“Today, more than ever, fleets are evaluating new technology with an eye to cost/benefit ratios.”

That quote from Clif Armstrong, director of OE and marketing for Continental Tire North America’s (CTNA) commercial tire group, referred to truck fleet use of RFID technology, but he could have been talking about any other aspect of modern truck fleets – especially tires.

The trucking industry has always been technology-driven. Why? Because ever-shifting cost and pricing structures place enormous economic pressure on trucking companies yet are often outside the direct control of fleets. Via technology, fleets can lower costs, improve revenues and drop more to the bottom line.

As important as it is to the survival of truck fleets, technology takes the long road. In our personal lives, we see technology pass us by in a matter of weeks or months. PCs, digital cameras or anything electronic – today’s hot must-have product – is yesterday’s news within a year.

In the trucking industry, technology changes and enhancements also come fast. Adoption of the latest-and-greatest cost-saving or revenue-enhancing technology, though, can be painfully slow. Often these seemingly obvious ‘must haves’ earn their place only after detailed analysis, endless testing and much soul searching by fleet managers.

They are all looking for one thing: an edge. As Armstrong described, fleet managers “evaluate” technology, seeking an advantageous “cost/benefit ratio.”

The trucking industry has no doubt enjoyed good fortune over the last couple of years. Contraction (weaker fleets going by the wayside), increased manufacturing activity, high import rates and, well, technology, have resulted in a boon to the survivors. Road miles are up. Capacity is high. Shipping rates, driven higher by employment and fuel costs, are holding. Things, all in all, seem good.

Experienced fleet managers, though, know that tomorrow never knows, to borrow from a Beatles tune. On top of dealing with the added expense the well publicized conversion to lower-emission diesel engines will bring, the industry is also looking at a tighter money supply (higher interest rates), a housing slowdown (decreased shipments of related goods), ever unstable diesel fuel prices and skittish consumers, who are spending like there is no tomorrow but claim they are concerned about their economic futures.

In other words, they continue to look to technology to maintain profitability. And, with tires remaining their second-greatest expense next to fuel, every 32nd helps.

Tread Depth Debate

Fuel efficiency and removal mileage are the top-two items on a fleet’s tire technology menu and have been for quite some time. But, with diesel hovering at $2.53 per gallon (as of this writing) and tire prices increasing two or three times a year (due to the cost of raw materials, which includes oil), fleets are extra sensitive today.

Deeper-tread drive tires have been discussed as one way to increase removal mileage. Once the exception, 30/32nds and 32/32nds tread depths have become the norm, and some ultra-deep 36/32nds have hit the market. But, is this entirely good?

“Drive tire tread depths have probably reached the upper limits, and future gains in removal mileage will come from improvements in design and materials,” says Donn Kramer, Goodyear’s director of commercial tire marketing. “If fuel costs remain high or increase further, the trend may return to shallower tread depths with lower rolling resistance.”

Ron Gilbert, Toyo Tire USA Corp.’s national sales director for commercial tires, says that deeper treads may have maxed out. With the cost of raw materials and fuel, the industry may have reached the “point of diminishing returns” in terms of fuel savings and enhanced retreadability. “I think we are just about there. If fleets actually knew what those extra 32nds of rubber cost in the terms of lost fuel economy, I feel that there would be a lot fewer deep-tread tires run today, especially in the Sunbelt.”

“Simply adding more tread depth to drive tires is a hollow benefit for the customer, as the payback, in terms of additional removal miles, is definitely not linear,” says Michael Burroughes, product manager for Michelin Americas Truck Tires, who says the deeper treads degrade handling and rolling resistance. Longer tread life, he feels, can be better achieved through other technologies, such as siping and wider tread faces.

CTNA’s Armstrong wonders if “the deterrent to deeper drive tires is the technology needed, or if it is the driver’s sense of a loose feel when the tires are new.” With deeper treads, compounding of the tread cap is a key issue, he says, and, if the cap doesn’t wear smoothly, the life of the tire will be compromised.

Tiremakers will continue to offer ever-deeper treads, as technology allows, says Armstrong, until the market pushes back. Still, tire costs must be considered. “We are sure that the cost of raw materials must play its part, especially as tiremakers have to pass on these extra costs to the end user. There will be a time when end users will assess the cost of ownership of any type of tire and seriously identify the benefits of fuel saving vs. removal mileage vs. casing value vs. original purchase price.”

Conversely, steer tire treads have become shallower for greater fuel efficiency, while promising same as or greater removal mileage. The term “Total Cost of Tire Ownership” equally applies here, though there is no agreement as to where the technology can go.

