Retread giant Bandag’s recent announcement to reduce the headcount of its U.S. workforce by 15% and freeze pension plans for U.S. and Canadian workers reflects the new competitiveness of the retread industry driven by a thriving commercial trucking industry.
Don Schauer, Bandag spokesman, told FleetOwner that the replacement tire business is shifting in favor of tire imports from Asia. He pointed to a recent article in Tire Business, a trade publication covering the tire industry, that said commercial and bus tires imported from China soared 87% to 4.5 million units in 2005 compared with 2004.
“Many less-expensive tires are coming in from Asia—that’s influencing the retread market because some of these tires are coming closer and closer to the price of a retread,” Schauer told FleetOwner.
“Asian imports have taken over,” Bruce Davis, special projects reporter for Tire Business told FleetOwner.
“But the retreading market has continued to grow,” Davis continued, adding that roughly half of the replacement tire market is comprised of retreads. “In Bandag’s case they have considerably more competition.” He noted that Michelin is being very aggressive in building its truck retread market share as well as Goodyear, and retread makers Maragoni and Oliver.
“I wouldn’t blame [Bandag’s cutbacks] on China,” Peggy Fisher, vp of Tire Industry Assn. (TIA) and president of Fleet Tire Consulting told FleetOwner. “Bandag 20 years ago had a virtual monopoly on retreads and Michelin and Goodyear have been getting serious in the retread market and have been picking away at Bandag’s market. Bandag now has 44% of the market whereas around the mid- to late 80s they had two-thirds of the market.”
“Chinese tires, yes, are a factor—but they aren’t a critical factor,” Fisher added. “[Bandag has] been raising the red flag about Chinese imports, and rightfully so, because it will impact retreading.”
The retread industry is most vulnerable to losing market share for intermodal trailer tires to imported new tires, according to Tire Business. “In the intermodal industry the market for retreads is drying up,” Davis said. “That was the domain of the retread industry but even there it’s a price-point-sensitive part of the business. Lower prices for new tires have definitely made an impact on that segment.
Bill Bainbridge, marketing director of Hankook Tire America Corp., whose firm is based in South Korea, refutes the notion that Asian imports are adversely impacting the retread industry.
“Retreads clearly have their application in the marketplace,” Bainbridge told FleetOwner. “A price for a brand-new trailer tire can be close to the price of a high-end retread but that’s an apple-to-oranges comparison. But are new tires going to replace retreads? Absolutely not.”
Michelin concurs, as evidenced by its aggressive North American expansion into the retread market in 2006. “We announced we’re building a new retreading plant in Mexico and we’re also in the process of completing our Covington, GA tread plant expansion,” Herb Johnson, public relations manager told FleetOwner. “We’ve signed two new franchisees. The demand for our retreads are so high that we have to increase our capacity to build the treads.”
Commenting on competition from lower-priced tire brands, Johnson said, “Our position has always been we always look at not just short term but the long term. When you look at total cost of ownership, while it may be more expensive to go with the Michelin tire and retreads, over time the fewer number of flats and issues make the higher-end premium tire better than the lower-end product.”
“We’ve been hearing some rumblings in the marketplace but we haven’t experienced what Bandag is going through,” Dave Wilkins, Goodyear spokesman told FleetOwner. “Goodyear offers a complete cradle-to-grave solution from fleet tires, management tools, and retreads. We also import our private brands from China to counter some of those global pressures.”
“Times are good right now trucking-wise but if [that industry] goes into a downturn instead of a taking a [high-end] casing and retreading fleets may choose instead to buy a Chinese tire for the same amount of money,” TIA’s Fisher said. “That is a serious threat [to the retread industry] but only a threat. Right now people aren’t running out in droves and doing this. The sophisticated fleets are looking at maximum performance for the lowest cost per mile. In the interim [Chinese tires] will put downward pressure on retread prices for everyone especially as those tires get better in quality.”