Pneuhage and Recamic – "no compromises"

When the Pneuhage Group began retreading using the Bandag process at its Karlsruhe, Germany plant in 1988, it was not yet fully apparent how the company would develop in this market segment over the coming years. Today – exactly quarter of a century later – Pneuhage is positioned as one of Germany’s largest retreaders and is now a Michelin Recamic partner. A key factor in its business success has been the 88 outlets Pneuhage operates. Of these, the majority are active in the commercial vehicle tyre segment. They are the foundation upon which future growth also seems possible, explains managing director Erwin Schwab during a visit to the Pneuhage rereading facility in Nossen, near Dresden.

Virtually all of the 70,000 or so tyres retreaded in the company’s two factories, in Nossen and at the headquarters site in Karlsruhe, are sold through Pneuhage’s own outlets. This is “very much a key success factor,” says Erwin Schwab. On the one hand, the proceeds earned through business with resellers can’t be compared with that achieved with sales through a self-owned organisation. On the other, these outlets ensure the all-important proximity to the company’s customer base. For the Pneuhage Reifenerneuerungstechnik GmbH managing director, proximity also means a personal relationship with customers who need truck tyres, whether new or retreaded.

The consistency with which the company relies upon proximity to its customers was clearly shown following Germany’s reunification in 1990. The retreading plant was established in 1987 and production in Karlsruhe had been underway for only two years when the wall was demolished. The company, incidentally, entered the retreading segment prior to this, with its 1963 acquisition of the Reifen Karle retreading business in Karlsruhe. Company executives saw great potential in the ‘new’ regions of the reunified Germany, however the market there was in very bad shape and lacked any market structure; as was the case for many aspects of life in the former Eastern Germany, the deck of cards was then completely reshuffled. During this virtual ‘foundation period’ after 1990 a decision was made in relation to all the company’s business activities – its Pneuhage outlets’ retail tyre trade plus the Interpneu wholesale business and the retreading operation – to extend into the new federal regions. The company was also active there from the start with its ‘Pneuhage Vertriebspartner’ franchise network (which today has 220 members, primarily operations focused on passenger car tyres),

Soon the first the first company-owned Pneuhage branches opened; today almost half of the company’s 88 outlets are located in the former German Democratic Republic. One of these is the Nossen site near Dresden. The company acquired a prime location property there, and the site offered sufficient space for a fully-fledged pre-cure plant and associated logistic setup. The factory in Nossen entered production as early as 1991. Erwin Schwab shares that due to the proximity between the production site and sales points, logistics and processing costs for customers in the new federal regions of Germany were kept low. From the very start, Pneuhage supplied so many of its outlets in Eastern Germany that the retreading plant in Nossen operates at the same level of utilisation as in Karlsruhe. 

The subject of casings is currently an important one for retreaders in Europe. The raw material for every retreading operation is and will remain used tyres, specifically their substructure, the casing. It is in this context that proximity to customers through self-operated outlets particularly pays off. While other, centrally set-up retreaders – such as those from the new tyre segment – must gather a portion of their casings from throughout an entire country or even all of Europe, Pneuhage mainly sources its casings from its distribution area in Saxony, Thuringia, Brandenburg and Saxony-Anhalt (all former GDR regions) and also in Southwest Germany. Customers there are supplied with new tyres and Pneuhage also strives to retrieve the casings.

The high proportion of at least 50 per cent customer casings highlights the close triangular relationship between customer, outlet and retreading. At least a further quarter of the retreaded casings are sourced through the Pneuhage Group, leaving only the remaining 25 per cent of needs to be filled on the open market, although Pneuhage Reifenerneuerungstechnik says this still represents the purchase of a good number of casings. 

Compared with ten years ago, acquiring essential, suitable casings for retreading is much more problematic today (more on this later). The percentage of imported truck tyre brands on the market has significantly increased over the years, and this has led to a shortage of casings as some of these are not considered retreadable. And the evolution of tyre dimensions to narrower aspect ratios and the resultant enlargement of potential product portfolios ensures that suitable casings are often lacking. However, Erwin Schwab stresses: “To date we have always received all the casings we’ve needed.”

