Black—as in finally being in the black—is beautiful in some segments of the rubber industry these days, with tire, hose and other rubber product manufacturers reporting they are returning to profitability. Finally.
The long climb out of the trough of recession is far from over. But the positive news from some quarters is welcomed in the perpetually struggling rubber industry.
In the biggest segment, tires, the news is encouraging. Goodyear's first-quarter sales jumped 20.8 percent, and the company posted operating profits of $240 million compared with a loss of $176 a year ago. Continental returned to profitability in that three-month period, recording $652 million in operating income and a 40-percent rise in sales.
The net results aren't as good, but still an improvement over recent disasters.
Companies in the hose sector also are experiencing better times.
At the NAHAD conference two weeks ago companies in the manufacturing and distributing end of the business reported a decided uptick in sales in the first three months of the year. For example, Eaton Corp.'s Fluid Conveyance Division is going great guns, according to Jeff Finch, the operations' general manager, with the OEM business coming “back with a vengeance.”
The most positive news from the hose segment is that the companies at NAHAD were pretty optimistic about growth for the full year.
Why is business getting better? First and foremost, rubber is a cyclical industry and was bound to improve someday.
One could point to the government stimulus, pent-up demand, a foreign currency situation that is encouraging exports and—in tires—the effect of tariffs being imposed on Chinese tire imports.
And then there is the impact of the cutbacks manufacturers took to survive the hard times—closings, layoffs, pay and benefit cuts for surviving workers. Everyone is leaner or they are gone.
Lots of problems remain. The rubber industry wasn't exactly the gold standard for prospering businesses during the good times, since it's a mature business at best. The future of feedstocks derived from oil, in availability and price, is worrisome. Natural rubber prices are very high, and events ranging from floods to excess wintering make its availability also problematic.
At least it now looks like the rubber industry is rising from the deep hole it found itself in. Finally.