Bridgestone to phase out bias truck tires in North America
As “Modern Tire Dealer” reports, in response to reduced demand Bridgestone is to stop supplying bias medium truck and bus tyres to the United States and Canada by the end of 2006.
North America
As “Modern Tire Dealer” reports, in response to reduced demand Bridgestone is to stop supplying bias medium truck and bus tyres to the United States and Canada by the end of 2006.
Michelin North America has announced a three-year supply agreement Volvo Trucks North America and Mack Trucks. As a result of this continuing relationship, Michelin fleet customers will be able to specify the Michelin line-haul products they value on every Mack line-haul truck and Volvo VN highway tractors.
Times have changed dramatically in the North American tyre industry. Nowadays there is no such thing as a one-brand dealer. The seemingly inexorable way to ever more private brands ceased with Firestone’s tyre recall. Now tyres have penetrated more than before into the consciousness of the consumers. One expected a “flight to quality”, which is a little misleading, because the house brands manufactured by large tyre companies do not have quality deficiency. The hoped for trend is directed to brands, toward brand image, and on brand contents. With this we arrive automatically at Michelin. No tyre manufacturer, in economically good as well as bad times, did as much for the structure of its tire brand as Michelin. Michelin was not the inventor of the steel-belted radial tyre, but the French tyre maker marketed it world-wide with a persistence which is worth admiration. There is no alternative to the steel-belted radial tyre. The French did not invent the multi-brand strategy, either. But they filled this operation with content and brought it into the market in such a way that an alternative was impossible. Nevertheless, Michelin puts its stamp on the markets of this world and in particular on the American market in a completely unmistakable form when it comes to multi-brand strategy.
Las Vegas is for Michelin a good and important meeting place, but the events and meetings outside of the fair hold themselves within clearly smaller frameworks than, for example, those of Bridgestone/Firestone. Michelin has attained clear advantages in the last three years in the American market. Was Michelin now the winner, or were Bridgestone (Firestone recall) and Goodyear (continuous large company losses) only the losers? One would underestimate the French if one would attribute their advances only to the weaknesses of the competitors. Anyone who analyses the American market can come to the conclusion, that the French would have asserted themselves in any case, although perhaps not as quickly. Anyhow, in North America they do ride on a wave of success, although this market has not yet recovered completely from the dramatic break-downs of “9/11”.
Although the results of the Pirelli group have improved during the first nine months of this year, it is the tyre business that really shines. What was taunted by analysts as the “old economy” two years ago now represents the pearl of the company. That tyres participate in the company’s turnover with “only” around 45 per cent, but with an EBIT of 174 million Euro for the first nine months in the face of expected 194 million EBIT for the company as a whole says it all. As in previous years Pirelli’s General Manager Tyres Francesco Gori travelled to Las Vegas in order to deepen contacts to the market, from which the Italian tyre manufacturer still expects a lot in the future.
On the largest tyre market of the world, the USA, Pirelli was not very lucky during the last 20 years. From all of this nothing is left. There is nothing in common and the two keep out of each others’ way. Nevertheless, Pirelli did not give up the US market. After the MIRS factory started in Rome/Georgia earlier this year, ever more strongly, the Italians will generate a turnover of approximately 250 million Euro this year with American customers and for the second time in a row will end a financial year in Northern America with a profit. This is all the more remarkable as that the initial costs of the MIRS factory are to be borne. This time Pirelli is taking the difficult and time-consuming route into the market via the OE manufacturers. But a glance on Pirelli’s OE business, which shines with high growth rates, is worth while: here Pirelli proceeds rather selectively; anyway, the Italians do not supply bread and butter tyres with weak margins. On the one hand it concerns high-quality ultra high performance and expensive Off-Road tyres, which are manufactured in Rome, and on the other hand the company supplies tyres from the Brazilian factories into the American original equipment to customers such as Ford and Chrysler. Beginning next year, Gori says, a considerable volume will also come from the newly built Brazilian tyre factory in Salvador (Feira de Santana, Bahia). This factory is considered as particularly efficient and economical, so that the OE business in Northern America might be good fun not only under volume criteria, but will be profitable as well. And concerning sales prospects Pirelli shouldn’t have any real worries, because right now there are dozens of dimensions that are homologated with General Motors, these will be followed by orders. Thus the growth in the North American OE market will continue.