While structure and business relationships needed to be built up in the market that emerged following the collapse of the German Democratic Republic, the market also delivered – as mentioned above – significant development potential. However, at the same time developing a market more or less from scratch requires a hefty transfer of knowledge from the supplier to (new) customers. At the start of the 1990s, Pneuhage’s management in Karlsruhe were convinced it could only achieve results in the former East Germany and develop stable business relationships when its on-site presence was properly set out – specifically, if it was close to its customers. “I’m a friend of mobility,” says Erwin Schwab, who oversaw the set-up of the retreading business in Nossen from the very beginning and later led the business as managing director. Consequently, Pneuhage typically offers a mobile service through its outlets. “Our tyre service technicians are often on-site with our customers.”

Following the company’s start in Eastern Germany, its commercial vehicle business expanded significantly and has developed, says Schwab, into a pillar within the company.

According to Erwin Schwab, the professional marketing of retreaded tyres is not merely all about the (perceived) major brands behind them – whether Bandag or Michelin with its Recamic range. “We, as people, sell the tyres,” comments the managing director. And through personal contact via the company’s outlets it is possible to significantly influence the customer’s purchase decision. The ultimate decisive factor is of course product quality, but it goes without saying that cost and the advice and service received on-site must also be just right. 

Schwab emphasises the significance of personal influence in reference to the transition period when the company switched from Bandag to Recamic and became a Michelin partner and system provider.

Pneuhage was a Bandag partner when the first tyres in the new Karlsruhe factory were produced in 1988. And when it was joined by the second factory in Nossen three years later the company maintained its loyalty to the (then) US system provider and pre-cure retreading market leader. It was only ten years later that Pneuhage swapped supplier and entered into a franchise agreement with Michelin’s Recamic. Why the swap? “At this time Bandag was no longer right for us,” recalls the managing director. And “very efficient machinery with a high level of quality and accuracy” is available through Michelin/Recamic. Furthermore, the treads on offer were more application specific and covered a broader range of dimensions. The product was simpler to apply to low aspect ratio tyres and the process used a lower operating temperature which was kinder to casings. During the changeover the company, within a two week period, completely dismantled the Bandag production equipment in both plants and installed the new Recamic equipment – then started up production at the two structurally identical production facilities, where 25 employees today work. Schwab declined to report how much was invested in the switch from Bandag to Michelin/Recamic beyond saying that “we knew that it would pay off.” 

He adds: “We didn’t want to compromise on anything.” Along with the benefit that both production sites were completely new designed without the need to take existing equipment into consideration, the managing director views the total renovation as “a symbolic step”. Pneuhage was, as mentioned, certain of “receiving a better product with Recamic.” Whoever wishes to argue this with their customers is better off when a clear break with the past is made. The advantage of the new system needed to be made clear to customers. This was, Schwab continues, a task for the company’s entire sales team. Schwab places great value on the fact that it wasn’t just the Michelin brand and the range of treads the French manufacturer offered that had persuasive power, but also the influence of Pneuhage’s own team.

Pneuhage’s commercial vehicle tyre and retreading business didn’t just take off through the expansion its own retail network in Eastern and Western Germany. The switch from Bandag to Michelin/Recamic and the as-mentioned change in strategy also aided this. In regards to retreading, this provided a stronger orientation towards the growing quality market segment; the future aim, in response to economic considerations, was to produce more tyres for regional and local transport and fewer for the construction segment. Thanks to Recamic, after the changeover Pneuhage had 70, 65 and 60 series tyres, sizes previously only barely technically practicable, immediately at its disposal. Through this, the company was able to establish a “completely new circle of customers” and with them additional and especially profitable volumes, and also partially distance itself from the fiercely cut-throat competition in the lower end of the market. At the same time, this change of strategy in Pneuhage’s retreading business matched the changing requirements of increasingly professional truck fleets. In the truck tyre business it is “no longer possible to survive without high-end retreading.” Schwab adds: “We’ve been very successful since we started retreading with Recamic.”