Interesting article about the quality of aftermarket vs oem tires
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Interesting article about the quality of aftermarket vs oem tires
According to a recent Washington Post article, aftermarket tires are made of more poor quality when compared to the same exact model equipped as OEM tires. Here's the article below:
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<B>It's Tougher for Tiremakers to Make a Buck</B>
By Frank Swoboda
Washington Post Staff Writer
Sunday, October 22, 2000; Page H01
AKRON, Ohio -- For a tire, the low-slung building in the middle of the research complex at the Goodyear Tire and Rubber Co. can be described only as a torture chamber.
There's the vibrating machine and the suspension machine, the footprint test and the spring-rate machine, all designed to bounce, jiggle and stretch a tire beyond its capabilities. And that's nothing compared with what tires are going through on the adjacent 82-acre test track, screeching their way through high-speed turns.
Engineers estimate that more than 2 million equations are needed to develop a modern tire before it reaches even the testing stage--all for a product that most people never notice until something goes wrong.
Now people are noticing. The Aug. 9 recall of 6.5 million Firestone tires used as original equipment on the popular Ford Explorer sport-utility vehicle has focused attention on an old-line manufacturing industry that has been restructured by globalization. And just as the auto industry has been reduced to a handful of global giants, the tire industry has been reduced to three major players--Goodyear, Michelin and Bridgestone/Firestone, which together account for more than half the tires sold around the world--and a host of smaller companies.
Of the three leaders, only Goodyear has its headquarters in the United States--in Akron, which once was to tires what Detroit was to cars.
About the only things the three giants have in common is that their major product is round with a hole in the middle and that they all are being squeezed by rising prices for materials and an inability to raise prices. The result is that the tiremakers are extremely price-competitive, looking for any way they can to trim costs.
Greg Kagay, a tire industry analyst for PaineWebber, said: "Pricing has been a big problem because there's just too darn much supply. Customers have not seen too much difference in the grades of tires."
Goodyear, the world's largest tiremaker, told analysts that it will either break even or report a small loss for the three months that ended in September and break even for the fourth quarter of the year, largely because of higher raw-material costs. It was the fourth time in 18 months Goodyear told Wall Street that it won't make its profit targets.
The news at Michelin, the world's second-largest tiremaker, isn't much better. Michelin, based in Clermont-Ferrand, France, announced last month that earnings for the first half of the year were down 29 percent because of declining sales and rising materials costs.
Bridgestone/Firestone Inc., the Nashville-based subsidiary of Japan's Bridgestone Corp., estimates that the tire recall will cost it $450 million, its chairman and chief executive, John Lampe, said last week. Lampe replaced Masatoshi Ono, who stepped down this month. The company announced Tuesday that falling demand had forced it to order layoffs and temporary plant closings.
Analysts from J.P. Morgan reported last week that while shipments of tires in the United States rose 7.3 percent in September, prices dropped 1.6 percent. They estimated that tires shipped to replace recalled Firestone products accounted for half the September increase.
"This is a very tough industry," said John Fiedler, chief executive officer of Borg-Warner Corp. and formerly the No. 2 official at Goodyear.
Fiedler, whose new employer is a major parts supplier to the auto industry, said some of the biggest cost pressures in the tire industry are in the market for tires installed by the automakers on new cars and trucks. "Pricing at OE [original equipment] was always built on 'How much do I want to sell below cost if I wanted to get wheel position?' " he said.
Wheel position, as Fiedler calls it, is important to tire manufacturers because nearly two-thirds of new-car buyers replace original tires with the same brand, according to Tire Business, a trade publication.
<B>The replacement business is where the tire companies make their money. While replacement tires may look the same as the originals, they are made differently, in ways that hold down manufacturing costs and make them more profitable than original-equipment tires. So the companies' goal is to get just enough new-car business to steer customers to their tires in the replacement market.
For example, tiremakers use different rubber and chemical compounds in the two types of tires because of fuel-efficiency requirements that apply to original-equipment tires and not to replacements.
Automakers must meet federal fuel-efficiency standards, and a tire's "rolling resistance" accounts for 20 percent of a vehicle's fuel consumption. So when automakers buy tires, they require that they meet fuel-efficiency specifications.
Once a car is sold, though, fuel-efficiency standards no longer apply, and consumers generally don't care about rolling resistance. So tiremakers may use a different rubber and chemical compound in replacement tires, with the result being a tire that tends to last longer but is a bit noisier, gives a somewhat harsher ride and is slightly less fuel-efficient.</B>
Bryan Kinnamon, vice president for Goodyear's original-equipment tire business, said "original-equipment tires may be over-engineered" because the the automakers have elaborate specifications for fuel efficiency, noise and handling.
But Kinnamon acknowledged that the original-equipment business is driving tire technology and that the low-cost bidder always gets the business--fueling intense price competition among tiremakers.
Adding to the competition is the growth of multi-brand retailers, forcing tire manufacturers to work to help shoppers distinguish among their products. Otherwise, said David Bradley, an analyst with J.P. Morgan, a tire is "a big black piece of rubber as far as the consumer is concerned."
