Nokian Tyres has released financial results for last year. Net sales were 398.5 m Euro, 23.5 per cent higher than 1999. Allowing for acquisitions made during the year, the figure was 359.8 m Euro, or 11.5 per cent higher. Operating profit was 39.4 m Euro (1999: 42.1 m), affected by a 1.7 m Euro loss incurred by the tyre retail chain. Net profit was 19.8 m Euro (1999: 25.7 m).
Continental has announced that the prices of its passenger, van and 4×4 tyres sold in Germany will go up by four per cent from 1st August. Higher costs of raw materials are being blamed for the increase, particularly the price of synthetic rubber and carbon black. The price hike does not apply to markets outside Germany.
The tyre industry is faced with a new method of doing business: e-commerce. Continental has developed a new product that enables smaller customers to check stock availability and order product at a time to suit him. Called ContiContact, it is essentially an electronic catalogue giving information on product and prices in real time and is available to any dealer who has a PC and a modem. ContiContact is designed to complement, not replace, traditional methods of ordering and Continental will continue with its EDI and call centre operations; the new service is part of Continental’s desire to be known as “a company that is easy to do business with”. It has been on trial with selected customers for a year and is now ready to roll out to a wider customer base. Continental has also introduced e-billing, which allows customers with internet access to log on to a website where they can view or download their invoices. The advantages are space and time saving (Continental can archive invoices for customers if required) and less chance of mistakes, lost invoices etc. The system is totally secure and records are stored electronically at two separate locations, in case of accidents.
Over the past year or so, manufacturers have suffered from rising raw material costs. These have fallen recently and may fall even further, following a drop in the price of oil (around 40% of a tyre’s content is ultimately derived from oil). Back in September, the price of Brent crude oil was at a 10-year high of $37 a barrel. This week’s price is 35 per cent lower, at $24.23.
The alloy wheel market in the UK is nothing like the size of , say, that in Germany, and reliable estimates of its size are hard to come by, although one educated guess is £500 m at wholesale prices. Reasons for the comparatively small market are manifold, varying from the way cars are sold in the UK to the effect of the large company car/fleet sector, which accounts for over half of new car sales. Fleet buyers do not welcome anything which increases costs, and alloy wheels fall into this category. Despite this drawback, the UK alloy wheel market is growing, due largely to increasing fitment in the OE sector. In the aftermarket, it is those who have disposable income to spend and who are fashion conscious that buy alloys and, as with most other fashion accessories, this means the young. As with other fashions, there are labels which are “in” and others which lack street cred and, again as with other fashions, the successful designs spawn many imitations. So, in order to stay ahead of the pack, the leading design labels have to introduce new designs – to reinvent the wheel.
The latest comparative study of the European Commission regarding car prices, shows that 46 of a total of 81 passenger car models cost over 20 percent more in Germany than in at least one of the other Euro-zone markets. Companies such as PSA, Fiat, VW, Ford, Opel and some Japanese manufacturers follow a high-price strategy in Germany. The cheapest prices for new cars to be found in the Netherlands, Finland, Spain and Denmark, which does not even belong to the Euro zone.
Deutsche Bank analysts have upgraded Goodyear shares from “Market Perform” to “Buy”. They are of the opinion that Goodyear has made significant progress in reforming its cost structure and this, coupled with lower raw material prices, will mean much better-than-expected profits. The analysts also believe that Goodyear can capture many Firestone dealers in February next year, when their contracts with Firestone expire.
Car makers in a lot of markets grieve over significant reductions in new car registrations. One should not forget that, for most suppliers, from whom parts are needed for the production of cars, the consequences are negative also. But not for manufacturers of light alloy wheels: a flood of special car editions and generally growing fitment rates – in comparison with steel wheels – means that the European aluminium wheel manufacturers are selling all that they can produce. New facilities are even having to be built. The aluminium wheel in original equipment changes from a part which raises the value of a car to standard fitment, even for middle class vehicles. In spite of these favourable conditions, the sector is under pressure. The middle-class structured alloy wheel manufacturers cannot resist the downward trend of prices, caused by the car manufacturers. This is especially so because the purchase of this product happens more and more on a global scale. Besides this, the number of possible oe suppliers of cast aluminium wheels is still enormous. A process of consolidation (as in other segments supplying oe) has not happened, until now.
