News from Notch Consulting, Inc.

January 24, 2011

Yokohama expects commercial tire supplies to remain tight in 2011

After a very sharp downturn that began around mid-2008 and deepened during the downturn in 2009, the commercial truck tire industry recovered strongly in 2010. Yokohama’s website has an interview with its own Dan King on the situation in 2010 and the prospects for 2011. A few excerpts below. The whole interview is here.

Question: Despite the tough economic climate, the commercial tire industry weathered the storm, and for Yokohama, business actually increased. What were some of the factors that helped the company report positive numbers in 2010?

King: Simply put, demand increased. In 2009, there was a huge reduction in inventory levels almost across the board, including the tire industry, and the retail and consumer packaged goods. Fleets, for example, went so far as cannibalizing tires from their other trucks that were not in operation. Because of the recession, there was a lot of risk to carry inventory.

However, in 2010, the economy began to turn around and trucks started to get back on the road. It was this pent up demand that primarily contributed to a very successful year for Yokohama.

Question: Do more trucks carrying goods translate to more commercial tire sales?

King: Yes, actual vehicles on the road, miles being driven and freight being hauled are very good indicators of commercial tire sales and where the economy is going. All of those show signs of improvement and that we’re heading in a positive direction.

Question: From a pure industry perspective, how would you describe the 2010 commercial market?

King: 2010 was definitely much better than 2009, but it also came with its challenges. The biggest issue for Yokohama and the industry was fill rate. It started really in the middle of the year, and it’s been very difficult for us to reach our increasing demand. Yokohama had huge increases in demand – actually higher than the industry’s – and it’s been difficult for us to supply to that demand.

Question: Is Yokohama increasing manufacturing and/or using more of the global supply and putting it in the U.S. market?

King: Both, we will allocate more production from Japan and will be expanding production at other plants.

Question: The spiraling cost of raw materials has to also be on the list of 2011 concerns…

King: Unfortunately, we do not see it letting up, especially through 2011. We’ve had to announce a price increase that started in January. Unfortunately for us, it’s not as high as what we’re experiencing in cost increases, so we can’t pass on everything. We’re willing to absorb that for right now, but we do believe raw materials will continue to escalate through 2011.

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