Magazine for the professional tire industry
Issue link: https://mtd.epubxp.com/i/449261
MTD January 2015 Industry analysis MTD: What about the smaller manufacturers? Mitchell: I think the smaller manufacturers that focus on the Tier 3 segment of the market will try to leverage the opportunity created by the protective measures against Chinese passenger tires in the U.S. Meanwhile, the product rich producers should make inroads in the niches they serve. MTD: What's the next merger you anticipate in the industry? Mitchell: I expect American Tire Distributors Inc. and Monro Mufer Brake Inc. to continue rolling up smaller wholesalers and installers, respectively. W hen it comes to the manufacturing side of the business, deal activity is much harder to predict. I am sure there will be some deals announced in Asia, especially in China, as producers look for opportunities to create synergies in the wake of what appears will be more restrictive trade with the U.S. I do not think the Big Tree will make any acquisitions in 2015, but I would not be surprised to see consolidation or strategic alliances- platforms to share technology, gain purchasing capital and capital alliances-formed among some of the manufacturers in the Tier 2 or Tier 3 segments. I suppose a suitor could emerge at Cooper Tire & Rubber Co.'s doorstep in Findlay, Ohio, but I do not think it is a high probability scenario at this point in time. MTD: How much do tire recalls afect the botom line? Mitchell: Unfortunately, recall, product liability and warranty costs are here to stay as they are clearly a cost of doing business. I would say these expenses typically equate to 2.5% to 3.5% of a manufacturer's revenue. Incredible cold led hot year for auto parts stores Low gas prices will fuel business in 2015 Record cold temperatures in early 2014 were a big boost to auto parts sales, and 2015 should be another strong year, says Nick Mitchell, senior vice president and research analyst for North- coast Research Holdings LLC. "The big chains had very robust same-store sales trends in 2014, partially driven by a huge tailwind from favorable weather conditions in the frst half of the year," Mitchell says. "Look- ing forward, I expect the group will perform very solidly well into 2015." Mitchell looks for the do-it-for-me channel to lead the way, with sales to grow 2% to 5% in 2015. But low gas prices will provide another boost, Mitchell says. "The sharp drop in fuel prices should help the do-it-yourself (DIY) consumer, and stimulate demand in this segment of the market," Mitchell says. He expects DIY sales to increase up to 3% in 2015. Quik-Link: 800-687-1557 ext. 11111 22