So tiremakers try to make their products look good with extra touches-- such as raised writing on sidewalls, or tread design--to attract attention in the showroom.
Goodyear Aquatred tires are a good example. The tires, advertised as being good on wet surfaces, have a groove down the center of the tread, a channel for water on the road. Goodyear could have made Aquatreds without the groove, but the groove sells, said Paul Maxwell, a senior designer at Goodyear. The new Eagle Aquatreds have two grooves.
At the design studio in Goodyear's research center, designers are experimenting with the size and shape of the lettering on the tire sidewall, with some letters as big as the sidewall and others designed so that when the tire is in motion the lettering becomes the tire's whitewall. And whitewalls--like men's ties--again are getting wider.
Warranties are also used to lure customers. New-car tires have no tread warranty, but replacement tires do. Kinnamon, of Goodyear, admitted that the tread warranty is primarily a marketing gimmick. The tires are usually durable enough to outlast the warranty.
Tires also come in different grades. The biggest profit-maker for the retailer and the manufacturer is the middle-grade tire. A Goodyear official said that when a customer goes to a tire retailer, the sales clerk will almost always offer the customer three price choices and almost always the customer picks the middle-priced tire.
Customers may be bewildered by the variety of tire brands. Some--Firestone, BFGoodrich, Uniroyal and General Tire--are the familiar names of once-independent U.S. companies that now are subsidiaries of overseas corporations. (Michelin produces BFGoodrich and Uniroyal tires. Continental, based in Germany, makes General tires.)
All three top tire companies are major players in the original-equipment market. But Goodyear and Michelin have focused most of their efforts on the replacement market, which is three times as large.
Bridgestone, however, has focused greater attention on the original-equipment market, industry analysts said. The Japanese company has been working to build market share since 1988, when it purchased Firestone, which was still reeling from the recall of its Firestone 500 tires a decade earlier, the biggest ever.
Bridgestone became aggressive on pricing in the United States in the early 1990s, one industry analyst said, because it had to find a way to offset the slumping economy in Japan, where it controlled 60 percent of the market. He said Bridgestone/Firestone has continued to use price to gain U.S. market share ever since.
Bridgestone/Firestone now has 21 percent of the North American original-equipment market, putting it in third place.
In its 1999 annual report, the company reported continuing growth in North American tire sales and "further gains in market share" and rising productivity in its manufacturing operations.
At the time of the report, Firestone was enjoying its position as sole supplier of tires to the most popular sport-utility vehicle in America. Since the recall, however, Ford has announced that it will offer its Explorer customers a choice of tire brands.
=======================
<B>It's Tougher for Tiremakers to Make a Buck</B>
By Frank Swoboda
Washington Post Staff Writer
Sunday, October 22, 2000; Page H01
AKRON, Ohio -- For a tire, the low-slung building in the middle of the research complex at the Goodyear Tire and Rubber Co. can be described only as a torture chamber.
There's the vibrating machine and the suspension machine, the footprint test and the spring-rate machine, all designed to bounce, jiggle and stretch a tire beyond its capabilities. And that's nothing compared with what tires are going through on the adjacent 82-acre test track, screeching their way through high-speed turns.
Engineers estimate that more than 2 million equations are needed to develop a modern tire before it reaches even the testing stage--all for a product that most people never notice until something goes wrong.
Now people are noticing. The Aug. 9 recall of 6.5 million Firestone tires used as original equipment on the popular Ford Explorer sport-utility vehicle has focused attention on an old-line manufacturing industry that has been restructured by globalization. And just as the auto industry has been reduced to a handful of global giants, the tire industry has been reduced to three major players--Goodyear, Michelin and Bridgestone/Firestone, which together account for more than half the tires sold around the world--and a host of smaller companies.
Of the three leaders, only Goodyear has its headquarters in the United States--in Akron, which once was to tires what Detroit was to cars.
About the only things the three giants have in common is that their major product is round with a hole in the middle and that they all are being squeezed by rising prices for materials and an inability to raise prices. The result is that the tiremakers are extremely price-competitive, looking for any way they can to trim costs.
Greg Kagay, a tire industry analyst for PaineWebber, said: "Pricing has been a big problem because there's just too darn much supply. Customers have not seen too much difference in the grades of tires."
Goodyear, the world's largest tiremaker, told analysts that it will either break even or report a small loss for the three months that ended in September and break even for the fourth quarter of the year, largely because of higher raw-material costs. It was the fourth time in 18 months Goodyear told Wall Street that it won't make its profit targets.
The news at Michelin, the world's second-largest tiremaker, isn't much better. Michelin, based in Clermont-Ferrand, France, announced last month that earnings for the first half of the year were down 29 percent because of declining sales and rising materials costs.
Bridgestone/Firestone Inc., the Nashville-based subsidiary of Japan's Bridgestone Corp., estimates that the tire recall will cost it $450 million, its chairman and chief executive, John Lampe, said last week. Lampe replaced Masatoshi Ono, who stepped down this month. The company announced Tuesday that falling demand had forced it to order layoffs and temporary plant closings.
