Across the Atlantic they are called tires, while over here we use a “Y” and say tyres. This tag provides the latest tyre business news emanating from the United States of America (USA), whichever way you spell it.
William L. Davis, a former manager of a Goodyear-owned tyre store in the USA, has been accused of defrauding the manufacturer of $1.5 million. Davis allegedly ordered tyres at a discount then sold them at a profit, with the payments going through a separate company he had set up. If convicted, he faces a prison sentence of up to 20 years and a fine of up to $1 million.
Car industry analysts have reacted cautiously to news that November sales in the USA were ahead of predictions. Continuing high incentives to buy is helping sales volumes, but keeping profits down, leading to a situation dubbed “profitless prosperity” by one analyst. Even more ironic is the fact that it is the Big 3 of Ford, GM and Chrysler that are offering the greatest incentives, yet all three experienced double-digit sales falls last month and their market share is down 3 per cent to 61 per cent, with shares of imported vehicles rising. Analysts predict more of the same for early 2003, with prices falling because of over-supply of vehicles and the main question being “how much longer can the situation continue?”
In the United States, Michelin Retread Technologies has won a two-year contract to supply retreads and servicing to the vehicle fleet of utility company Alabama Power Co. The fleet includes around 1,900 passenger and light truck vehicles, 840 heavy trucks, 1,000 trailers and 30 off-road vehicles.
The talks between the Kumho Group and the US consortium of JP Morgan Chase and the Carlyle Group, aimed at selling Kumho’s tyre division, have broken down. The disagreement was over prices, with a Kumho spokesman quoted as saying that the consortium’s offer price was “really cheap” and unacceptable. Earlier in the year, the two sides signed a memorandum of understanding to sell 80 per cent of the Kumho Tyre, but this expired in November with no deal finalised. Kumho says it is talking to another – as yet unnamed – buyer.
It has been a good year for Pirelli-shod cars involved in rallying. In the recent Rally Great Britain, Petter Solberg notched up his first World Rally Championship win, with Pirelli taking the first six places. Solberg claimed 2nd place in the 2002 Driver’s Championship, ahead of Ford/Pirelli drivers Carlos Sainz and Colin McRae. In the USA, Pirelli-sponsored drivers scored a 1-2-3 in the SCCA ProRally series driver’s championship and a 1-2 in Group N. Success too in the Pirelli British Rally Championship, with a Pirelli 1-2 in Group N and first and third in the overall driver’s championship. Other successes: 2-3 in the Super Driver’s Championship and first places in the Toshiba Irish Tarmac Championship and the New Pig Scottish Championship. In Australia, Pirelli-shod cars were 1-2 in the Kumho ANCRO (Asia-Pacific) Championship.
It was in mid-2001 that we reported on the plans of Continental Tyre group to drastically re-organise its commercial tyre operations in the UK. How successful was it? The result was no cosmetic tinkering with the problem, but a root and branch reform that ushered in a fundamental change in the way the manufacturer brought its tyres to market. Conti’s plan was to form a network of independent truck tyre dealers, each with their own territory, to provide an effective nationwide service capability. The commercial division of the Conti-owned equity, NTS, disappeared, with some depots being bought out, others purchased by outside parties and a handful joining ContiNetwork, as the new chain was called. Certainly Continental needed to take some action, as its commercial tyre activities were consistently posting losses, and the radical surgery that was the introduction of the ContiNetwork was seen as the best way. So, 18 months or so on, has it worked? Has the patient recovered? At the time, there were some mutterings that the whole exercise was merely a precursor to Continental quitting the truck tyre business – something which, to be fair, the company has always vehemently denied. The company had turned its loss-making commercial activities into a profit, the ContiNetwork members were happy with the volume and profit they were making and the fact that no fleet customers had been lost indicates that they must be happy. Arthur Gregg, Business Director for Commercial Tyres, certainly believes that the future is bright and pays tribute to what has been achieved over a relatively short period. “We’ve gone from loss to profit and established what we regard as the UK’s premier independent network,” he said, concluding: “the truck tyre business makes a profit for us and for our partners.”
