Tire dealers see mixed results in various OTR markets

Tire dealers throughout the country are seeing growth in their overall OTR business, which they credit to a strong economy.

James Raben, vice president of OTR sales at Evansville, Ind.-based Raben Tire Co., said the economic climate plays into the success of the OTR market.

"The OTR market is strong primarily because the current administration has been very supportive of the coal industry, and the economy overall is strong and creating more commercial and industrial investment," he said.

Industrial projects are popping up across the board.

"The sustained national economic high-water mark is driving investment in site work for everything from elderly housing to new corporate headquarters here in Maine," said Jim McCurdy, CEO and founder of Maine Commercial Tire, which has four locations in Maine.

"Since Maine is traditionally a year or two behind national trends, we are in the catch-up mode when it comes to infrastructure development. This naturally drives demand for OTR tires as well as construction-related truck tires and retreading."

Ty Smith, vice president of OTR sales and operations at Wilkes-Barre, Pa.-based McCarthy Tire, said demand for earthmover tires has increased while supply has decreased.

Mr. Smith said OTR business has grown, as has pricing over the last two years, but it has leveled off in the last six months.

Planning is key.

"Forecasting is very important for our customers," Mr. Smith said. "We're having to forecast at least 90-150 days out for tires in certain sizes."

Other areas have seen a spike in the oil and gas business.

"Last year was probably our best year ever since 1961, but it's all oil and gas. Oil and gas has really boosted things up," said Vernon Skinner, owner of Beverly, Ohio-based Skinner Firestone.

"It seems like you lose one thing, another thing opens."

OTR business has been decent, he said, but not what it should be.

Equipment drives demand

With many construction and other industrial projects in motion, new and old machinery is in use.

Mr. McCurdy said "any piece of equipment that may have been underutilized in the past is working every day."

Raben Tire isn't so much seeing new equipment driving demand, but rather the return of older machines.

"In previous years a lot of mining equipment was taken out of service," Mr. Raben said.

"Now much of that older equipment is back in service. Underground mining rebuild shops are at full capacity with orders booked out for all of 2019."

Mr. Raben noted the export side of the mining industry continues to remain strong, and underground mines are expanding current sites.

Mr. Skinner's mining industry business is on the opposite end of the spectrum. He said nothing in the mining industry has helped business, but tractor trailer, dump trucks and water truck business have been good.

Market loss, growthMcCarthy Tire photoMcCarthy Tire, which operates several retail dealerships, has seen its OTR tire business increase with the ourishing economy.Some areas are seeing mining industry success, while others see a lag.

Mr. McCurdy said logging in Maine has suffered a setback because it competes directly with Canadian companies, and Canada subsidizes those company efforts. He said his logging business dropped 42 percent in one recent year.

On the flipside, he is seeing growth in the truck and OTR market in Maine that revolves around construction and paving companies.

"Maine has had an enormous backlog of paving jobs over the past few years and now is catching up on thousands of miles of road-paving and reconstruction," Mr. McCurdy said.

Articulated trucks and small to mid loaders are in demand, Mr. Smith said, and rigid trucks are "pretty strong."

Additionally, construction and aggregate equipment sizes are "very much in demand," he added, because the aggregate and housing segments are strong in McCarthy's market.

Not only are tire dealers seeing equipment trends, but they also are noticing the OE market edge out its replacement counterpart.

"OE is very strong at this point," Mr. Smith said.

"New machines and the supply for new machines and the tires for new machines is taking precedence over replacement. Major manufacturers are supplying a lot of OEs right now and I think replacements is kind of taking a back seat."

Mr. Raben said OE equipment purchases are starting to see an upswing in orders.

Farm sector

The farm sector remains a stagnant part of the industry, partly because of commodity prices and tariffs.

"2018 was mostly soft primarily due to the lower grain prices from the U.S./Chinese tariff dispute," Mr. Raben said.

"Today, the farm communities remain supportive of the current administration's approach, but it has caused many to hold off on a lot of their larger purchases."

Mr. Skinner said 2018 was a little weak on the farm side for Skinner Firestone because oil and gas has come into the area.

"A lot of people got paid a lot of money, and they bought new tractors," he said, noting new tires will last a while.

If commodity prices stay a little weak, Mr. Skinner said he doesn't anticipate any changes because they are not at the best price structure now.

"Farmers aren't getting what they need out of the product, so therefore, they don't have the money," Mr. Skinner said.

People just make do with what they have, he added.

Jeff Will, manager at McCarthy Tire's Mount Joy, Pa., location, sees the vast number of tire sizes and applications as one of the farm market's biggest challenges. Tires are getting much larger.

"Tires, with the new technology coming out with so many new sizes and applications, it's very difficult for the ag dealer to stock all of the sizes," he said.

The application challenge is more prevalent in the farm sector than other markets.

"In the ag tire industry, there's so many more sizes than your truck sector or your OTR sector, and many more applications," Mr. Will said.

"You can have one size, but you might need to stock three or four different models of the same size for different applications. And that's not really true of the other markets, especially OTR markets."Raben Tire photoMany OTR eets are putting their older equipment back in service, Raben Tire said.Most local distribution centers do not stock newer sizes either, Mr. Will said, so they must pull the tires out of plants.

"When a (farmer's equipment) breaks and the distributor does not have it in stock, they are going to have to wait a week or two to get up and running again."

"That's one thing we've been struggling with … and the other is with the new technologies, the tires are lasting a lot longer. For the ag dealer, it has not been as profitable as in the past with tires wearing a lot longer."

Mr. Will said ag equipment such as harvesters and tractors imported to the U.S. cause some additional challenges.

"The tire sizes are much different and a lot harder to get here in the States. That's been hindering us," he said.

This is an issue in part because not all U.S. tire companies make sizes for the European equipment.

Trending

The lack of workers in the industrial trades create significant hurdles to complete projects.

"There is demand for every type of vocational work. Site work requires many disciplines to create a finished product," Mr. McCurdy said.

It is not just a lack of engineers, he said, but also of laborers, truck drivers, equipment operators and peripheral truck drivers who bring construction materials from off-site manufacturers.

"The trend that is throttling back our growth mode is simply the unavailability of workers," Mr. McCurdy said, noting many of his customers have told him they have refused work or delayed it because of this shortage.

Many trends that OTR tire dealers see are common among other segments of the tire market.

Mr. Raben said "smaller operations are getting consumed by larger companies."

Online purchasing also is affecting the OTR space.

"More people are checking out the product online," Mr. Skinner said. "I think that confuses them just as much as helps them. Just because they buy a tire online doesn't mean they are getting the right tire for the application."

What works for one application, doesn't necessarily work for another, he said.

"Anyone can sell a tire, but you have to sell them what they need and fits what they're doing, their application," Mr. Skinner said.

Overall, the OTR market is faring well with different sectors succeeding in varying markets.

"It's really about supply and demand and the amount of inventory we're having to keep on the ground to deal with to cover our customers. It's definitely increased," Mr. Smith said.

Mr. McCurdy agreed. "There is an old saying: 'A rising tide raises all ships' and that is where Maine is right now," he said.