The current economic recession is leaving no industry untouched. 2008 was a difficult year for all businesses, and many tire retailers, wholesale tire distributors, and commercial tire dealers are thinking hard about their survival strategies for the future. With so much bad news its hard not be discouraged – but if you create an action plan that is oriented for long-term growth, there is plenty of light at the end of the tunnel.
According to tire industry analyst Saul Ludwig, the main problem right now is that there is too much manufacturing capacity and too little demand for the product. The recession has people reducing spending across the board, which means they are putting those new tires on hold until things start to look a little better on the economic front. The conflict between tire supply and consumer demand means that productivity is dropping and manufacturers are having a hard time pricing their products.
In 2008, the tire industry saw manufacturing capacity shrink in an effort to reconcile supply levels with the current demand. Michelin scrapped plans to build a new plant in Mexico, Kumho suspended the construction of a new plant in Georgia, Cooper closed down their Albany, GA facility, and Bridgestone announced the possibility of eliminating passenger and light truck tire manufacturing at their plant in La Vergne, Tennessee. Unfortunately, Ludwig expects more plant closings in 2009.
Things may sound bleak, but Ludwig is convinced that 2009 will not be a total bloodbath. He expects demand for replacement tires to remain stable, and he expects demand for auto service to increase. People want to be sure that the car they have is working well to avoid more costly repairs and investments further down the line. Passenger car tire shipments are also expected to rebound this year after falling in 2008, but no matter how you look at it, the tire industry has an overcapacity problem. Unless demand returns to normal levels or unless tires are dumped on the market at lower costs, the industry could be in for another difficult year.
So what is there to be done? Although it’s more difficult to invest in your tire business in a slow economy, it is always the tough times that generate the highest returns on your investments. If you concentrate on long-term growth while your competitors stagnate and try to ride out the recession, you will be better poised for success when the recession finally fades into history. The tire businesses that aim to strengthen themselves in tough times (as opposed to mere survival) are usually the ones that reap enormous rewards when the economic pendulum swings back into the green! We wish the best of luck to you and your business in 2009.