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How Continental Has Battled the ‘Big Unknowns’ of the Pandemic

Read through the Q&A from Continental’s Gold Dealer Meeting for insights on supply challenges, planning around the ‘big unknowns’ and more.

Continental Tire the Americas has pushed through and is looking at ways to solve some of the challenges 2022 may bring, executives said in an interview with Tire Review Publisher Dean Martin at the Continental Gold Dealer Meeting in Riviera Maya, Mexico. 

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Read through the Q&A from the meeting for insights on supply challenges, planning business around the “big unknowns” and more. 

Tire Review (TR): Tire dealers across the globe are facing supply challenges. How is Continental addressing these challenges, and in what ways have you been an ally to dealers struggling with stocking the products they need?

Bill Caldwell, senior vice president of sales and marketing:  “We’re in kind of a lucky position because historically, we have relied on our global manufacturing network, particularly in Europe where we were very strong from a capacity standpoint as kind of our flex. You said dealers around the world are experiencing this dilemma, but I’m not sure it’s quite like that because some of the other markets are not rebounding as robustly. The U.S. and China continue to be really hot, strong markets. The U.S. market came back really quickly. This time last year, we were already at this kind of peak demand, but I think in Europe, it’s been much slower, and we’ve been able to leverage that because we’ve been able to transfer some production over there and utilize the capacity on their side that they don’t need right now. … The feedback we get is that we do a pretty good job compared to our competitors in terms of supply.

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“The second thing is not so good for another part of our business, which is that the OEM side continues to struggle with component shortages, which has also helped [since] … at least we don’t have that headwind of an OEM market rebounding strongly, so we’ve been able to utilize more of our capacity for the replacement market than probably in a normal year with the pandemic.”

TR: If the chip component and that side of the business comes back, what happens?

Caldwell: “ It’s going to be a headwind. I think the interesting thing is how long does this hot demand sustain itself? Inflation’s everywhere. … That’s the question because it’s extraordinary right now. We all need to catch our breath a little bit … but no one knows when the moment to catch your breath is going to be. If nothing changes, next year will continue to be a challenge because they’re saying the second quarter next year is when you should start to see the chip shortages start to solve themselves, which will give us a little bit of a headwind. 

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“On the other side of the equation, we start to look at more investments for capacity because the other change has been the mix of product. It’s dramatically changed from small to big, which taxes our manufacturing capacity because you’ve got to put an ATX versus an RT43, it’s basically tripled the size of the product, the material in that tire is still one unit. We see this huge shift or significant shift to bigger tires, all-terrain upgrade packages … people are coming in and still dropping big money on upgrade packages, so we have to add capacity just to keep up with that mix change, let alone grow.”

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TR: How do you plan your business around those ‘big unknowns?’

Chris Charity, vice president of sales: “As Bill said, we work really hard to get some of the European supply, but from a customer and from a dealer standpoint, we spend a lot of time trying to get the right signal for customers, so the capacity that we do have, we really spend a lot of time with our operations and sales teams to make sure we’re working with the customers and making the right stuff. 

It’s been really difficult over the last 18 months because it’s a little bit of whack-a-mole. All that conversation, all that dialogue with our customers, means we’re going to be a little bit closer to getting it right. We spend a lot of time on forecast accuracy. Last year was tough, this year it’s coming back. We’re able to understand what signals are coming through, and the capacity we do have, we’re going to put the right notes in the right [place].”

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TR: Over the past couple of months, Conti has made a number of announcements on EVs, whether it’s testing prototype tires, electric trucks, setting world records, these types of things. How important is that focus going to be for Conti over the next five to 10 years with that EV market?

Caldwell: “Clearly in Europe, they are leading this evolution right now, which means as a European company, we’re probably in a good place to be prepared. At the end of the day, if you just want to talk about a tire, it’s just going to be a different performance balance, a different design for what happens with that type of powertrain, the torque, weight and range is really important. Being able to build the development toolbox and building blocks to be able to make that seamless to a consumer so you meet their needs, I think we’re in a really good position.”

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TR: What do you think is going to be the biggest challenge tire dealers face over the next year in 2022?

Caldwell: “Obviously supply. We need some macro things to happen for that to solve itself, at least in the short term. Long term, we can invest, we can add capacity, we can do things, but in the short term, the best we can do is optimize what we’ve got to play with. Longer term, EV is interesting, maybe not for tires, but if you’re a servicing dealer, that’s a big difference.”

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