Price Increases: A Cold Hard Reality - Tire Review Magazine

Price Increases: A Cold Hard Reality

"We see no relief in the raw material price trends," Goodyear CEO Rich Kramer said earlier this week in the company’s first quarter report. "Rubber prices are at an all-time high. We expect raw material prices to rise by 35% in the second half of the year."

“How can you justify a price increase in a recession? Stop and look around, and go talk to your dealers. Goodyear should know better,” said reader Bob Mack in reaction to last week’s announcement that Goodyear was taking a May 1 hike in its commercial tire prices.

On one side are manufacturers who are being choked by another nasty round of raw material cost increases – and that, for the most part, took no increases last year thanks to the economy. On the other side are dealers who have to address those increases with customers – whether commercial or consumer.

And then you have the end-user, already beat down by lost work, hauls or jobs; frozen or cut incomes; and scared to see what will come next.

Through the first seven years of this decade, tiremakers were pounded relentlessly by fast-rising and/or volatile raw material and energy costs. Oil took a flatter upward trend, reaching the nose-bleeding $140 per barrel level in mid-2008 before calming down. Thanks to burgeoning growth in China and the Asian theater, steel was driven up. Natural rubber, controlled by the seemingly uncontrollable, rose, fell, rose, fell, and is rising yet again. Carbon black and all of the other bits and pieces have also seen their price tags grow wider.

And through those seven years, the balance between input costs and price – regardless of the depth or frequency of the price hike – remained in the favor of the dealer and end-user. Tire companies were never able to make up the difference. Then the economy fell, putting greater pressure on output pricing while only marginally slowing input costs.

Since late 2009, raw material prices have hit high gear. Natural rubber prices have risen more than 150% through the end of March compared to the same time period in 2009, according to one JP Morgan analyst. That was after posting a 92% increase last year. Oil held firm in the $50-$55 per barrel range through the first half of 2009, and then started to creep upward. Today it’s hovering around $80, and with continuing issues in the Middle East and the recently lost platform in the Gulf of Mexico (and perhaps a head cold suffered by the CEO of Shell, which posted a $5 billion first quarter profit), oil prices will likely continue toward $100 per barrel.

Bottom line: Expect plenty of price increases in 2010 and 2011. Perhaps deep into 2012. Tiremakers can carry the freight only so far. Goodyear expects per tire raw material costs to increase 15% in the second quarter compared with the first quarter. With unemployment still around 10% (government figures, real world is more like 17%), higher tire prices will be a bitter pill for those just returning to tire-buying mode after 12 months of just-get-by belt tightening.

You May Also Like

Continental appoints new ‘head of region’ for the United States and Canada

In this role, he will oversee all of material handling, port, earthmoving and agriculture tire business in the United States and Canada.

Conti-RobSchroeder_HeadofRegion

Continental revealed that Rob Schroeder, former Sr. manager of operations, marketing and analytics, will take over the responsibility of head of region for the United States and Canada. In this role, he will oversee all of material handling, port, earthmoving and agriculture tire business in the United States and Canada. The appointment took effect April 1.

How to know whether to resurface or replace brake rotors

The rise of front-wheel-drive vehicles in the mid-1970s led to the emergence of hubless or “hat” style rotors.

TR-Continental-brakerotors
Hercules Tire reveals spring rebate on five tire lines

From now until May 15, customers who purchase four qualifying Hercules Tires may be eligible to receive up to a $70 rebate.

hercules-spring-us-rebate
Michelin leadership talks EVs, sustainability and airless tires

Executives discuss the future of sustainable tire manufacturing, the relationship between EVs and tire waste and what’s next for airless tire technology.

Michelin-Q&A-1400
Kenda Tires becomes Cleveland Cavaliers associate partner for NBA playoff games

The tire manufacturer will be advertised on the court, with Kenda-branded rally towels, and will appear during local pre-game programming.

Kenda-Tire-Sir-CC-High-Fives-1400

Other Posts

Nokian Tyres releases 2023 sustainability report

Highlights of the company’s sustainability actions in 2023 include a commitment to achieve science-based net-zero emissions by 2050.

Nokian-Tyres-sustainability-report
Yokohama Rubber’s Advan Sport V107 tires to be used as OE on new Mercedes

The Mercedes-AMG CLE 53 4Matic+ Coupé is being fitted with 265/40ZR19 (102Y) front tires and 295/35ZR19 (104Y) rear tires.

Advan-Sport-V107-Yokohama
MatraX Tyres on navigating the diverse needs of the U.S. marketplace

We talk about how MatraX Tyres is adapting its products for U.S. customers and the challenges associated with U.S. distribution.

WT-YT-matraXtire-1400
MatraX Tyres on navigating the diverse needs of the U.S. marketplace

We talk about how MatraX Tyres is adapting its products for U.S. customers and the challenges associated with U.S. distribution.

WT-YT-matraXtire-1400