Tire manufacturers for the most part enjoyed sales growth and profitability in North America in 2004, and the industry´s biggest players expect the success to continue in 2005 despite the usual challenges.
Officials from Bridgestone/Firestone, Cooper Tire & Rubber Co., Goodyear and Michelin North America Inc. forecast continued improvement while dealing with rising raw material costs, tire monitoring regulations and other issues.
Overall, the business climate was good in 2004, said Jon D. Rich, president of Goodyear´s North American Tire unit, "although it was filled with a lot of ups and downs."
The Akron tire maker´s largest division posted sales of $5.84 billion through nine months in 2004, up 15 percent from $5.08 billion in 2003. Through September, the North American Tire business also produced operating income of $16.2 million, a huge turnaround from its $116.2 million loss of 2003.
Rich said demand for commercial tires was strong for Goodyear throughout the year, reflecting the strength of the transportation industry. Replacement sales were very brisk in the first half of the year, dipped significantly in the third quarter and seemed to rebound at year-end, he said.
Business also was positive for Cooper, according to Patricia J. Brown, the company´s vice president of global branding and communications, even though the second half of the year was soft.
Findlay, Ohio-based Cooper reported North American Tire segment profits of $61.8 million through nine months, up from $53.1 million in 2003. The unit´s net sales also rose over 2003, up 14 percent to $1.38 billion from $1.21 billion.
Christine Karbowiak, Bridgestone Americas Holding Inc. vice president of public affairs, said BFS´ consumer tire business experienced a strong first half in 2004 but a weaker second half. Truck and bus tire sales were up throughout the year, she said.
Bridgestone Americas Holding recorded operating income of $235 million through nine months on sales of $6.8 billion, as passenger, light truck and medium truck tire sales in North America were strong in both the replacement and original equipment markets.
Michelin also had a strong year in the original equipment segment of the truck tire market, said Marc Laferriere, vice president of marketing for Michelin Americas Truck Tires.
On the passenger and light truck tire side, "a long-awaited improvement in tire shipments was seen through mid-year, but then slowed substantially as surging oil/gas prices depressed retail tire sales," according to Pascal Couasnon, vice president of marketing for Michelin Americas Small Tires.
And in 2005...
Cooper expects business to be brisk in 2005, "with similar increases in the Rubber Manufacturers Association forecast range of 2-3 percent," Brown said.
Rich is equally optimistic for Goodyear, noting that although the company is still in a turnaround phase, "we had a terrific 2004 and see good signs that we can keep the momentum going."
Karbowiak pointed out "analysts will be watching to see if issues such as oil prices, interest rates and inflation will have an effect on the truck/bus momentum, but current assessments are that there should be continued strength throughout the year."
On the consumer side, she said, "analysts are suggesting that the original equipment segment will be slow in the first quarter, with a moderate recovery over the summer. They also suggest that sales in the replacement market will recover in the first half and show a strong second half."
Both Laferriere and Couasnon see improvement continuing for Greenville, S.C.-based Michelin through 2005. Laferriere anticipates that all aspects of the truck tire business will experience growth; Couasnon figures that as oil and gas prices—which have dropped about 25 percent from their high—moderate their climb, "consumer confidence and economic improvement should accelerate."
What´s up, what´s down
Improvement in the commercial truck tire market will continue and the replacement tire business "will be extremely competitive," Goodyear´s Rich said. "As has been the trend of the last several years, we see ultra-high-performance and light truck/SUV segments continuing to outpace the industry."
Ultra-high-performance, high-performance, SUV and light truck tires will grow because of OE sales of vehicles needing these tires, according to Cooper´s Brown.
Nashville, Tenn.-based BFS anticipates continued growth in consumer, SUV, run-flat, high-performance and touring tire segments, Karbowiak said.
Couasnon sees performance tires again showing above average growth. The growth of P-metric light truck tires also should continue, he said.
On the other hand, sales of S-rated broadline tires, especially in 15-inch and smaller sizes, likely will fall, Couasnon said, noting that the OE market has moved away from such tires.
Shipments, imports up
Both Michelin and Cooper expect to increase their share of North American tire shipments for the replacement market in 2005.
In the original equipment truck tire market, Michelin experienced significant growth in 2004 and is expecting a rise this year, Laferriere said.
Couasnon figures that economic improvement through 2005 will gain steam and drive tire shipments upward, with the second half of 2005 showing gains over the like period in 2004.
In terms of supply, Michelin and Cooper expect imports to grow compared with domestic production. "Capacity increases in the U.S. will moderate," Brown predicted. "Imports will continue to be strong."
Domestic output should be at capacity in 2005, which means additional demand created by strong market growth will be filled by imports, Laferriere said.
BFS´ domestic production is running at or near capacity for its key goods, Karbowiak said. The company relies on global sourcing, meaning that supply constraints in one part of the world can be addressed with product from another, she said.
Upward spiral continues
The raw material pricing picture is unlikely to improve in 2005, the tire company officials agreed.
BFS is experiencing continuing pressure because of unstable raw material costs and supply shortages and the firm expects that to continue this year.
"While the recent reduction in crude oil prices is welcome, many tire raw materials, including natural rubber and steel, are not related to oil prices and continue to be in short supply, subject to severe fluctuations depending on increased demand from one sector or another," Karbowiak said.
As raw material costs climb, availability will become a larger issue concerning all manufacturers, Brown said.
That could prompt increases in tire prices. In fact, she said, Cooper expects a minimum of two or three hikes in 2005. Goodyear, BFS and Michelin didn´t comment on tire pricing expectations.
Tire manufacturers also are facing regulations dealing with tire pressure monitoring systems, Rich said.
Brown cited the Transportation Recall Enhancement, Accountability and Documentation Act and other government regulations, along with size proliferation, as issues that will impact the industry. Michelin´s Couasnon said distribution, currency fluctuations, global demand and the pace of growth in China, especially in the OE market, and its consequences on the inflow of product in the North American market will be interesting.
Brad Dawson and Bruce Meyer, Rubber & Plastics News staff, contributed to this report.