U.S. tire dealers will be happy to know that manufacturers of medium truck tires believe the market will improve considerably during the second half of 2008.

This means dealers will have a choice between more tires of the brands and types they prefer to sell.

Bridgestone/Firestone, Goodyear, Hankook, Michelin and Toyo unanimously agree that 2008 will be an improved year and 2009 should be even better.

Unfortunately for tire dealers, Class 7-8 truck makers and fleets are holding their collective breaths, eying a 2008 already under heavy pressure from after-effects of the subprime loan fiasco, the direct and indirect impact of the housing slump (which most experts say will ease by the end of 2008), fast-sinking consumer confidence and an economy teetering on the brink of a recession.

So while tiremakers expect supplies and sales of top-shelf medium truck tires to improve during the second half of the year, the trucking industry still faces many challenges.

Michelin believes that the OE side will bounce back by more than 20%. “We are confident that the second part of the year will get us on track,” says Marc Laferriere, vice president of marketing for Michelin Americas Truck Tires. “We are looking for something in between 2006 and 2007. Dealers never want to be in the 2006 situation because they had a tough time getting a supply of tires.”

During that period, he noted, there was a strong demand for both replacement and OE tires, which put a strain on the ability to supply product. This opened the door to imports from other countries, but there will be a reversal of this trend in 2008.

“This is good news for domestic manufacturers and dealers,” Laferriere says. “In 2006, the demand was too strong. Dealers were forced to select other manufacturers, instead of their normal suppliers. 2007 was a little more extreme the other way because the OE market has been down. In 2008, there will be a better balance between OE and replacement. OE will be back to a reasonable level and there will be a slight reduction on replacement demand.”

That “extreme” Laferriere mentioned was a 31% fall off in OE medium truck tire shipments in 2007, so says the RMA in its revised shipment predictions for 2007. RMA expects a moderate 6.4% rebound in 2008, but keep in mind that’s against prevailing 2007 results.

Laferriere noted an improved supply for dealers will result in an overall improvement in quality and will enable the volume of supply the customer wants. RMA’s revised 2007 predictions show the replacement market will see a slight 2.7% increase for 2007 vs. 2006.

“Although the slowdown in the trucking industry will lap over into early 2008, we expect to see signs of improvement during the second half of the year,” says Steve McClellan, vice president of Goodyear’s Wingfoot Commercial Tire Systems. “The long-term outlook is considerably brighter as we experience OE recovery taking hold in the second half, coupled with a return to growth in replacement tires. Industry shipments overall should improve year over year.”

Kirk Danielson, vice president of truck and bus tire marketing for Bridgestone/Firestone North American Tire, believes that the immediate market will continue to be slow for the first half of 2008 for replacement tires and through the second half for the OE side.

“The majority of the reduction in the industry for the replacement side comes from a decreased dependence on non-RMA (Chinese) tires,” Danielson says. “The OE segment should strengthen in 2009 as the pre-buy begins to hit full stride ahead of the 2010 engine mandate. The replacement market will continue to be weak as long as the economy, particularly the housing market, is down.

“Overall tonnage will continue to be down, but this number is deceiving as the weight and size of products, particularly electronics, decrease in size,” he continues. “There are many goods being sold and moved, as IPI and consumer confidence show. The credit crunch and housing market will continue to be a major determining factor in the direction the economy takes.”

The immediate market should continue as it has the last several months, according to Clif Armstrong, director of marketing for Continental Tire North America’s commercial tire group.

“Due to the (engine/truck) pre-buy of 2006 for heavy trucks and the sluggish U.S. economy (led by the housing slow down), 2007 has been a weak replacement truck tire market,” Armstrong says. “The trend will continue into 2008. We expect to see a rebound as the economy picks up steam in the third quarter and fleets start to buy heavy trucks prior to the 2010 engine changes. However, 2008 should see limited growth over the 2007 market numbers, with 2009 showing vibrant growth. This cycle will repeat itself in 2010 with a rebound to ‘normal’ in 2011.”

Hankook believes that 2008 is going to be a challenging year for medium truck tire manufacturers.

“OE demand is very unpredictable due to the double whammy of the ‘2007 emissions hangover’ we are currently experiencing and the continuing decline of the trailer OE market demand,” says Brian Sheehey, director of commercial tires for Hankook Tire America Corp. “In previous cycles, manufacturers have been able to count on the strength of the replacement market to maintain sales levels. However, we are now experiencing lack of demand in one of our traditional safety nets – the construction industry. Suppliers to this industry are producing less, meaning they have fewer goods to ship. The net result of this lack of demand is idle trucks – their own and private carriers.”

