Commercial Tire Year-in-Review with Yokohama Tire Corporation's Rick Phillips

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: 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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