Kansas City, Kan.--During the first quarter of 2008, Bob Kotan said the tire industry is likely to experience as much change as it experienced in its first 50 years of existence.
Kotan, general manager for Tire Centers (TCI) in Kansas City, said he started working in the tire business in 1974 and has been exclusively involved in the industry every day since.
"The one thing that you can certainly count on in the industry today is change," he said. "Change is very rapid in the industry, very sweeping, and it doesn't leave anybody behind. Everyone that is closely related to the tire industry has been affected by the changes, which are coming fast and furious."
Kotan said the biggest changes in the tire industry this year involve how the manufactures work with their distributors and the relationships they share with the retailers.
He said that previously, the manufacturers' relationship was only with distributors, who would communicate directly with the retailers. Now, through loyalty programs such as the Michelin Alliance program, the relationship has become three-way.
"It will be a tremendous movement from the retailers' standpoint," Kotan said. "The retailers will have a lot more control over their destiny. Michelin will be able to communicate changes, marketing plans, and specials directly to the retailer within a matter of hours, whereas it was taking weeks or months before."
The program also offers cash back for the retailer. A retailer who sells $750,000 to $1 million in tires through the Michelin Alliance program can expect to see $50,000 to $75,000 back in loyalty bonuses, he said.
TCI has a similar program called the T3 Certified Tire Program that assists retailers in merchandising, advertising, training, purchasing power, and managing their business, Kotan said. He added that to qualify for the program, a retailer must sell between 1,300 and 2,000 tires a year, which breaks down to about one set of tires each day.
"The three-way partnership is rapidly becoming an Internet-based, electronic communication, e-business that is kind of being force-fed to the distributors and retailers by the manufacturers," he said. "In order to be successful, it all relies on getting data very, very quickly."
As of Jan. 1, Kotan said Michelin will be able to gather data from its Alliance retailers on the sale of the Michelin family brands every day. Michelin will know which tire, how many of them, and what size, were sold each day, he said.
"They already know what is going on in the distribution side, but now they can get a feel for what is happening at the retail point-of-sale," he said. "That is crucial in order to have the right products in the marketplace at the right time. They can communicate the programs directly to their retailer and a distributor within moments. They can put a special in effect in an hour."
As for technological changes in tires, Kotan said, it includes developing tires that are more fuel efficient and longer lasting.
One way he said that fuel efficiency is enhanced is through development of tires with a larger rim diameter.
"Performance tires and larger-rim-diameter tires are not a fad anymore; it is a consistent way," he said, adding that 10 years ago a 16-inch tire was almost unheard of on a passenger vehicle, and it was just starting to come out on light and heavy duty trucks. "Now, in 2008, it is not unusual to see a Chrysler minivan that comes original equipment-equipped with an 18-inch tire for a soccer mom minivan."
Kotan noted that the longevity of a tire is affected by its air pressure. "With self-service fuel, no one is checking the air pressure in the tires anymore," he said. "It is very difficult for even a professional to look at the tire and tell that it is 15 percent low on air pressure. A tire that is 10 percent low on air pressure will lose 25 percent of its tread life. And air pressure is huge for fuel economy."
Also leading to changes in the tire industry on the consumer end is what Kotan said is called the "Flight of Quality."
Due to manufacturer problems such as the Bridgestone/Firestone and Ford debacle in 1999 and the recent Chinese tires that were missing gum strips, consumers are becoming more brand-conscious, he said.
"Basically, the 'Flight to Quality' is a consumer awareness that never occurred in the last 50 years," Kotan said. "It made consumers more brand-conscious, and they wanted to know if the brand of tire going on their car was a brand that they could trust. This China tire debacle will only further reaffirm the consumers that they need to know exactly what is going on their vehicle."