However, also on the American replacement market Gori has set himself and his staff ambitious goals. According to Gori the tyre manufacturer succeeded in finding new dealers, that were interested in Pirelli, and these in sufficient numbers. Tyre dealers observe the market very closely and notice quickly, in which direction trends go and with whom they should form a coalition, in line with Gori’s perception. The good position within the OE business, in addition with predominantly high-quality tyres, let Pirelli become ever more a valuable partner for the replacement business. In the last few years Pirelli grew in North America annually by almost 20 per cent and this is what Gori wants to realise for the coming years, too. However, with all optimism Gori refers to the extremely hard competition in North America, where each manufacturer wants to maintain ground. Pirelli could improve drastically all services, delivery speed, etc., and even concerning the prices the tyre manufacturer was able to position the brand better than last year. “But,” acknowledges Gori, “we are still far away from what we want and what we have to reach.”
North America is the big challenge for Pirelli, here the Italians find larger growth prospects even over years, which must be exhausted. The termination of the co-operation with Cooper was in reality, at least it looks that way today, a completely new beginning in Northern America. Concerning the costs of distribution and services over the whole of the continent, Gori calms down: there was no problem, everything is on schedule.
Earlier this year it was clear that the CTNA (Continental Tires North America, previously General Tire) would again have to report a three-figure million loss. In the meantime it seeped through that this number is closer to 150 million Euro than “only” around 100 million Euro. This frighteningly high loss shows: In the European tyre business the company makes huge earnings and if the American losses have finally come to an end, the tyre section is not just strongest in turn-over (despite the expected next year’s higher growth in the Automotive business unit), but also the yield-strongest. Tyres still have good expectations in the company; among other things this assumption was underpinned by the majority purchase of the tyre business of the Malaysian company Sime Darby Berhad with two tyre factories with an already existing production capacity of four million passenger car, one million small truck as well as 300,000 heavy truck tyres.
Talking to T&A at the SEMA Show in Las Vegas, Manfred Wennemer (55) and Martien de Louw (57), who is responsible for Continental’s passenger car tyre unit as well as CTNA, affirmed that the American tyre business will reach break-even by the end of 2005. Wennemer specifies: “With the CTNA we will reach break-even in the last quarter of 2005 even though naturally we would be pleased, if we could reach it even earlier.”
Continental was not represented at the SEMA show with its own stand, unlike Bridgestone/ Firestone, Cooper, Goodyear, Michelin and Pirelli and other competitors, probably a cost-based decision. All too tragically this might not have been, because more important than meetings in the company’s booths at the show are meetings accompanying the SEMA show in the surrounding luxury hotels of the craziest city of the world. Martien de Louw and his executive team had invited the customers to an evening in the Mandalay Bay hotel, where hundreds of Continental’s “Best Friends” arrived. De Louw used this opportunity to present his complete executive team. Manfred Wennemer, who travelled to Las Vegas, too, was accessible “on the floor” for everyone, without pushing his colleague de Louw into the background. Optimism was noticeable in Las Vegas; but in order to see that the distance remaining to be covered remains rough and stony, requires no clairvoyance.
Bridgestone/Firestone has survived the largest tyre recall in the history of the tyre industry in North America, and yet has switched again into forward gear. Under the guidance of its charismatic boss John Lampe, the company is now working hard on an improvement of the results, so that the record loss extending far beyond a billion dollars for 2001 will soon be forgotten.
Two years ago Lampe succeeded at Las Vegas in bringing around 4,000 tyre dealers on the side of his company and the brands Bridgestone and Firestone. And he has lost none of his persuasive power. At this year’s SEMA Show in Las Vegas Lampe presented to thousands of dealers new Firestone products and advertising campaigns, aimed to affect these Firestone customers emotionally. It became clear that the new rise of the tyre brand Firestone cannot be stopped, not even in North America.
