RANCHO BERNARDO, Calif. — An era of tremendous demand that has outpaced supply for giant off-the-road tires will continue another four or five years, according to a Bridgestone/Firestone executive.
The OTR tire business has faced a "perfect storm" of global issues since late 2003 when demand jumped and surpassed supply, said Shawn Rasey, executive director of North American sales and marketing for Bridgestone/Firestone Off Road Tire Co.
This collision of forces "unleashed a great deal of havoc for us all," he said in his keynote address at the Tire Industry Association´s annual Off-the-Road Tire Conference in Rancho Bernardo in February. It also has created opportunities for companies that can adjust their business models to compete in an Internet-driven OTR tire marketplace.
OTR tire makers and dealers must make smarter choices about the segments they want to be in, Rasey said. They need to partner with customers and they need to make a profit.
"The age of trying to be all things to all people is over," he said. "No one can afford it, and we all know it doesn´t drive growth anyway."
When demand for OTR tires skyrocketed in late 2003, BFS already had begun shifting its OTR tire business model from a "make-it-all, sell-it-all, try-to-be-all-things-to-all-people mindset" to one more focused, specialized, efficient and profitable. Yet it still wasn´t enough to overcome the simultaneous collision of forces that hit the industry, Rasey said.
Those forces included the rapid industrialization and growth in Brazil, Russia, China and India. These latter two countries alone represent more than one-third of the world´s population, he said. At the same time, China and most of Asia are growing at almost double-digit levels annually, and entrepreneurship is becoming a powerful dream for many.
"Based on population growth alone, we can all expect significant growth to continue in off-road tire volume worldwide and well into the future," Rasey said.
Other contributing factors to the perfect storm are the wars in Afghanistan and Iraq and hurricanes that hit the U.S. Gulf Coast, which created additional demand for OTR tires; the effect of skyrocketing raw material and operating costs along with a global mining and petroleum boom; and the impact of the Internet.
Rasey called the Internet arguably the most significant of all the forces impacting the OTR tire market. It created the most powerful pipeline of information in human history and has leveled the playing field dramatically, he said.
Information that previously was available only to the largest companies through their information technology and research departments "was now available at the speed of light to anyone with a personal computer, with only a few clicks of a mouse and a search engine called Google," he said.
The world now essentially is flat, thanks to the Internet, he said. "Today, anyone with a laptop, an Internet connection and the right software access can check on the price and availability (or in some cases, nonavailability) of off-road tires anywhere and any time."
Prior to late 2003 when OTR tire demand took off, rubber tonnage for these products was flat, Rasey said. Inventories were high and companies were struggling to find ways to make and sell more products to offset the lower prices they were getting for them in the marketplace.
That´s when BFS management decided they had to make the OTR business more profitable and efficient.
To achieve this, the tire maker established three key focuses-strategic, technology and higher value, Rasey said.
Part of its strategic focus involves determining which distribution channels and segments can sustain profitable long-term growth, then seeking to lead in those segments.
To support its information technology focus, Rasey said the company re-engineered its sales and information processes to anticipate the tire performance and forecast needs of each OTR tire segment better as well as target customers within those segments.
With its higher value focus, the company developed a litmus test that said, "If whatever we do doesn´t create a higher value that matters to the customers we seek, that matters to our distribution partners and that allows Bridgestone/Firestone to make money and grow, it´s not a good idea and we won´t do it."
To address the growth in OTR tire demand, Rasey said BFS´s Tokyo-based parent Bridgestone Corp. is increasing its giant OTR tire production by more than 20 percent over the next four years. This includes an investment of $600 million in a new OTR tire plant in Hibikinada, Japan, along with capacity expansions at factories in Shimonoseki and Hofu, Japan.
The company also is spending $5.2 billion between 2006 and 2009 to increase its captive supply of raw materials from steel cord to natural rubber.