Sheehey believes that we will see a drop in 2008 vs. 2007 for first and second quarter shipments, primarily due to the decrease in demand for the Class 5-8 segment.

“Trailer tire sales may be even more disturbing,” he says. “Opportunities may very well be in the used truck market, but we won’t know just how much opportunity unless fleets are able to get reasonable prices for traded in or ‘downsized’ tractors.”

The medium truck tire market will have its ups and downs over the next 12 months, says Ron Gilbert, director of sales for Toyo Tire (USA) Corp. “This is due to the current downturn in the economy and the upward price of diesel fuel. The current slump in the housing market has a domino effect on all aspects of the economy and the trucking industry as a whole.”

According to Gilbert, however, there will be opportunities in 2008 for those dealers and manufactures who go the extra mile to service and work with fleets to manage their overall tire cost and get the lowest cost per mile available with a quality product of medium tires for replacement.

Fleet Buying Criteria
Michelin says that recent events have dictated a change in how fleets grade the value of their tire decisions, moving toward a view of total cost of ownership for vehicles and trailers.

“We are really progressing toward total cost of operation, purchase and ownership,” says Michelin’s Laferriere. “The industry is moving toward cost of acquisition and cost per mile. But will total cost of ownership affect retreadability?”

“The new exhaust systems and idling systems add weight, so trucks can’t haul as much as they used to,” he continued. “Many fleets are examining ways to save weight and reduce the weight of tires. One tire vs. two on the same axle is one solution. Tire dealers used to talk to fleets about maintenance, but now they are talking total cost of ownership (TCO).”

Laferriere says to take advantage of TCO, tire dealers need to broaden their knowledge and explain to fleet maintenance managers that a better-maintained tire will deliver a better cost per mile in replacement tires and fuel savings. This means the fleet must pay more for maintenance. It puts an additional burden on the tiremakers because they must find the right balance by segment.

A TCO focus also creates an additional challenge to tiremakers: it may results in fewer tires being sold.

“The historic progression has been cost of acquisition, to cost per mile, to cost of ownership,” he says. “It’s a bottom line question of dollars and cents. Fleets will have to spend more on equipment and maintenance and less on tires. Legislation is helping to do this. In today’s economy, dealers who don’t know the effect of the tires they sell on fuel economy are borderline irresponsible, and they must become experts.”

More and more, TCO also considers the impact of other factors, such as government regulations and the scramble for greater fuel efficiency, says Goodyear’s McClellan. “This is particularly true as we’ve seen rising fuel and other operating costs adversely affect fleet margins.”

“The EPA Smartway program is influencing some fleets to make tire purchases based on fuel efficiency,” BFNAT’s Danielson says. “Overwhelmingly, though, fleets still make their tire purchases based on the confidence they have in the manufacturer, dealer and the total life cycle cost of the tire – purchase price, original mileage and retreadability of the casing.”

What Fleets Want
In recent years, fleets have frequently discussed what they really need from a tire dealer, but tiremakers and dealers alike have varied opinions about which needs are the most urgent.

“Fleets are thinking about total cost of ownership, but this need has not been totally shifted to dealers,” says Laferriere. “They’re looking for dealers to come up with practical, cost-effective ways to maintain pressure in tires, and this may mean weekend inspections. Fleets must make sure they don’t waste away tread. Too often tires are removed prematurely for retreading because it’s easier.

“This is where a tight partnership between the fleets and dealers must occur,” he continues, and that partnership has to come from the dealer earning the trust of the fleet by taking a more honest approach to selling services. That does not mean giving it away for free.

“The dealer may sell fewer tires and retreads, but will gain added service sales,” Laferriere says. “Dealers must start charging a reasonable amount for service – including mounting, balancing and rotation, instead of giving it away for free. Service work is worth real money and should be sold instead of donated.”

Tire dealers are a key component of this value delivery, says Goodyear’s McClellan. Among other things, fleets are looking for a strong network of knowledgeable dealers that they can trust to take care of their specific product and service needs, regardless of where their trucks travel.

BFNAT believes fleets expect a dealer to bring them solutions, value and quality service.

“Rather than just a dealer to sell them a tire, any tire, a fleet wants a dealer to advise them on tire solutions based on their particular application, route and operating situation,” said Danielson. “The credibility of a dealer is ultimately rooted in their integrity and the reputation of the tire companies they choose to associate with.”

New Retread Alignments
Manufacturers have varied feelings about the recent marriages of Bridgestone-Bandag and Michelin-Oliver. Most manufacturers, and their dealers, have a wait-and-see attitude.