Talking to T&A, Lampe briefly reminded us of the tough times. At the peak of the crisis the company counter-steered with the brand Bridgestone. But then again Lampe doesn’t want to hear, that Bridgestone has been made a cheaper tyre brand as planned: “A more differentiated view is necessary. With a volume line we were cheaper, because we wanted to absorb Firestone decreases, but for example with the Potenza, which represents the top line, we have always held the price and could hold it. Since the Firestone recall we carried out changes, with which we can annually sell eight million additional Bridgestone tyres by now. Today we sell more Bridgestone and Firestone tyres than before.” Before and after! Talking to John Lampe that is to be heard several times. In Lampe’s world this means: before and after the tyre recall. During the last three years a change took place towards the brands Bridgestone, Firestone and Dayton. 65 per cent of all tyres sold carry a Bridgestone or a Firestone signature; today already predominantly that of Bridgestone. And that will continue, because nowadays the OE business is exclusively carried out with Bridgestone tyres and in the longer term this should affect the company’s replacement business. Approximately 40 per cent of all passenger car and 4 x 4 tyres, that are sold in America, went “before” into the OE business. Today there is only about 30 per cent. Lampe: “Three years ago we were in a rather despairing financial situation and had to do something for relaxation. The OE business was profitable at no time. And of course we could not afford to always produce volume to whatever costs, but we have very much paid attention to profitability. Our market share is now lower than “before,” but we have the more profitable dimensions. Also Michelin acted very selectively, and into these gaps pushed some European and Asian manufacturers.”
Because of the continuing market weakness and on-going high losses in North America, Goodyear’s situation in “Bob” Keegan’s 25 months as COO and president and in the 11 months as CEO remains extremely serious and worrying. Unlike competitors such as Michelin, Goodyear could not even increase market share by capitalising on the Firestone disaster.
Even worse: Bridgestone, with Firestone – a tyre brand that many predicted would not survive the crisis – is back on the road and advancing strongly. Cooper, during the third quarter 2003, added around almost ten per cent, while Goodyear could increase sales by only approximately four per cent, while the total market grew by more than six per cent. Also Goodyear’s figures continue to be under pressure, because the sporadic price increases could not compensate for past rises in raw material prices, margins remained lower than expected and the fixed costs “moved in the wrong direction” despite all restructuring measures, says Rod Lache, Analyst at the Deutsche Bank in New York.
Also the sales development in North America is not satisfactory: in 2002 Goodyear sold eight million tyres fewer in the US market compared with the year before, and in 2003 everything points to a further sales reduction of more than two million tyres. This is a clear sign of continuing acceptance problems on the market. Following this it is no surprise that analysts still do not recognise any signs of a turnaround in the recently submitted business figures for the first nine months of this year and that the visible trends give further reasons for concern regarding the future of the company.
Talking to Tyres & Accessories, Bob Keegan was still optimistic. It cannot be denied that fewer tyres than before have been sold. The biggest challenge is to generate growth in the highest market segment. This is the goal of the strategy “How Do We Win” with its seven quintessential points and its personnel policy that has already been explained to analysts in the early summer. Keegan: “I took a few good decisions concerning executive positions in order to be able to realise the necessary changes. My goal was not merely one of only bringing in outsiders. In all areas of the company we have a good mixture of old and newly-hired, high-level personnel. Jon Rich, who has to bear the load of the turnaround, has the same pattern of thinking as me.” Keegan was convinced that he has now brought together the correct executive team. “Managers who led the company into the crisis, are not necessarily the right staff to lead it out again. We needed a change of course, in order to be able to win. I feel very comfortable with the people, who now carry this responsibility along with me.”
The Spirit of America, one of three Goodyear airships operating in North America, has been involved in a minor accident. On Wednesday, the blimp broke loose from its moorings while landing at its base in Carson, California and drifted for 300 yards before crashing into a compost pile. There were no serious injuries and Goodyear says it is too early to say how bad is the damage, or how long the Spirit of America will be out of commission.