“Shallower tread depths on steer axle tires have probably reached practical limits,” says Kramer. “We must develop tires with tread depths that deliver the lowest cost per mile to trucking fleets.”

Toyo’s Gilbert says technology for higher-mileage shallow treads “has been with us for some time,” but the trucking industry wasn’t ready for it. “Think of shallow-depth steer tires as ‘high performance touring tires’ for a truck. Today’s computer-driven casing technologies and compounding have made this possible. Technologies learned a few years ago, with radical new designs and compounding of trailer application tires, have evolved into this new technology for ‘high-speed’ steer applications.”

Michelin sees things going in the opposite direction, with deeper steer tread, and has focused its technology on improving irregular wear resistance, all-weather traction and higher removal mileage, according to Burroughes. “Without the investment in key technologies like these, the easier path is to reduce the original tread depth of steer tires, just as it is to increase the tread depth of drive tires.”

Quiet Revolution

Where fuel efficiency and long original tread life are uppermost attributes to fleets, where can medium truck tire technology go in terms of materials, performance and overall ROI? Toyo’s Gilbert says it will go as far as other technologies will allow.

“Medium truck tires will continue to evolve into better ‘performance tires’ due to changes in technology and the use of super computers and chemical compounding to deliver better traction, mileage and retreadability, with better fuel economy,” he says.

Kramer says Goodyear is focusing technology on lowering cost per mile. “The trend is to develop smaller-diameter tires – lower aspect ratios and smaller wheel diameters – and the technologies needed to make these tires perform to customer expectations.”

Outside of the tire itself, for RFID technology – embedded chips that monitor inflation and temperature – to be prevalent, Kramer says, standardization is “desperately needed.” And, he feels extended-mobility technology to protect tires after they suffer a puncture will spread beyond mixed-service applications.

CTNA’s Armstrong doesn’t discount super wides (see IQ: Tires feature in this issue) or self-sealing technologies, but he feels that the “true revolution will be applicable to the lion’s share of the market.

“From large fleets to the owner operator, we feel the next revolution will be a major advancement in terms of irregular wear performance and improved fuel efficiency,” he says. “Not glamorous or earth shattering, but a quiet revolution in terms of performance that may not even be recognized at the time it happens.”

Tight Supplies

Stepping away from the technology question for a moment, any discussion of the medium truck tire market requires a look at supplies.

From the middle of 2004 through 2005, supply of medium truck tires was impossibly tight. It was a global problem, as truck tires were hot commodities across Europe, Latin America and Asia. Higher truck builds, spurred by fleet buying, drove OE shipments up. And, with shipments up, fleets were putting all of their used equipment into service, therefore pushing the replacement tire market. As we said in our April 2005 issue, 98% of all medium truck tires produced were sold as fast as they could be made.

Last year, everyone agreed, things were tight. This year, there is not so much agreement. Michelin’s Burroughes says his company is comfortable with its ability to supply tires. “Our manufacturing facilities have been running at full output, and we are in a very healthy position in responding to the needs of our customers.”

“Medium radial truck tire supply is still tight,” says CTNA’s Armstrong to counterpoint. CTNA is working to boost truck tire capacity at its Mt. Vernon, Ill., plant, and will start producing medium truck units at its new plant in Brazil by July. Plus, CTNA is bringing product in from other global Continental plants.

Goodyear’s Kramer says: “Demand remains high, but we have ample capacity to meet current and forecasted demand.”

Across the country, Gilbert sees a difficult situation ahead. “The demand for medium truck tires is outpacing the industry’s ability to keep pace. But, supply has improved somewhat.”

Over the last year, Toyo, he says, increased capacity by “more efficient production methods and plant expansions.” Still, admits Gilbert, “Demand for our product continues to outpace our current supply.”

Looking forward, according to a recent RMA forecast, the OE medium truck tire market appears shaky. Modest growth in OE shipments is expected, but RMA sees a “sharp decline of approximately 15%” for 2007, after which segment growth will be “erratic” in the roll up to another round of EPA-mandated diesel engine emission regulations that will come in 2010.

On the replacement side, RMA projects 17.8 million medium truck tires will be shipped this year, up from 2005’s 17.5 million tires and an increase of 1.5 million units from 2004’s 16.3 million replacement tires. But, RMA sees only a 1% annual growth rate from 2007 to 2011.

More SKUs on the Way?

So, it appears slower unit shipment growth is on the horizon. At the same time, tiremakers are placing greater emphasis on application- or vocation-specific tires as another way to meet fleet customer demand for optimum cost/benefit and on-road performance.

