Not Satisfied

MAST Sees Growth Potential
Despite Predicted Tight Market

A sharp departure from past dealer meetings, this year’s Michelin Americas Small Tires (MAST) customer meeting was the model of efficiency. The early-January event in Phoenix combined the group’s national sales meeting with a meeting with its top dealer customers, and some of it’s mass merchant and marketing group customers.

Jean-Michel Guillon, MAST vice president of sales, noted that while MAST had set records for unit sales, marketshare gains and revenues over the last two years, the financial performance of the tire industry as a whole was dismal.

Guillon said MAST projects industry-wide tire sales to remain flat in 2001, primarily because of decreases in P-metric light truck/SUV tire sales due to the Bridgestone/Firestone tire recall. "At the same time, we’re projecting MAST volume to grow 8%," he said.

MAST’s hard work in 2000 to correct shortfalls in distribution and fill rates, Guillon said, saw customers enjoying "steady fill rate levels above 90%." The recall, however, hurt fill rates on various product lines. "In four months we sold two million tires over an aggressive business plan," he said. To get fill rates back above 90%, MAST implemented: "a fair allocation of products, a more selective approach to OE business, and a very selective choice of new market opportunities."

Pete Selleck, MAST executive vice president and COO, said higher interest rates, growing energy and raw material costs, higher operational costs associated with the recall, and increased labor costs from recent contract settlements with the United Steelworkers of America had a significant impact on the profitability of Michelin North America (MNA) and other tire companies.

While the profitability of MNA’s commercial and OTR tire units has been solid, "the passenger tire business has the lowest return assets," Selleck said. "We cannot justify any further growth in the North American passenger tire business until our return on assets improves to more competitive levels within our company. In 2001, we will focus on improving return on assets within our company by reducing our asset base and streamlining our cost structure.

"Further, we must insist that recent dramatic increases in material and energy costs be addressed through price increases," Selleck said, warning that further tire price hikes are possible this year depending on prevailing fuel and raw materials costs.

Discussing some of the shifts and changes in the tire market over the last few years, Scott Clark, MAST vice president of marketing, said that while the 2000 U.S. replacement tire market grew 4.6% vs. 1999, without the BFS recall the industry’s real grow was only 1.5% – "the lowest rate of growth since 1995."

P-metric light truck/SUV and performance tires drove replacement market growth in 2000, Clark said. The performance market increase of two million units was offset by a two million-unit decrease in broadline tire sales. But the light truck/SUV segment saw volumes up over 10 million units – bolstered by the recall.

Another trend to watch, said Clark, was an apparent shift between "flag" brands and private brands. "In 1991, flag brands represented about 48% of the U.S. replacement market," Clark said. "Since then, flag brand share has consistently increased – achieving a record high share of nearly 58% in 2000."

MAST brand managers outlined their 2001 product and promotion programs.

Tom Bennett, private and associate brand manager, said special emphasis would be placed on MAST’s Riken brand in 2001, focusing on a subset of the growing sport tuner market.

"We see a great opportunity to develop the Riken brand into an important player in what is being called the Ôsport compact’ market – and, in particular, the so-called ”fashion performance’ portion of that market," Bennett said.

"Instead of emphasizing brand-to-consumer communications," said Joe Herget, Uniroyal brand manager, "we’ll be maximizing customer-to-consumer marketing activities." Besides two major consumer sales promotions in 2001, Uniroyal will expand its successful youth soccer support efforts nationwide.

"Many Uniroyal customers executed successful soccer programs in 2000 and we anticipate over 300% growth in 2001," he said. "And our support for the Uniroyal TOPSoccer program – featuring national spokesperson Julie Foudy – is generating a positive response across the country by getting kids with disabilities off of the sidelines and onto the playing field."

Bennett also mentioned a number of product additions in 2001, including the Laredo HD/T commercial light truck tire, the Touring HR, the Tiger Paw AS6000, and the T-rated Durability featuring a 80,000-mile treadwear warranty.

The BFGoodrich brand, according to Mathew Aaron, brand manager, has three major initiatives for 2001:

• Partnering with Jun USA and Super Street magazine, the g-Force T/A Tour will visit over 30 sport compact shows and race events in 2001. The tour, featuring Jun sport tuner cars, race support equipment and displays, will visit tuner customers and dealers across the country.
• New products, including the Rugged Trail T/A light truck/SUV line, the new Mud-Terrain T/A KM, and additional sizes of the "comet" style Scorcher T/A.
• A 28-city dealer sales training program, featuring classroom instruction and hands-on driving.

