Skip to main content
Sister Publication Links
  • European Rubber Journal
  • Plastics News
web
Subscribe
  • Login
  • Register
  • Subscribe
  • News
    • ITEC
    • Automotive
    • Tire
    • Non-Tire
    • Suppliers
    • Silicone
    • Latex
    • Coronavirus
    • Executive Action
    • Government/Legal
    • Opinion
    • Technical Notebooks
    • International Elastomer Show
    • Women in Tire & Rubber
    • HEXPOL Sponsored Content
    • Goodyear recognized by Lockheed Martin as 'elite supplier'
      EV tire advancements to help secure future
      Lambillotte: Only question on AVs is timing
      CAR official says EV future brighter than autonomous
    • Goodyear to install dynamic driving simulator at Luxembourg site
      Nokian Tyres to add up to 150 jobs at Dayton, Tenn., factory
      Biden signs executive order, prioritizes U.S.-made EVs, PPE
      Conti starts production of ‘HL' load index tires for select OE customers
    • Order takes Michelin-Enviro partnership a step closer
      Goodyear to install dynamic driving simulator at Luxembourg site
      Nokian Tyres to add up to 150 jobs at Dayton, Tenn., factory
      Conti starts production of ‘HL' load index tires for select OE customers
    • NewAge Industries promotes two from within
      EnergyEne gets grant to focus on guayule latex
      DuPont investing in Liveo line of silicone products
      A change at the top for Stockwell Elastomerics
    • NuSil's high-purity silicones are taking off
      Audia Elastomers launches new range of sustainable TPEs
      Order takes Michelin-Enviro partnership a step closer
      Phillips Carbon Black expanding capacity at site in India
    • NuSil's high-purity silicones are taking off
      NewAge Industries promotes two from within
      Rubber Division scholarships, stipends available
      DuPont investing in Liveo line of silicone products
    • WCCO task force navigates pandemic, expands communications
      ASTM cancels April meetings as COVID-19 continues impact
      Paycheck Protection Program funding reopens Jan. 15
      Detroit Auto Show canceled; alternative event being planned for September
    • NewAge Industries promotes two from within
      A change at the top for Stockwell Elastomerics
      Angelos Papadimitriou to leave position with Pirelli after six months on job
      Tero Peltomaki named Cimcorp CEO
    • Biden signs executive order, prioritizes U.S.-made EVs, PPE
      ITC votes to keep duties in place on China P/LT tire imports
      Hwa Fong joins Taiwan tire makers' bid for alternative to import duties
      NLRB certifies USW as bargaining unit for Kumho Tire plant in Georgia
    • Editorial: Against a backdrop of turmoil, M&A deals give glimpse of normalcy
      Column: Pandemic looms over everything in life, business in 2020
      Column: Lessons from the 2020 Best Places to Work
      Editorial: Silicone hit hard by pandemic, expected to bounce back
    • Advancements in synchronous drive belt design for industrial and consumer markets
      Effects of multiple repurposed materials for reinforcements of standard rubber compounds
      Impact of peroxide blends on the cure rate and aged properties in HNBR
      Techniques to detect long chain branching in polymers
    • Rubber Division seeks abstracts for 200th Technical Meeting
      WORD panelists say evolution, authenticity keys to success
      IEC keynote: Communication key to logistics
      IEC speaker: Specialized elastomers may reduce spread of life-threatening pathogens
    • WORD panelists say evolution, authenticity keys to success
      New video celebrates women in rubber industry
      ITEC panelists say women can thrive in tire industry
      Rubber Division planning second Women of Rubber event
    • Sponsored By HEXPOL Compounding
      Faster Access to Your Polymer Compounding Experts Around the World
      Sponsored By HEXPOL Compounding
      Take a walk thru a HEXPOL Lab
      Sponsored By HEXPOL Compounding
      HEXPOL offers a unique selection of High Performance Elastomers to match your application requirements
      Sponsored By HEXPOL Compounding
      It’s what you can’t see that makes the Difference at HEXPOL
  • Blogs
    • Products
    • Wacky World of Rubber
    • New Products: Nova thinks outside the box with sealing tech
      New Products: MonTech introduces 1,500 kN lab press
      New products: 3M introduces new durable, pliable medical adhesive
      New Products: Lanxess launches energy-efficient PU elastomer
    • Wacky World of Rubber: How Trelleborg, teens sealed a spot in the world record book
      Wacky World of Rubber: Of chicken and feet, but not chicken feet
      Wacky World of Rubber: Time to go mattress shopping
      Wacky World of Rubber: Because nothing says football like 'frunk' shrimp
  • Newsletters
    • Rubber in Automotive
    • Silicone News
    • Latex News
    • Sign Up for Newsletters
    • Goodyear to install dynamic driving simulator at Luxembourg site
      Nokian Tyres to add up to 150 jobs at Dayton, Tenn., factory
      Biden signs executive order, prioritizes U.S.-made EVs, PPE
      Conti starts production of ‘HL' load index tires for select OE customers
    • NuSil's high-purity silicones are taking off
      NewAge Industries promotes two from within
      Rubber Division scholarships, stipends available
      DuPont investing in Liveo line of silicone products
    • EnergyEne gets grant to focus on guayule latex
      Rubber Division scholarships, stipends available
      Bridgestone bets on guayule as alternative natural rubber source
      Synthomer CEO MacLean to step down by early 2022
  • Multimedia
    • Videos
    • Photo Galleries
  • Directory
  • Resources
    • Classifieds & Mold Mart
    • Sponsored Content
    • White Papers
    • Sponsored By HB Chemical
      The Company Behind the Inventory
      Sponsored By French Oil Mill Machinery
      Process Improvement, Cost Reduction with Custom Press Systems
    • Sponsored By Uncountable Inc.
      Cooper Standard deploys lab informatics platform to synchronize R&D
      Sponsored By Elkem
      LSR Select™: A solution to improve your financial impact in molding applications
      Sponsored By HEXPOL Compounding
      Understanding and Selecting Performance Additives for Rubber Compounding
      Sponsored By HEXPOL Compounding
      Peroxide Cureable Silicone Injection Molding
  • Data
  • Events
    • RPN Events
    • RPN Livestreams/Webinars
    • Industry Events
    • Past Events
    • ITEC Library
    • International Silicone Conference Library
    • 2021 Healthcare Elastomers Virtual Edition
      2021 Rubber in Automotive Virtual Edition
      2022 ITEC
  • Advertise
  • DIGITAL EDITION
MENU
Breadcrumb
  1. Home
  2. News
October 30, 2006 01:00 AM