Laferriere says, “The Michelin-Oliver situation is more about capacity than building an additional footprint. With this and the Bridgestone-Bandag combination, many dealers are asking, ‘Will this polarize the market further?’ The fleets are the ones that decide this. Both companies must come up with innovative practices and offer attractive packages. It is to everyone’s best interests to cater to the users’ wants. The end user is the ultimate boss.”

“Fleets have come to expect the highest quality products and services from Bridgestone, Firestone and Bandag, but until they became one, the business relationships were with separate companies,” says Danielson. “Through the ‘marriage’ of our companies, fleets can expect an even higher level of product design, development and performance, as well as enhanced customer service.”

From an outside viewpoint, the real impact of the Michelin-Oliver and Bridgestone-Bandag marriages have yet to be realized. “The changes should be introduced this year. It will be very interesting and exciting for the industry – but we will have to wait to see what they are,” says Hankook’s Sheehey.

Technological Changes
In recent years, the industry has seen many technological changes that impact fleets. But these shifts must be carefully analyzed to ensure that fleets are getting the best performance and mileage.

“The key factors to consider in taking advantage of new technologies are rolling resistance and fuel economy,” says Laferriere. “With diesel fuel approaching $3.50 a gallon, fleets must purchase longer-wearing products. It is no longer just tread depth, because mass is not everything.”

“Wider tires are working better, as well as new tread designs,” he continued. “Michelin XDN2 tires at 27/32nds are wearing as long, if not longer, than tires with 32/32nds. We also offer regenerative treads and improved compounds. Our waste and urban application tires are reducing tire costs by as much as 30%. Dealers must be aware of significant improvements, including our Michelin Durable Technologies tires, and should look for new systems and configurations and new tread designs – for both new and retreaded tires.”

Goodyear says that it continues to see great interest in applied technologies that deliver real, measurable value.

“Faced with ever-rising fuel prices, fleets are embracing fuel-efficient products, such as Goodyear’s Fuel Max line of tires,” says McClellan. “They also are looking to minimize vehicle downtime and improve productivity levels with Goodyear DuraSeal Technology. In fact, fleets increasingly are requesting such productivity-based tire technology in applications beyond severe service. And they’re also asking for more information technologies that can consolidate data, analysis and insight to maximize overall fleet performance.”

BFNAT is constantly working to enhance its product offering to the customer, according to Danielson. “These products include longer wearing tires, new tread designs and concepts like wide single tires and tires designed to be more fuel efficient.”

It’s critical to assess the fleet’s needs and provide the best product solution for those needs, Danielson says. Super wides are getting a lot of attention these days, and for many users, super wides are a good option, but not always the best option for every fleet.

Another example is fuel-efficient tires, he says. Every fleet wants to save fuel, but traditionally the use of fuel-efficient tires means sacrificing original tread miles. Fleets are looking for the total “life cycle” package, which for some may include fuel-efficient technology, but for others it may not.

“We owe it to our fleet customers to educate them on the technologies available, and advise them of the best product options for their individual needs,” Danielson says.

“Fuel is a major issue in our industry,” Armstrong says. “The key is being able to prove that you do save with fuel efficient tires. It is very easy for a fleet to know the total miles a tire runs because they know when it was put on and when it was taken out of service. It’s more difficult to prove the overall fuel economy of a tire because there are so many variables.

“One way Continental has attacked this issue head-on is to bring to the market the HDL Eco Plus drive tire,” he says. “At 28/32nds of tread depth, it is competitive mileage-wise with most of the non-fuel efficient drive tires in the marketplace. An added bonus is that we have been able to create this drive tire with a very fuel efficient compound to offer fleets competitive mileage and better fuel economy.”

New technology – specifically, active inflation pressure maintenance systems, will play a large role in helping fleets manage their tire costs into the future, Armstrong feels, and will be critical in maximizing treadwear, protecting casing integrity and significantly reducing fuel costs.

Hankook notes that the Smartway environmental initiative from the EPA will be very influential on how tire manufacturers go to market in the U.S. over the next few years, and could become a deciding factor in fleet buying criteria.

Toyo’s Gilbert says that the tire market isn’t the only truck product-related segment to see technology change. “Most fleets designate a certain percentage of their wheel positions to review new technology from various manufacturers,” he says. “Dealers should work very closely with their suppliers/manufacturers to ensure that they are in the loop on all new product introductions. This is one of the reasons why the dealer/supplier relationship is so important for the dealer, the fleet and the manufacturer.”

As the market shifts gears into the new year, dealers need to take greater advantage of the opportunities that are available, including an improved supply of medium truck radials, high quality retreads, technology that will demonstratively reduce fleet operating costs, changes in fleet buying policies and practices and, most of all, developing new ways of serving fleets.

Dealers who attack the market in that fashion will be better positioned to succeed – good times or bad.