The Condor Will No Longer Fly

Reiff Reifen & Autotechnik (Germany) gave up the production of retreaded passenger car tyres at the end of December 2004, because it was not making a good enough return on its investment. The Condor tyres it produced were a well-known brand and the Reiff manufacturing plant, built only five years ago, was considered the “most modern in the world.” What caused the degeneration of such a promising business model?

Managing director and shareholder, Eberhard Reiff, decided to inject approximately 2.5 million euros into the reconstruction of a new plant following the destruction of the previous site in a fire. He believed that Germany had a future in retreaded passenger car tyres if it invested in the most modern machines and operational sequences, and so the company did.

The withdrawal of its major competitor, Gummi-Mayer, at the same time was also encouraging to Mr Reiff. He recognised changes in the market and believed that other retreaders would also retract their services from the segment. The market seemed to comply with his prediction: At the end of 2001 Vergölst (Bad Nauheim, a subsidiary of Continental), which was the largest producer at the time, negated its retreading activities. But Mr Reiff’s calculation, that Gummi-Mayer and Vergölst’s business would distribute itself through the remaining market and from which Condor would take the largest piece of cake, was wrong. Instead of changing to alternatives like Condor the end consumers bought low budget new tyres from Eastern Europe or the Far East.

Through a quality offensive and with the support of the Association of Industrial Retreaders, Mr Reiff and his colleagues (from companies Ihle and Schwarz) began a campaign to impress upon customers that German retreads were more sophisticated than cheap new tyres. Their opinion had little affect on the consumer, as did any reference to the environmental benefits of purchasing retreads instead of new tyres.

Despite all efforts the German retreader could not compete with the low labour and energy costs that existed in Eastern Europe or South East Asia, where the new tyres were produced. It was particularly impossible for the company to stop the price purge. Eberhard Reiff could have continued to sell Condor retreaded passenger car tyres, but at prices that could not justify further investments. With the initial investment repayment due to be completed this year Mr Reiff had to decide whether to re-invest a considerable six-digit sum into new and current tyre forms – or to make the decision to leave the market segment. He decided that any further investment would be an unprofitable move.

The remaining retreaders of passenger car tyres for the German market are Reifen Ihle (brand Rigdon – Reifen Ihle Günzburg Donau) and Schwarz (brand Respa – Reifen Schwarz Passau). Together they produce less than half a million pieces per year. Like Reiff Reifen before them the companies believe they can compensate for Reiff’s closure and thus survive in the niche of passenger car tyre retreads. However their long-term success is in doubt. It seems that the retreading of passenger car tyres, in a modern, western and highly developed country is a diminishing business model.