Goodyear has signed an agreement whereby its tyres will be fitted as standard on all Volvo trucks sold in North America over the next three years. The tyres will be manufactured at Goodyear’s plants at Danville and Topeka and products will include the new generation G395 LHS plus Goodyear’s complete commercial portfolio of application-specific tyres. The tyre manufacturer says it is delighted to be associated with a prestigious brand such as Volvo and expects considerable benefits in sales of replacement tyres.
Tyre manufacturer Goodyear announced a net loss of 332.4 million US Dollars for the first nine months of this year. The net loss for the 3rd Quarter totalled $105.9 million. Sales in the last quarter rose around eleven per cent from 3.5 to 3.9 billion Dollars. However, volumes increased only by approximately two per cent from $54.4 (3Q 2002) to $55.3 million (3Q 2003). According to Goodyear, the turnover increased partly due to currency-exchanges and partly due to an improved product-mix. CEO Keegan is of the opinion that the efforts of the last months are bearing fruit. Nevertheless the fact is that the company disappointed again on the full line.
Goodyear’s 3rd Quarter 2003 results were taken up by the financial world with a deal of restraint and also with some disappointment. The Analyst at UBS Investment Research fears that because of the continuing loss situation in North America Goodyear shows signs of a possible breach of a covenant, while an analyst at Fitch Ratings asks impatiently, how long one has to wait for signs of the promised turnaround in North America? There was particular criticism that Goodyear was able to increase sales volumes only by approximately four per cent, in a market which grew by 6 per cent, while competitor Cooper added around nine per cent. Doubts were voiced that Goodyear can increase prices to the full extent needed, because of raw material price increases. While Goodyear mentioned positive trends, these were not apparent to observers.
Continental Teves is launching production of six new electronic stability control programs in North America for model year 2004 vehicles. Continental expects to supply more than 3.6 million stability control units to automakers in North America, Europe and Asia in the 2004 model year, a 7 per cent increase on 2003.
BMW is to build a research centre focused on information technology in an automotive research park in Greenville. Michelin North America Inc., the Greenville-based subsidiary of the French tyre maker, said it will also participate in the park, in a capacity not yet defined. Nan Banks, a spokeswoman for the company in Greenville, said Wednesday Michelin will play a role in the park. “We’re going to determine the form that support will take as the project unfolds,” she said. Michelin, which already has a research and development operation in Greenville County, sees Clemson’s park “as something that will expand and enhance the activities we already have here.”
So far the acquisition of General Tire in 1987 has not been a success story. During this year the loss will amount to 100 million Euro at least. This has to be changed, according to Conti’s chairman Manfred Wennemer and Martin de Louw who is responsible for Continental’s passenger tyre division and works in the North American headquarters in Charlotte, North Carolina. The two set out the goal: during the last quarter of 2005 the break-even point has to be reached. Wennemer puts his hope in de Louw as a new member of the board. De Louw in his strategy focuses on new products, the extension of low cost production sites such as Mexico, and the persuasion of a multi-brand strategy that in turn is borne by the brands Continental and General Tire. For the replacement market Continental hopes for good business with the car dealers because the tyres with the prancing horse have been widely sold on the OE market during the last couple of years – there will be a pull-through effect. Wennemer states clearly that Continental will continue its business with truck tyres in North America because this division has always been very profitable.
Dunlop North America announced the SP Super Sport Race; a Z-rated radial designed for super car owners and autocross enthusiasts who want a non-competition, street-legal tyre that nevertheless has race-like levels of grip. The Super Sport Race is available in eight Z-rated sizes, with aspect ratios from 40 series down to 30 series and for 17″ and 18″ wheels. Target cars include Audi TT, A4 and A6, Porsche 996 and 986, BMW 3 series, 5-series, M3 and Z3, Honda S2000, VW Golf GTi and the Mercedes SLK, CLK, C-class and E-class.
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