhibit A), and faxed the invitation to every tire business in Michigan that would give me their fax number.
At some point I suppose I should announce that the rest is history. Since 1998 our litt le Michigan group has enjoyed the same buying price benefi ts as TAG’s 550-store Morgan
Your turn
would make!
and again visualizing the
woI
cal(TthtirtiojocDicI
laughter —could comprehend at the mo
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MTD January 2012
Group out of Clearwater, Fla. We enjoy the same powerful benefi ts on our credit card discount rates, parts costs, tire equipment and tire supplies, and many other deep programs only aff orded to huge buying groups.
If this story reads as boastful, I am long past that stage. I am still a small independent tire dealer fi ghting the fi ght, but the game has changed for me and for others in the Great Lakes Tire Group. My children have a future in the business they would not have otherwise had. It should not escape the notice of the small independents reading your magazine that what we have done can be replicated in other parts of the country and with other buying groups — it just takes some eff ort. While you will still be mauled by the marketing might of a large independent or chain store in your markets, banding together with your brothers and aligning yourselves with a fi rst rate buying group will tip the world of tires back toward level, and will put some of the lost fun back in the business. Just don’t expect it to be handed to you.
Dan Clark, PresidentGreat Lakes Tire Group
Detroit, Mich.
Need clarifi cation on budget chartsDear Editor:
I have been reviewing your budget in Chart 1 on page 54 of your November 2011 edition.
I am wondering how many counter sales people you are including in this $63,276 annual payroll?
Since labor is one of the variables that can be controlled, I am studying that section of your charts.
Chuck Simons, Owner/managerTire Pros
Newhall, Calif.We asked the author of that article, Norm Gaither, to respond.
Here are his comments:
“For the purpose of the budget numbers of $63,276, that would make a full-time person and a part-time person.
“Th e way we suggest to pay the people on the counter with responsibility (assistant manager), is to pay them about $45,000 per year and then pay them 5% of the net profi ts before taxes.
“We also suggest you pay the manager around $60,000 per year with 10% of the net profi ts before taxes.
“Of course in California, Chicago, Dallas and all the larger cities your pay may be a litt le higher.
“Please feel fr ee to call or e-mail with any other questions. My offi ce number is (757) 301-9897 and my cell is (757) 593-7063. My e-mail address is [email protected]. Or visit our website at www.dsp-20group.com
Th anks for your interest.Norm Gaither, President
Dealer Strategic Planning Inc.Virginia Beach, Va.
Your turn
Join Modern Tire Dealer’s National Advisory CouncilEach month, Modern Tire Dealer is guided and infl uenced by a select group of readers — members of our National Advisory Council. Th ese members’ opinions are the heart of the monthly Ludwig Report, compiled by well-known industry analyst Saul Ludwig. If you’d like to join this prestigious group, please let us know. We’d love to hear from you. Contact Editor Bob Ulrich at [email protected] or call (330) 899-2200, ext. 11.
“Business is not good. The current trend is customers buying what they need and not buying discounted quantities. In 34 years of the tire business, I never saw any month as slow as December 2011. We had a tremen-dous 2011 with record sales, but December just didn’t follow suit!”
Marty Gilkes, General ManagerJee Wholesale Tire LLCHouston, Texas
“I feel business will be soft until June 2012. Manufactur-ers will have surplus inventory. Wholesalers, in general, are overstocked.”
Jeff Cohen, Co-ownerTraction Wholesale CenterBensalem, Pa.
“The tire manufacturers keep raising prices. They are pricing themselves out of the market, forcing the consumer to buy foreign-made tires. Wake up!”
Jerry Reygaert, OwnerReys Auto & TireShelby Township, Mich.
“I think we are seeing some improvement in the overall optimism our customers are feeling toward our economy.”
Bill Anders, PresidentBurlington Tire Service Inc.Burlington, N.C.
“Our rural area is very strong, and we expect it to stay strong for at least the next year.”
Mike Thompson , PresidentThompson’s OK Tire Inc.Beloit, Kan.
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