Jul. 21, 2008 – Tire manufacturers feeling the heat
July 21, 2008
Filed under Uncategorized
Three large tire manufacturers recently announced price increases or production decreases in the past month as soaring energy and raw material costs are taking their toll on one of the larger sectors of the ATV and motorcycle aftermarket industry.
Michelin North America announced it is increasing prices on some of its product lines because of increasing costs on raw material, energy and transportation, according to a company press release.
Motorcycle and scooter tire and tube prices are among the product lines being affected. Prices are anticipated to increase up to 15 percent on Michelin brand products sold in Canada, Mexico and the United States, which will be effective Sept. 1. All two-wheel products delivered after Aug. 31 will be invoiced at the new price.
With energy prices increasing at a rapid pace, Michelin spokesperson Tate Hoxsworth said the company unfortunately had to implement these price increases to adjust to market conditions. “It’s not just oil that is spiking, either,” he said, “other energy sources like steel have been extremely high as well.”
And Michelin’s increases don’t end with the powersports industry. The company also announced it will increase tire prices by up to 12 percent on passenger and light truck tires, and 8 percent on commercial truck tires.
Another industry leader, Goodyear Tire & Rubber Co., also announced recently it will be raising prices on all its tires, stating that the volatility of oil prices has been especially hard-hitting on the company’s bottom line.
Company spokesman Keith Price said the Akron, Ohio-based company has had to raise prices to cover raw materials costs, including those of natural rubber, petroleum and steel.
“Goodyear’s strategy is to focus on sales of higher-quality tires, the ones whose cost has more to do with value-added features than with the cost of raw materials,” Price said. “Commodity inflation has a greater effect on lower-cost tires.”
Cooper cutting production
One company is taking a different approach to its economic woes, cutting production over cost. Cooper Tire & Rubber Co., manufacturer of Avon motorcycle tires, says it has reduced production in its North American facilities during the second quarter to counter decreased tire demand and projected shortages of certain raw materials, according to a company press release.
The company says the production curtailments during the second quarter will cost in the estimated range of $12 million- $14 million. The company has 67 manufacturing, sales, distribution, technical and design facilities within its family of companies located around the world.
Spokesman Jim Cartwright said that when raw materials go up, tire manufacturers have two options. “One is to cut other costs and run plants more efficiently,” he said. “The other is to charge customers more. We’ve made the decision to cut costs at this time.”
When asked if the company sees a turnaround in lower raw material costs in the near future, Cartwright says the outlook is dim.
“At this time we don’t see a reason why the cost would go down, especially considering how volatile the market is,” he said. “But we’re doing our best to ensure our customers get the best value for a great tire.” psb