This year’s meeting of the German co-operation of independent tyre dealers under the umbrella of the retail brand “premio” had as its motto “time for take off”. Round about 125 outlets are members, with only a few having more than one service station. The downside of the premio network is that the “brand premio” is not well-known among end users. One reason for this is the fact that the chain is relatively young, about five years old. Of course a brand would be more popular if it were spread all over the country or – as service provider Goodyear would say – if more stations are on the net. But the premio managers are realistic, and it is not possible to grow by leaps and bounds. The competitors among the other groups of tyre dealers have restricted the market. And of course sometimes a member leaves the group after selling his business. Premio is part of the controlled distribution network of Goodyear in Germany which today covers round about 600 outlets. Premio wants one day to be what the group managers call the “lighthouse of the market”. Because the quantity targets have to be limited, Premio wants to be the best in terms of quality. In all criteria of an independent customer satisfaction analysis Premio performed better and even much better than the competitors – in all but two aspects, that is and these two were brand awareness and prices for endusers. It is hard to become the best in the market, but it is also hard to stay the best. How does it work? The best way is to continue to improve and optimise the modules of the system which the Premio Centre in the Goodyear headquarters makes available for the members. They not only try to develop new modules but also have to decide whether some of the older modules are no longer relevant. With more than 50 (!) modules the Premio offer is a leading player; taking just one of the modules available, the new software solution for the tyre trade called “tiresoft II” may well be the most modern in the market.
Cheaper oil prices and the result of the Firestone recall in the US make Michelin shares a “buy”, according to analysts from the Deutsche Bank. Despite weakening demand in the US – the world’s biggest tyre market – Michelin is gaining market share and selling more tyres than ever. Market observers believe that it will be possible to obtain better prices for tyres in the region of 3 to 5 per cent.
The price of rubber, at US$0.54, is the lowest for 30 years. Tyre producers, who buy two-thirds of rubber production, are being very cautious in view of the falling demand for cars in the large industrial countries. Thailand, Indonesia and Malaysia want to keep prices high through a cartel but to date have not been very successful. Competitors Vietnam and Cambodia are increasing production, which has kept prices low. The rubber producers are pinning their hopes on China which – if it joins the World Trade Organisation – will import more rubber.
Nokian Tyres is preparing to launch RoadSnoop, its first generation tyre pressure and temperature monitor. The sensor is battery powered and is mounted in the tyre at tyre changing and operates instantaneously upon turning the key in the ignition. It sends signals to a dashboard mounted monitor. Deliveries are expected at the beginning of March 2002.
According to the monthly investors’ update, the group is still under pressure. In the US the replacement business was quite good, not so in the OE business. In Europe, the group is suffering because of the warm weather, which is having a negative effect on sales of winter tyres, and in Asia, the company has been forced to lower prices due to the fact that cheap imports from China are putting pressure on prices. In a cost cutting move, Goodyear is offering an early retirement package for around 700 white collar workers, half of them working in the Akron HQ.
The BRV invited its members to attend its annual meeting in Weimar, historically one of the most famous cities in Eastern Germany. BRV President Ludwig did not have only good things to talk about, as he believes that margins will fall even further and the tyre trade cannot afford more pressure on margins. He mentioned Michelin and Goodyear as brands sold to car dealers at prices which are unrealistic and, due to the fact that tyre dealers have not been successful in the fast-fit field, President Ludwig urged tyre manufacturers to give tyre dealers better buying prices than car dealers. The association also expressed concern that tyre manufacturers might establish direct selling contacts with big fleets.
The prospects for manufacturers of heavy trucks in the USA are rather gloomy for this year, as experts are expecting a decline of up to 30 per cent. Despite this, analysts are not pessimistic about the prospects for Michelin, as the turnover from OE sales of truck tyres is only about 3 per cent of total group turnover. Better results than for 1999 are expected too for Goodyear, due to the downward trend in raw material prices and, last but not least, the recently-announced tyre price increases look like they will stick.
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