The customer´s burden: As cost of tire production goes up, someone´s got to pay

Miles Moore
  • Tweet
  • Share
  • Share
  • Email
  • More
    Print

    WASHINGTON—Higher costs, caused primarily by sharp increases in raw material and transportation expenses, have led nearly all tire makers to raise prices repeatedly during 2006.

    Mostly, the price hikes are sticking, according to tire manufacturers, while tire dealers report consumers generally aren´t rebelling over the higher prices. And as the cost of business continues to rise, the tire makers expect to initiate further price increases every few months.

    Michelin has been the most active company in increasing prices, announcing at least five during the year. That included one worldwide hike by 6 to 8 percent for original equipment passenger and light truck tires; one of 4 to 6 percent for motorcycle, scooter and bicycle tires; and several across-the-board for all tire lines and brand names, including a total increase in ag tires of up to 13.5 percent for the year so far.

    More typical is the example of Toyo Tire (U.S.A.) Corp. The company pushed through three price increases for the first 10 months of this year for passenger, truck and off-road tires, a total as high as 14 percentage points for off-road tires. Similarly, Kumho Tire U.S.A. Inc. boosted prices twice, by 7 and 5 percent on selected lines, and Bridgestone/Firestone also had two, of 5 and 4 percent for most products.

    BFS´s parent, Bridgestone Corp. of Japan, already has declared a price hike for next year-from 5.5 percent for auto, LT and motorcycle tires to 10 percent on construction vehicle tires, going into effect Feb. 1.

    The manufacturers´ view

    Large increases in the prices of raw materials are the main engine behind hikes in 2006, the tire makers said, although energy, transportation and general operating costs also play a role.

    "Natural rubber is trading at or near its peak, and setting new records every day," said Clif Armstrong, director of original equipment sales for Continental Tire North America Inc.´s Commercial Group. Conti boosted prices March 1 by as much as 6 percent on all commercial and OTR tires, and followed that on July 1 with a 5-percent increase on LT and auto tires.

    NR prices may fall a little from day to day, but keep recovering and remain very high in any case, Armstrong said.

    Prices for NR hit a 12-year high this summer, rising 40 percent in a 60-day period, said a spokesman for Goodyear. The company had three price hikes this year: 4 percent across all lines April 1, 5 percent on medium truck tires Aug. 1 and another 5 percent on consumer tires Sept. 1.

    Petroleum prices, however, have just as big an impact on tire makers as rubber, if not more, the Goodyear spokesman said.

    "If you look at it from a tire manufacturer´s perspective, an oil price increase is a triple whammy," he said. "Oil is a major ingredient in the production of tires. It affects the cost to make tires, it affects the cost to heat or cool the plant where we make tires, and of course the trucking cost to ship tires."

    The simultaneous and global price increases in NR, crude oil, synthetic rubber and natural gas are unprecedented in the tire industry´s history, according to a BFS spokeswoman.

    "We´ve tried to overcome these raw material price increases with improved productivity and operational efficiencies," she said. "But those measures have not been enough to overcome raw material prices of this magnitude."

    Specifics may vary from country to country, but the problem of rising costs is worldwide, said Eric La Corre, chief financial officer for Michelin North America.

    "Natural gas is the largest source of energy for our North American plants," he said. "In Europe, it´s electricity. But both have gone up significantly."

    The cost of shipping by sea has risen at least as much as trucking, La Corre said, and for reasons in addition to fuel costs.

