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What a Difference a Year Makes

December 27, 2012  By Aggregates and Roadbuilding

rick_phillips_headshot-1According to Rick Phillips, Yokohama Tire
Corporation’s director of commercial sales, 2012 could not have been any more
contrasting from 2011. In this industry interview, Phillips, a 35-year tire
industry veteran, discusses what the challenges were within the commercial tire
industry in 2012 and how they will affect 2013. 

rick_phillips_headshot-1According to Rick Phillips, Yokohama Tire
Corporation’s director of commercial sales, 2012 could not have been any more
contrasting from 2011. In this industry interview, Phillips, a 35-year tire
industry veteran, discusses what the challenges were within the commercial tire
industry in 2012 and how they will affect 2013.  



Question: How would you sum up 2012 for the
commercial tire industry?  Was there anything that surprised you?  


Rick Phillips: 2012 was very surprising. In
the 35 years I’ve been in the industry, I’ve never seen two years back to back
that were as different as 2011 and 2012. The unpredicted swing in supply
and demand, and also the price of raw materials, made 2012 somewhat of a
challenging year.   


Question: What were the main differences
between 2011 and ’12?  


Phillips: In 2011, we were coming out of the
recession and had a bigger spike in recovery than expected. There was a lot of
pent-up demand and very little supply – and the industry wasn’t ready for
it. This created a lot of product shortages in the industry. On top
of that, the prices of raw materials increased dramatically. In 2012, it all
switched: we saw demand slow down considerably, which caused inventories to
build, and the price of raw materials reversed course and decreased.  


Question: How did the different yearly
scenarios affect Yokohama?  


Phillips: Yokohama actually fared well in both
years. The challenge in an unpredictable market is to maintain a high level of
service for your customers while adapting and adjusting to the changes that are
occurring. We were successful at doing this because we actually gained market
share both years. In 2012, our total volume actually was down a little bit –
like the rest of the market – but overall, we were able to gain market share.


Question: How were you able to maintain that
high level of customer service?   


Phillips: We place a very high priority on all
aspects of customer service. It’s very important to us that we are able to
meet the needs of our customers. Everyone who touches the customer in our
organization is empowered to a certain degree to make decisions that add value
to our relationship with that particular customer. There are a lot of
things that we have no control over but our level of service is something we
can control and we do take that seriously.  


Question: What are the hot industry topics
right now?  


Phillips: Fuel efficiency continues to be the
hot topic. Fleets are trying to deliver more freight and burn less fuel.
Tires contribute significantly to the overall fuel consumption of a vehicle, so
the key is trying to make tires that are truly fuel-efficient without
sacrificing mileage and retreadability. We rely on our technology to accomplish
just that without sacrificing the other elements.  


Question: You’re a big advocate of fleets
maintaining the proper air pressure in their tires. Why is that important and
how are you relaying the message?  


Phillips: The single most effective piece of
maintenance relating to tires is just keeping them properly inflated. This
year, we developed a web-based air pressure calculator tool that calculates the
correct inflation pressure by simply entering the tire information and load
weights by axle. We’re trying to be as creative as we can to come up with
more solutions to help fleets lower their tire costs. Having properly inflated
tires is critical to help manage fuel consumption and ensure the wearability of
the tire and the sustainability of the casing.   


Question: What do you foresee for the
commercial tire industry in 2013?  


Phillips: We see the overall commercial tire
demand increasing slightly in 2013. There were a lot of inventory
corrections industry-wide in 2012 so we should see more of a balance of supply
and demand than there has been in the past couple of years. Then in 2014-15
we think there is a good chance tire demand could pick up again… significantly. 


As for the economy, there are a few things to
worry about. First and foremost is the fiscal cliff. Depending on what
happens, we could be fine or we could enter a deeper recession. Our
projections are based on avoiding the cliff. At best there is still a lot
of uncertainty. There are also issues with Europe and China, which could
affect the US economy.  


Hurricane Sandy has had an effect on the
transportation industry. We’ve seen estimates that it initially cost the
trucking industry $140 million a day in down time, and that 20 percent of the
industry was not hauling freight due to the aftermath of the storm. But
long-term, the impact could be good for the trucking industry because they’re
projecting around $100 billion to rebuild and trucking/transportation could be
as much as 10 to 12 percent of that total. That would be a big shot in the arm
for the trucking industry.  


The commercial tire industry is also obviously
dependent on the trucking industry. Besides dealing with the high cost of
equipment and fuel there are a lot of regulatory issues to deal with like CSA
(Compliance, Safety and Accountability) and HOS (Hours of Service). These
will challenge a lot of fleets. But probably the most worrisome issue when
we talk to our fleet customers is the current driver shortage. It’s a
major problem and it figures to get worse. And if the economy picks up and
more jobs are available, we could even see truck driving jobs gravitate toward
construction and other work. This is making it tough to keep freight
moving with trained drivers.  


Question: Is there any solution in the trucking
industry to address the shortage?   


Phillips: Trucking is a tough industry.
Drivers are away from home sometimes for weeks at a time. It’s definitely an
industry where it’s difficult to find good people. Plus, there’s a lot of
training involved to get a license. Many fleets require additional training and
truck driving school is expensive.  


It’s an interesting dilemma: we’ve got very
high unemployment and yet there’s a huge truck driver shortage.  


Question: It sounds like the economy is
recovering and more goods are being moved. Will that create more demand for
commercial tires?  


Phillips: Freight and GDP are pretty tightly
tied together. When people buy things, those things get moved by truck at
some point. Right now, GDP growth is not great but it’s enough to
challenge the capacity. There’s a good bit of money on the sidelines but
still a lot of uncertainty so spending is very cautious. However, we are
seeing some positive signs that things could be turning around. The housing
industry is one of those. Hopefully, we will continue to see more good
signs than bad.  

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