Magazine for the professional tire industry
Issue link: https://mtd.epubxp.com/i/449261
MTD January 2015 W hen the Chinese consumer tire tarifs are fully implemented, everyone in the industry will adapt accordingly. Tey will have to: Te tarifs will be in place for a minimum of fve years, and historical precedent makes 10 years a real possibility. They may even become permanent. Tarifs are a given in 2015. What else can we expect to see that will afect the industry in general and independent tire dealers in particular? Here are three more concerns that may become commonplace in the near future. At the very least, they will be topics of discussion. 1. Truck tire tarifs? Consumer tire shipments from China were up 86% from 2012 to 2014. Over that same period, truck tire shipments from the same country increased 30%; in addition, they represent a greater percentage of their market (35.5%) than Chinese consumer tire imports do (25.7%). Truck tire pricing is a concern among retreaders. In 2014, the average price diferential between a new and retreaded truck tire was a healthy 46.5%. Unfortunately, some low-cost imports skewed the average. According to Bob Majewski, owner of Sumerel Tire Service Inc. in Newport, Ky., truck tires from China are almost meet- ing retread prices on a cap and casing. He said a low profle 295/75R22.5 import is selling for $178 ($150 plus the Federal Excise Tax) "and they are geting lower. A cap and a casing is more than that. Tey need a tarif on it." Nick Mitchell, senior vice president of research for Northcoast Research Holdings, believes a tarif is a possibility. "Te ITC (International Trade Commission) voted unani- mously in early 2014 to retain the antidumping and counter- vailing duties that were levied against Chinese of-the-road tires in response to a 2008 judgment, despite the fact that Chinese manufacturers are pressing forward with eforts to fght the ruling. "Te odds look good that similar measures will be fnalized against passenger and light truck tires imported from China. "As such, I would not be surprised if the next area of focus is on the TBR tire market. China has the ability to produce nearly 120 million radial truck tires, so it is clearly a force that needs to be monitored." W hen asked if the United Steelworkers (USW) union is looking at petitioning for the implementation of any other tarifs on imported tires, such as on medium truck tires from China, Wayne Ranick, director of communications for USW International, said the union "will not rule anything out. We are always exploring opportunities to pursue trade cases where U.S. jobs are threatened and the security of families is put at risk by unfair trade." 2. Private equity influence. W hat do American Tire Distributors Inc., Dealer Tire LLC, BJ's Wholesale Club Inc. and Titan International Inc. have in common? Private equity frms have a signifcant stake in all of them. Tat trend will continue, based on the steady performance of the tire industry through economic ups and downs. Te infux of cash from private equity frms can change the landscape quickly. Tanks to backing from TPG Capital LP (Tarrant Capital IP LLC), ATD purchased Hercules Tire Holdings LLC and Terry's Tire Town Holdings Inc. for $655 million. In 2014, MHR Fund Management LLC made a major move on Titan, increasing the private equity shareholder's infuence over the company. On its website, MHR says it seeks to "exert control or signifcant infuence on its portfolio companies." Dealer Tire already has had two investment partners. Te minority stake owned by the frst, TA Associates, was purchased by the second, Lindsay Goldberg LLC, late last year. Carlisle Transportation Products was sold to American Industrial Partners. Wheel Pros LLC was acquired by Audax Group Inc. from Platinum Equity LLC. Most recently, Raben Holdings LLC, which does business as Raben Tire Co. Inc., sold an equity interest to Palladium Equity Partners LLC. President Tom Raben said Palladium "shares our vision of expanding the Raben Tire footprint within our existing markets and into adjacent markets across the U.S." 3. Eco-friendly tires. Corporate Average Fuel Economy (CAFE) standards seting a 49.6 mpg average fuel-efciency goal for 2025 almost necessitate eco-friendly or low rolling resistance tires at OE. Te afermarket is a diferent story, however. According to Modern Tire Dealer's 2014 Eco Tire Survey, tire dealers say 7% of their customers ask for environmentally friendly tires. Te highest request ratio is, not surprisingly, for hybrid vehicles, followed by sedan owners and electric vehicle owners. W hen asked if consumers were willing to pay more for eco tires, 61% of the dealers responding to the survey said "no." ■ Facts section: Future shock Look for... more tarifs? You never know. Te same goes for the fascination private equity frms have with our industry Chart 29 NEW P-METRIC AND LT TIRE SIZES/SKUS IN 2015 P275/35R15 SL P305/55R20 XL P315/30R20 SL P235/45R17 XL P245/40R18 XL LT205/70R15 LRC LT215/65R16 LRD LT255/55R18 LRD LT235/65R17 LRD LT255/65R17 LRD LT255/65R18 LRE LT375/45R22 LT355/40R22 LT375/40R24 LRF LT225/70R17 LRE LT265/65R18 LRD LT285/60R18 LRD LT315/70R17 LRC 37x12.50R22LT LRE 35x13.50R20LT LRE 38x13.50R20LT LRE Source: Tire & Rim Association 56