    "Sea freight costs have risen largely because of a shortage of available capacity," he said. "Two years ago, a tremendous growth in the demand for shipping started, particularly in Southeast Asia. Those countries have significant needs, they import a significant number of products, and as a consequence there are not enough ships. The shortage of supply means higher prices."

    In the first half of 2006 alone, Michelin´s external costs-including raw materials, transportation and energy-were $518 million, according to La Corre. This compares with $570 million for all of 2005, and $317 million for the full year 2004.

    Michelin´s projected 2006 earnings are about $1.8 billion, so the company´s external costs over the past 21/2 years have nearly equaled its annual income, La Corre said. With expected full-year external costs of $1 billion, they soon will exceed a year´s income for the tire maker.

    In the face of rising costs, it is Michelin´s policy to pass the costs on to customers, and the price hikes it has made this year have stuck, La Corre said. Those increases have made up for most of the spikes in the company´s internal costs, he said.

    La Corre also said that, to his knowledge, other companies´ price increases have been sticking as well.

    "Our competitors, being faced with the same issues, go along the same path," he said. "Hardly a day goes by without a tire maker somewhere in the world announcing a price increase."

    Nevertheless, higher priced tires alone are not enough to offset higher external costs, La Corre said. Because of this, Michelin is working hard at applying best manufacturing practices internally, and also at cutting costs.

    Cost-cutting dictated the closures earlier this year of Michelin plants in Kitchener, Ontario, and Spain, according to La Corre. "They specialized in mass-market passenger tires, a market that has significantly declined over the past few years," he said.

    Conversely, the same effort dictated investing more than $25 million at the Michelin plant in Greenville, S.C., which has developed into one of the company´s most efficient factories worldwide, he said.

    Armstrong said Conti´s price increases also have stuck so far, but the company has had to work diligently on production and manufacturing efficiencies.

    "We´re trying to get as much productivity out of every employee as possible," he said. "There´s no way we could pass along such huge price increases in full to our customers."

    Dealer perspective

    Several dealers reported the price increases haven´t affected them all that much.

    For example, Thompson Tire Co. Inc., a five-store chain based in Christiansburg, Va., has passed some but not all of the increases from its suppliers on to customers, according to Fran Boyd, vice president of Thompson Tire and president of the Virginia Automotive Association.

    "This is a reality that is affecting a lot of people-not just us, and not just our competitors," she said. "It´s not just the tire industry that´s being affected by higher costs."

    Thompson Tire hasn´t seen any need to switch to more value-priced products, and neither have its customers, who are taking the price increases in stride, according to Boyd.

    "When customers come in, they know what they want, and we are still selling them our Tier One products," she said. "I´m sure there are people putting off tire purchases, but there are also people putting off house and vehicle purchases."

    Letter
    to the
    Editor

    Rubber & Plastics News wants to hear from its readers. If you want to express your opinion on a story or issue, email your letter to Editor Bruce Meyer at [email protected].

    SIGN UP FOR NEWSLETTERS
    EMAIL ADDRESS

    Please enter a valid email address.

    Please enter your email address.

    Please verify captcha.

    Please select at least one newsletter to subscribe.

    Get our newsletters

    Staying current is easy with Rubber & Plastics News delivered straight to your inbox, free of charge.

    Subscribe Today

    Subscribe to Rubber & Plastics News to get the best coverage and leading insights in the industry.

    SUBSCRIBE
    Connect with Us
    • LinkedIn
    • Facebook
    • Twitter

    MISSION

    To serve companies in the global rubber product industry by delivering news, industry insights, opinions and technical information.

    web
    Contact Us

    2291 Riverfront Pkwy, Suite 1000
    Cuyahoga Falls,
    OH 44221

    Customer Service:
    877-320-1726

    Resources
    • About Us
    • Digital Edition
    • Contact the Staff
    • Advertise
    • Order Reprints
    • Privacy Policy
    • Privacy Request
    • Terms of Service
    • Careers
    • Ad Choices Ad Choices
    • Sitemap
    Partner Sites
    • Tire Business
    • European Rubber Journal
    • Plastics News
    • Plastics News China
    • Urethanes Technology
    • Automotive News
    • Crain Brands
    Copyright © 1996-2021. Crain Communications, Inc. All Rights Reserved.
    • News
      • ITEC
      • Automotive
      • Tire
      • Non-Tire
      • Suppliers
      • Silicone
      • Latex
      • Coronavirus
      • Executive Action
      • Government/Legal
      • Opinion
      • Technical Notebooks
      • International Elastomer Show
      • Women in Tire & Rubber
      • HEXPOL Sponsored Content
    • Blogs
      • Products
      • Wacky World of Rubber
    • Newsletters
      • Rubber in Automotive
      • Silicone News
      • Latex News
      • Sign Up for Newsletters
    • Multimedia
      • Videos
      • Photo Galleries
    • Directory
    • Resources
      • Classifieds & Mold Mart
      • Sponsored Content
      • White Papers
    • Data
    • Events
      • RPN Events
      • RPN Livestreams/Webinars
      • Industry Events
      • Past Events
      • ITEC Library
      • International Silicone Conference Library
    • Advertise
    • DIGITAL EDITION