While today’s faltering economy has hit most areas of the country pretty hard, there is one segment in particular that has taken a beating – the trucking industry.

In October, truck tonnage fell for the fourth month in a row for a total decrease of 6.3% since July, according to the American Trucking Associations. With less freight being hauled and at higher costs, many small, independent fleets have been forced to close their doors.

All these factors add up to create a challenging landscape for tire dealers who are competing in the medium truck tire segment. But it’s not all doom-and-gloom; dealers who think outside the box and play up the service side of their business will earn their place at the top in this segment. And there to help them best position their business are three of the major medium truck tire manufacturers.

Downward Trends
The medium truck tire market peaked in both the OE and replacement sides in 2005 and 2006, and began its downward slump toward the end of 2007. That trend followed suit in 2008 and is predicted to continue in 2009, according to Donn Kramer, Goodyear’s director of commercial marketing.

“Without a doubt, the market is down,” says Marc Laferriere, vice president of marketing for Michelin Americas Truck Tires. “Consumers are not spending as much on goods, so orders have dropped, and companies aren’t shipping as much, which means that trucks and other types of freight haulers are sitting, rather than moving. This has an impact on fleets, tire dealers and tiremakers.

“On the OE side, while fleets normally replace up to 20% of their trucks every year, the latest industry information indicates that fleets are tightening their belts and delaying new equipment purchases,” he continues. “What we’re seeing on the OE side is a substantial, additional negative impact on future orders for OE as truckers and fleets delay new equipment purchases as long as possible. Consequently, Michelin is not expecting an OE spike due to 2009 pre-buys prior to the 2010 engine regulation changes as was seen in 2006.”

In the 2010 round of emmision regulations, the changes are not significant enough to prompt fleets to pre-buy as in years past, says Tim Chen, vice president of marketing for Bridgestone Bandag Tire Solutions. He notes that on the replacement side, numbers are down simply because there are more trucks parked while a smaller number of trucks are moving at excess capacity.

“It’s a very unpredictable market right now, and when that happens you always have people on both sides – there are some that say things could be back to normal by the end of next year, and some that are forecasting an even worse year than in 2008,” Chen says. “At least the first half of next year will be tough, and in that situation many times the smaller, weaker fleets exit the market.”

“There has been no prior period where the replacement market has declined three years in a row, and now we’re looking at the fourth year,” Goodyear’s Kramer says. “We’re really in uncharted waters at this point in time, where there’s nothing previously from a cyclical nature in truck tires that gives us a track to run on.”

Moving Forward
That being said, each of the tiremakers is doing its best to move successfully through this unpredictable period, and to set up its dealers to do the same.

“We are watching the economic indicators and making the best decisions based on the information available,” Laferriere says. “To date, Michelin has taken minor actions to respond to market conditions, including extending holiday shutdowns at our factories by a few days. We continue to monitor conditions and are prepared to take further action should it become necessary, while maintaining the flexibility to support our distribution network when the market does eventually rebound.”

Michelin is working with its dealers to help keep their businesses as efficient as possible by better managing cash flow through electronic transaction capabilities, relying on Michelin’s “strong distribution center network for tire availability,” and having access to “the most fuel-efficient tires on the market, which in turn offers fleets savings and a strong return for their constrained investment dollars,” Laferriere says.

“Michelin continues to maintain a strong brand presence at the fleet level through our commercial sales force. This sustains marketshare in tough times and allows our dealers to benefit when the market does rebound.”

Bridgestone is continuing to focus on product development and the creation of products to help offset the volatility of raw materials, without sacrificing performance, according to Chen.

The company also focuses on the truck tire market in a segment-by-segment basis, which allows it to offer products that are designed to meet needs for specific applications. And from a service standpoint, by partnering with TravelCenters of America, in addition to its network of tire dealers, Bridgestone can “ensure someone is there when and where the customer needs it,” Chen says.

Goodyear is trying to balance the supply and demand curve given this environment by not “overproducing product as we once might have done, but to continue to produce enough to keep the plants running,” Kramer says.

“We’re trying to accelerate new product introductions to give our dealers something to talk about and to provide real value to the fleets,” he continues. “We’re aggressively pursuing business solutions through our Fleet HQ (introduced at the beginning of 2008), which is a solutions center where we provide fleets with emergency breakdown services. We also provide them with additional decision-making tools for inventory, cost analysis, road service history and more.”

Kramer says Goodyear will give its dealers more new products in 2009 than in any year over the last decade.

“We have an unprecedented number of new products that we’re delivering to dealers to help them garner more sales. We’re spending a lot more time on fleet solicitation and focusing on a segment that we have not been historically more involved in – the small to medium sized fleets – through the growth of our truckstop network partner, Pilot.”

“Pilot is part of our Wingfoot organization, and we’re significantly expanding the number of outlets in 2009 to give us greater over-the-road presence. That will help give us the ability to garner more fleet sales,” he says.

Service is Key
In a down market, it’s important to focus on something that can set your shop apart from the competition – in this case, service. Having the necessary space, manpower and equipment to service fleets in need will get their attention. And knowledgeable, reliable service and tire maintenance will keep them coming back.

It’s important to remember that fleets are preoccupied with many things other than tires in this challenging economic environment, so they need a dealer who can step up and be the tire expert. “Taking the tire management burden off of fleets at this difficult time is a strong opportunity for dealers to really prove their value,” says Laferriere.

Also, let your fleet customers know that in many cases, the lowest total cost of ownership comes with premium products, which cost more upfront but will offer value in the long run, he notes.

“In most cases, attaining the lowest overall operating cost requires a higher acquisition price up front,” says Chen. “Putting better products on that run longer is the lowest cost over time. In today’s market, some fleets are only looking at the lowest acquisition price rather than the lowest operating cost. It’s always a challenge to educate fleets that often, spending a little more on a premium product will actually result in a lower cost and be a better decision for the long haul.

Another key to success in this market is the ability to offer retreads, which have grown in popularity among fleets now that money is particularly tight.

“Dealers need to participate in as many sales opportunities that exist during the lifecycle of a tire,” Goodyear’s Kramer says. “By that, I mean a replacement sale and the service associated with that, the retread manufacture and the service associated with that, the retread sale (first, second and third) and service associated with those, and emergency road service. The dealer that utilizes his assets to the fullest by participating in all those different sales opportunities will weather the storm better than those who don’t.”

“The current economic situation is an opportunity for dealers to show the value of retreading as part of an overall cradle-to-grave tire management optimization,” Laferriere says.

“Dealers should also continue to encourage their customers to treat tires as a critical investment to their business,” he continues. “The smart tire choice offers the benefits of fuel savings, longer life and durability. Also, good tire maintenance, such as proper inflation pressures, can have a significant impact on the bottom line. Maintenance is particularly important as fleets seek to delay new purchases.

It all boils down to best positioning your dealership to service fleet needs now, so that you’ll be prepared when the market rebounds, Chen notes.

“In a situation like we’re facing today, the product sales side of the business may suffer a little, but the service side is where dealers can keep things moving,” he says.

“At the end of the day, the trucking business is similar to any business in terms of the need to increase revenue and reduce cost. Fleets are only generating revenue if trucks are moving, so the service focus needs to be on things like reducing downtime and reducing operating costs. That may be offering cradle-to-grave services, but also other service aspects factor into that. If a fleet has an unscheduled downtime incident on the highway, a dealer needs to have someone there to get them up and running very quickly.

“Trucking is such a large part of the North American ecomony that I think it will rebound,” Chen says. “It’s human nature to think that when times are tough everything’s doom and gloom, and when times are good it will never end. But we’re just going through a cycle here.”