The shares of US auto parts retailers fell sharply this week on the news that hundreds of companies, including the Big 3 car manufacturers, are facing lawsuits from plaintiffs who have been exposed to asbestos, which was once widely used in brake manufacturing. An argument is on-going whether those outlets that performed repairs should face greater liability than the manufacturers of the products.
In the USA, Goodyear has been ranked number 118 in the InformationWeek top 500 list. This list ranks US companies with turnovers of more than $1 billion according to patterns of technical, operational and organisational innovation. The listing pleased Eric Berg, Goodyear vice president for e-commerce and chief information officer, who pointed out that the list is compiled on the basis of an organisation’s innovative use of information technology, rather than merely who spends the most on IT.
Pirelli is to be sole supplier of tyres and tyre technology to Maserati, the Ferrari-owned sports car maker. Next year Pirelli P Zero tyres will be fitted to Maserati cars competing in the Maserati trophy and, the following year, to Maserati cars competing on the GT race circuit. Maserati’s Spider and Coupe sell for around $100,000 and the brand was named as a “must-have” for affluent Americans in two lifestyle magazines. Maserati is concentrating on the US market and by 2006, hopes to sell 45 per cent of its global total of 10,000 vehicles in North America.
In the USA, Pirelli has introduced a new tyre, the P6 Four Seasons. As the name suggests, it is an all-season tyre, which is already OE fitment on a number of European vehicles. In North America, OE contracts have been signed for the Lincoln Town Car and Ford Crown Victoria. The tyre is also undergoing homologation on new models from Jaguar, DaimlerChrysler and BMW. It will be available in 23 sizes for wheels from 15″ to 17″, aspect ratios from 65 to 45 and H, V and W speed ratings.
Deutsche Bank has sold its involvement in Continental AG of which it held 7.5 per cent share valued at 142.3 million dollars to investment groups in Germany, Great Britain, Suisse and USA. The bank also reduced its DaimlerChrysler shares from 12.85 percent (31.12.01) to 11.80 (05.11.02).
Goodyear has published its results for the third quarter. Net income more than tripled to $33.7 million (3Q 2001: $9.3 m), while worldwide sales were down slightly at $3.5 bn ($3.7 bn). Currency movements had an estimated $4 m negative effect on sales and $10 m on earnings. For the first nine months, Goodyear posted a loss of $0.6 million, compared with a loss of $29.6 m for the same period last year. Sales were down too, at $10.3 bn ($10.7 bn), while tyre volumes slipped 2.5 per cent to 160.7 million units. Sam Gibara said that economic conditions in key markets and rising raw material costs are a concern, but Goodyear will continue to concentrate on reducing working capital.
Continental has published its financial results for the first nine months, and initial reactions by financial analysts are very positive. Sales rose 3 per cent over the same period last year to 8.48 billion Euros. Net income increased by 173 million Euros to 217 million Euros and debt was reduced by 516 million Euros to 2.4 billion Euros. Passenger tyre sales fell 5.2 per cent to 2.76 bn Euros, due largely to the sale of the National Tyre Service chain and sluggish sales in the USA. Commercial vehicle tyre sales were flat.
Michelin’s third quarter figures reveal that revenue during the quarter fell 3.2 per cent. However, ignoring currency exchange rate variations, sales increased by 2.7 per cent. Sales for 3Q were 3.86 bn Euros. In unit terms, Michelin’s passenger car tyre unit volume sales in Europe increased by 2.5 per cent (replacement sales + 8 p.c, OE sales -8 p.c). In the USA, car tyre unit replacement sales fell 5 per cent, OE sales rose 11 per cent. Latin America and Asia showed double digit growth in both replacement and OE volume. In truck tyres, there were gains for Michelin in Europe and the US for both replacement and OE.
In J.D. Power’s 2002 Global Component Branding Study, tyres and stereos came top of the list of components for which consumers prefer brand names. 68 per cent of respondents in Europe, Japan and the USA said it was important to have branded tyres, although awareness levels differed. No doubt prompted by recent recalls, more than 80 per cent of US respondents said tyre brand was important, compared to less than 20 per cent of Japanese. 17 brands were included in the study and the leading brands were Michelin, Pirelli, Goodyear and Bridgestone. Michelin’s brand was the strongest in Europe and the USA and Bridgestone was tops in Japan.
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