Alison Heiser, Michelin brand manager, reviewed the brand’s sweep of the recent J.D. Power & Associates consumer survey on OE and replacement passenger and light truck/SUV tires, which "continues Michelin’s unparalleled track record of receiving awards every single year since J.D. Power began researching tires."

Without elaborating, Heiser mentioned the brand would invest "in a multi-million dollar event marketing program to take our message to the streets, to the tracks, and to wherever young, discerning tire buyers can be found."

Michelin’s performance tire line will see three new products in 2001, including the Pilot Exalto (replacing the Pilot SX-GT), and Pilot Primacy (replacing the Pilot HX-MXM), and the Pilot Sport A/S (replacing the Pilot XGTZ4). The Pilot Sport A/S has a 400 UTQG treadwear rating, and features a triple-compound tread, made possible by Michelin C3M automated manufacturing process. Each tread compound enhances dry, wet and all-season handling, said Heiser.

TBC Unveils New Tire and Web Sites to Dealers Over 350 wholesalers and dealers gathered in Naples, Fla., for TBC Corp.’s annual dealer meeting. The three-day dealer meeting featured presentations by TBC officials, keynote speeches by John Polhemus, president of Goodyear North American Tire, and Tom Dattilo, chairman, president and CEO of Cooper Tire & Rubber Co., and noted sportswriter Frank Deford as a special guest speaker. The TBC dealer meeting also featured a mini-trade fair, displaying each of TBC’s tire lines, and available POP materials and promo items. Speaking of last year’s Bridgestone/Firestone recall and attacks on his own company, Polhemus said: "We all know what has happened in the past several months to bring the topic of tires to the top of minds of consumers, media, tire makers, auto makers, regulatory agencies, politicians and, yes, even plaintiffs’ lawyers. All of this scrutiny has put the integrity of the entire industry under a microscope, and quite unfairly, I believe." Polhemus noted that there are some 822 million tires on U.S. roads today, driven over 2.4 trillion miles annually, yet there "were only 645 accidents determined to be ‘tire related,’ and the leading cause in those incidents was under-inflation, followed by overloading." Cooper, too, has been the target of government inquiry and liability lawsuits, noted Dattilo, defending his company’s track record. "In the decade between 1990 and 2000, in which we produced over 300 million tires, only 47 complaints have been filed against our company with the National Highway Traffic Safety Administration," he said. Reasserting Cooper’s commitment to quality, Dattilo said Cooper would vigorously defend itself against all product liability suits. TBC President and CEO Larry Day presented his now annual "TBC Report Card," a review of how well the company has performed financially and with regard to its customers. Day gave TBC passing marks for territory exclusivity, line coverage, merchandising support, sales and earnings performance and people; an incomplete for fill rates; and failing marks for share price. Ken Dick, executive vice president of sales, and Glen Gravatt, senior vice president of marketing and product procurement, outlined TBC’s product enhancements, including the Ultrex IV, with a 520 UTQG treadwear rating, and Aqua Flow III, S-rated wet traction performance tire, released last year. On tap for 2001 are: Multi-Mile Grand Am GT and Cordovan Grand Prix Performance S- and T-rated performance radials; Cordovan Criterion II and Multi-Mile Epic Plus high mileage tires; Cordovan Wild Trac A/T and Multi-Mile Wild Country Radial SUV, both P-metric light truck/SUV lines; the Cordovan Wild Trac LTR and Multi-Mile Wild Country Trail XTS, LT-metric light truck/SUV tires; new sizes of the Fulda Extremo and Assuro, and the launch of the Fulda Attiro, with five popular H- and V-rated sizes. Jim Pascover, director of communications for TBC, eloquently discussed TBC’s efforts to reposition its three core brands and deliver a complete product line supported by a comprehensive marketing and promotion package. Pascover also introduced TBC’s new brand Web sites – sigmatires.com, cordovantires.com and multimiletires.com. Earl Shaut, director of customer service, reviewed the TBC Online electronic ordering system, and discussed ways it can aid dealers. Gary Paulson, TBC vice president of distributor sales, discussed changes in the market landscape, and the growth of Gen X and Gen Y consumers, who have expectations and desires vastly different than their parents. Paulson also noted that TBC’s Cordovan, Multi-Mile and Sigma Authorized Dealer program, launched two years ago, has grown to over 1,400 participating dealers.