US market a 'tale of 2 cities' - Bridgestone exec

ERJ staff report (TB)

By Bruce Davis, Tire Business staff

Akron, Ohio -- The US tyre marketplace is a “tale of two cities” scenario, with the consumer segment suffering from sluggish demand and a commercial segment that's “going crazy,” according to Bridgestone Americas CEO and President Gary Garfield.

Speaking during a press briefing at Akron's Firestone Country Club - site of the Bridgestone Invitational World Golf Championships - Garfield agreed with the recent lackluster Rubber Manufacturers Association forecast of replacement demand for consumer tyres, but clarified the situation, saying the slowdown has affected lower-tier, entry-level brands more than name-brands.

“There's a bit of a flight to value brands,” he said, noting that sales of his company's higher-margin Bridgestone- and Firestone-brand tyres outpaced US industry shipments in the first half of the year.

Garfield agreed with recent analysts' positions that high selling prices are affecting demand to a point, but he cautioned that raw materials costs haven't peaked yet and the market should expect more price increases throughout the second half of the year.

“Expect oil prices to keep rising,” he said, even if the pace of some raw materials price increases has started to ease.

Garfield acknowledged that dealers and distributors have started to push back against the tide of rising prices, “but less than I anticipated.… No one's happy (with rising prices),…but some of our OE customers have been very understanding.”

The slowing growth in the consumer sector is allowing Bridgestone to rebuild inventories to more acceptable levels, he said, which should allow the company to improve its fill rates in the second half.

Garfield said he feels the key to the US economy's recovery will be the housing market.

“It's key to employment, both directly and indirectly,” he said. And higher employment numbers will ease the strain on consumer confidence.

Longer term, Garfield said he feels the key to controlling costs and pricing lies in technology and supply.

On the commercial side, Garfield said Bridgestone is selling just about every truck, farm and OTR tyre it can build.

Farm and OTR tyre demand is up both domestically and in foreign markets, he noted, and truck tyre demand reflects the US trucking industry's move to modernize fleets.

He cautioned, though, that if consumer spending doesn't pick up at some point, the commercial side of the business will start to feel the pressure as well.

In the meantime, he said he expects Bridgestone Corp.'s half-year results, to be announced on Aug. 8 in Japan, to be among the best the company's ever reported.

From Tire Business (A Crain publication)