CHARLOTTE, N.C.-Some Continental Tire North America Inc. dealers aren´t too happy with the tire supply situation, even while the firm restructures its operations.
"People drive in and like (the original equipment tires) they had, but we can´t get them, so we turn them over to something else," Alpio Barbara, owner of Redwood General Tire in Redwood City, Calif., said of customers wanting Continental or General replacement tires. "We put them on Michelins, Pirellis, Goodyears. If you´re gonna drive in with your car, you´re going to drive out with something. I´m not going to say I don´t have them."
Barbara, who said his fill rate from Conti is only 50 percent, said the tire maker´s lack of adequate supply has been an ongoing problem the past few years even before it closed its Mayfield, Ky., tire plant and began phasing out production at its Charlotte facility. He attributed much of the backorder problem to Conti´s increased commitment to its OE business and the resulting proliferation of SKUs.
"There´s so many different types of tires in the same size, it´s ridiculous," Barbara said. "It´s a logistical nightmare. Your inventory is unbelievable. It´s getting worse."
Other dealers who spoke on Conti´s supply problems agree the German-owned tire maker´s emphasis on OE fitments created backorders that now are complicated by production ending at two U.S. factories. One dealer, who asked to remain anonymous, said he and other dealers he knows are hesitant to promote Continental and General products for fear of not having the tires in stock when they need them.
Earlier this year, Conti admitted it had supply problems to attendees at a dealer meeting in Las Vegas. Company executives promised to correct the issues but warned supply disruptions probably would continue as the tire maker tries to lower its cost structure and attain profitability in North America.
Tom McMillin, general manager of Cassidy Tire & Service in Chicago who attended the meeting, said the supply to his dealership hasn´t improved. He said the Continental and General products coming into the dealership reflect what the tire maker´s executives said then, that volume discounts to move units would end. As a result, the dealership has been sourcing tires from Asia to keep its units up.
"For somebody like us who is sort of a medium-sized dealer, that wasn´t good news for us because a lot of times we live off those deals to be competitive," McMillin said. "I would say we still have mixed reviews with Continental."
Supply ups and downs
Two Conti executives who addressed dealers in Las Vegas-Andreas Gerstenberger, just promoted to executive vice president of sales and marketing, and Marketing Director Travis Roffler-acknowledged there are lingering supply problems but not across the board in all market segments.
Gerstenberger said there are tire lines where the firm´s fill rate isn´t acceptable. However, he said the rates for recently introduced Continental CrossContact LX and ContiProContact and the General Exclaim UHP and Grabber UHP are "competitive."
"We are not happy with everything that we supply to the market, not at all," Gerstenberger said. "We still have homework to do."
His assessment did ring true for some dealers. Bill Jarvis, owner of Schererville, Ind.-based Midwest Tire & Auto Repair Inc., said he´s more satisfied with his supply from Conti now than earlier this year or in 2005, and he said he believes his distributor may have bought extra quantities. Jarvis now is selling a mix of broadline and high-performance products.
Cassidy Tire´s McMillin said the dealership has been able to purchase large quantities of General Exclaim UHPs and is happy with how well that line is selling.
Roffler said Conti is "suffering most" with supplying the marketplace with replacement tires for OE fitments. "When you look at a pure replacement line like Exclaim UHP, the supply´s pretty good, but when you look at replacement tires that are original equipment source and therefore sought after in the aftermarket, that´s where supply becomes a little erratic."
He cited as an example the Continental CH95 OE tire, which is sought after in the replacement market. Conti now wants dealers to switch their replacement to the ContiProContact.
"We´re trying to pitch (dealers) on putting the Pro in. We have supply of the Pro, but they´re still ordering the CH95, and then we get ´digged´ on bad fill rates," Roffler said.
Although Conti´s North American supply may be "erratic," Gerstenberger and Roffler emphasized the tire maker is not sacrificing the General brand in favor of the premium, OE-driven Continental brand. Last year´s introduction of the General Grabber UHP and Exclaim UHP was only the start of Conti´s efforts to revitalize the General brand, and the company will launch another General line at this November´s Specialty Equipment Market Association show in Las Vegas.
Additionally, Roffler said parent Continental A.G. in Hanover, Germany, has "conceded" General as a brand for North America and that the Conti North American unit should determine the direction of the brand.
SKUs and more SKUs
In the past five years, SKUs increased roughly 30 to 40 percent in the replacement market, according to Gerstenberger, and dealers need to carry more than two or three to remain competitive. The proliferation of SKUs is causing Conti to work on a "platform concept" to make tire production more efficient, much like the auto makers build different vehicle brands on the same chassis.
The OE business takes priority in tire supplies, but Gerstenberger said the OE business is not Conti´s only concern, as the company´s OE share for the U.S. and Canada is 20 percent versus a replacement share of less than 5 percent.
Most of Conti´s OE business is with General Motors Corp. and Ford Motor Co., both of which have fallen on hard times with declining market share and production.
"Unfortunately, we are impacted by that," Gerstenberger said of the auto makers. "For example, the Charlotte plant had a very high OE share with Ford and General Motors."
Conti´s new Camacari, Brazil, plant is devoting 90 percent of its capacity to North American supply, according to Gerstenberger. The factory´s target capacity this year is 1 million tires, but Conti plans to expand annual capacity to 7 million or 8 million tires, Gerstenberger said.