Analysts from J.P. Morgan reported last week that while shipments of tires in the United States rose 7.3 percent in September, prices dropped 1.6 percent. They estimated that tires shipped to replace recalled Firestone products accounted for half the September increase.
"This is a very tough industry," said John Fiedler, chief executive officer of Borg-Warner Corp. and formerly the No. 2 official at Goodyear.
Fiedler, whose new employer is a major parts supplier to the auto industry, said some of the biggest cost pressures in the tire industry are in the market for tires installed by the automakers on new cars and trucks. "Pricing at OE [original equipment] was always built on 'How much do I want to sell below cost if I wanted to get wheel position?' " he said.
Wheel position, as Fiedler calls it, is important to tire manufacturers because nearly two-thirds of new-car buyers replace original tires with the same brand, according to Tire Business, a trade publication.
<B>The replacement business is where the tire companies make their money. While replacement tires may look the same as the originals, they are made differently, in ways that hold down manufacturing costs and make them more profitable than original-equipment tires. So the companies' goal is to get just enough new-car business to steer customers to their tires in the replacement market.
For example, tiremakers use different rubber and chemical compounds in the two types of tires because of fuel-efficiency requirements that apply to original-equipment tires and not to replacements.
Automakers must meet federal fuel-efficiency standards, and a tire's "rolling resistance" accounts for 20 percent of a vehicle's fuel consumption. So when automakers buy tires, they require that they meet fuel-efficiency specifications.
Once a car is sold, though, fuel-efficiency standards no longer apply, and consumers generally don't care about rolling resistance. So tiremakers may use a different rubber and chemical compound in replacement tires, with the result being a tire that tends to last longer but is a bit noisier, gives a somewhat harsher ride and is slightly less fuel-efficient.</B>
Bryan Kinnamon, vice president for Goodyear's original-equipment tire business, said "original-equipment tires may be over-engineered" because the the automakers have elaborate specifications for fuel efficiency, noise and handling.
But Kinnamon acknowledged that the original-equipment business is driving tire technology and that the low-cost bidder always gets the business--fueling intense price competition among tiremakers.
Adding to the competition is the growth of multi-brand retailers, forcing tire manufacturers to work to help shoppers distinguish among their products. Otherwise, said David Bradley, an analyst with J.P. Morgan, a tire is "a big black piece of rubber as far as the consumer is concerned."
So tiremakers try to make their products look good with extra touches-- such as raised writing on sidewalls, or tread design--to attract attention in the showroom.
Goodyear Aquatred tires are a good example. The tires, advertised as being good on wet surfaces, have a groove down the center of the tread, a channel for water on the road. Goodyear could have made Aquatreds without the groove, but the groove sells, said Paul Maxwell, a senior designer at Goodyear. The new Eagle Aquatreds have two grooves.
At the design studio in Goodyear's research center, designers are experimenting with the size and shape of the lettering on the tire sidewall, with some letters as big as the sidewall and others designed so that when the tire is in motion the lettering becomes the tire's whitewall. And whitewalls--like men's ties--again are getting wider.
Warranties are also used to lure customers. New-car tires have no tread warranty, but replacement tires do. Kinnamon, of Goodyear, admitted that the tread warranty is primarily a marketing gimmick. The tires are usually durable enough to outlast the warranty.
Tires also come in different grades. The biggest profit-maker for the retailer and the manufacturer is the middle-grade tire. A Goodyear official said that when a customer goes to a tire retailer, the sales clerk will almost always offer the customer three price choices and almost always the customer picks the middle-priced tire.
Customers may be bewildered by the variety of tire brands. Some--Firestone, BFGoodrich, Uniroyal and General Tire--are the familiar names of once-independent U.S. companies that now are subsidiaries of overseas corporations. (Michelin produces BFGoodrich and Uniroyal tires. Continental, based in Germany, makes General tires.)
All three top tire companies are major players in the original-equipment market. But Goodyear and Michelin have focused most of their efforts on the replacement market, which is three times as large.
Bridgestone, however, has focused greater attention on the original-equipment market, industry analysts said. The Japanese company has been working to build market share since 1988, when it purchased Firestone, which was still reeling from the recall of its Firestone 500 tires a decade earlier, the biggest ever.
Bridgestone became aggressive on pricing in the United States in the early 1990s, one industry analyst said, because it had to find a way to offset the slumping economy in Japan, where it controlled 60 percent of the market. He said Bridgestone/Firestone has continued to use price to gain U.S. market share ever since.
Bridgestone/Firestone now has 21 percent of the North American original-equipment market, putting it in third place.
In its 1999 annual report, the company reported continuing growth in North American tire sales and "further gains in market share" and rising productivity in its manufacturing operations.
At the time of the report, Firestone was enjoying its position as sole supplier of tires to the most popular sport-utility vehicle in America. Since the recall, however, Ford has announced that it will offer its Explorer customers a choice of tire brands.
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