All of these application-focused new units place greater pressure on commercial dealers to understand available products, experts say. “A dealer’s sales force must be a well-honed, professional team,” says Gilbert. “If a dealer cannot, or will not, address application-specific tires, he can’t maintain a successful business relationship with fleets today. The fleet will move its business to someone who can and will offer this type of assistance.”

Are we headed toward an SKU explosion, as in the consumer tire side of the business? Not really, Gilbert says. “Yes, dealers are going to have to offer more application-specific products. This means more SKUs, but not to the extent of the current trend in passenger tires.”

Armstrong also doesn’t see a SKU-laden future, but he does think fleets are forcing the issue. “If you study the last several years in our industry, you’ll see the size range stay fairly steady. We do agree that, within that size range, we have developed more application-specific products. But, what you find is that fleets that have regional equipment can really get more value out of matching the tire to its use.”

Goodyear’s Kramer says there has been a trend toward vocation-specific tires, “but we don’t see these opportunities as unwieldy for the independent dealer. In fact, dealers will have many more chances to sell tires specifically fitting customers’ needs. We view this trend as a positive for dealers.”

Kramer insists SKU overload is much less of a problem in the trucking industry, which demands “standardization of sizes and emphasis on tire performance rather than proliferation by the ‘fashionable’ trends of the consumer market.”

Necessary Evil

With more tires to choose from, tire costs become an even greater issue for fleets. Over the past five years, tire raw materials costs have spiraled ruthlessly, and tiremakers have tried to recoup the hit in the form of higher pricing, which, of course, translates into greater operating costs for fleets.

It’s an unfortunate reality, say tiremakers, and they are doing all they can – including investigation of other materials – to keep costs down as much as possible.

“We constantly evaluate all of the individual products that make up our compounds,” says CTNA’s Armstrong. “Not only because of the increasing costs, but also because of EPA concerns, improved technologies, global sourcing, etc.” Cost justification and concerns over detrimental effects to tire performance are prime considerations, he says.

“No one likes increasing prices,” says Armstrong, “it is simply an economic must.” On the other side of the coin, Armstrong sees truck fleets adjusting to this reality through price hikes of their own. “As a shipper, we also get increased prices from fleets hauling our tires. The freight economy is vibrant, so fleets are also able to raise their prices.”

Goodyear “continuously evaluates alternative tire materials,” Kramer says. “While we experiment with raw materials to lower our cost basis, we also seek innovation to improve tire performance for our customers.” And, while cost increases are facts of life, “tire manufacturers, dealers and end users must work together to identify business solutions that can offset increased costs.”

For its part, Michelin, too, is always evaluating new materials and processes, says Burroughes. “Of course, one of the challenges in deploying technology is the modification to traditional tire-building processes and the associated capital investment. Any changes in compounds or metallic components used in our tires are the result of many years of rigorous testing.

“The value of the investment made by our customers and the integrity of Michelin products cannot be compromised by short-sighted efforts to reduce costs,” he says.

Toyo’s Gilbert agrees. “We have taken no short cuts to save in the production of quality medium truck tires.”

Yet, “higher costs are a part of doing business today,” he says. “It’s that way for all of us. If a company is unable or unwilling to pass those costs on to its customer base, then it ceases to become a viable supplier to that customer.”

Fuel costs, too, play a major role in tire selection and utilization. Inflation maintenance remains a fleet’s greatest fuel efficiency – and tire cost-reduction – tool. That’s nothing new. Neither, reminds Toyo’s Gilbert, is the industry’s concern over fuel economy.

“It’s been around for a long time, especially since the early 1970s,” he says. “There’s no new science on fuel-cost savings in maintenance practices. They’ve been around as long as high fuel prices. The problem is getting everyone to practice it every day.”

At the end of the day, as much as things have changed in the medium truck tire segment, little has really changed. The basic dynamics remain, as do core concerns and primary drivers for every fleet making key tire decisions.

“Next to fuel, tires are the most expensive items that a fleet must have to operate and maintain its vehicles today,” says Gilbert. “The more modern and efficient fleets are looking to technology to improve their cost per mile in every aspect of their operations, especially fuel and tires.

“Fleets are now looking at things like tire tracking and other systems to improve on their bottom lines and make their trucks more efficient and profitable,” he says.

“The tire is no longer a round and black object that is a necessary evil,” he says. “It has become a total part of the vehicle and its suspension system. To deliver the lowest cost per mile, a tire today must be fuel efficient, with high removal mileage and a solid history for retreadability.”