Discount tire direct

Byline: DAVID CULLEN, EXECUTIVE EDITOR

Buying a new truck tire is not much of a gamble. At least not right off the bat. They're plenty of established brands to pick from, all of which hold air and hold up.

But over the long haul, fleet managers fixed on price alone all may well gamble away the value in their tire investment.

Fleet should not to get caught up in a shell game of their own making. Tire value can get lost in the shuffle if fleet buyers don't pay adequate attention to where their tires are coming from. Fleets may also leave money on the table not through any sleight of hand, but just because they are not clued in fully on how truck tires are marketed.

All this deserves to be under a 'scope right now because new truck tires - never cheap to begin with - are becoming ever more expensive as the cost of the raw materials required to build them continues to escalate.

Back in May, for example, both Bridgestone/Firestone North America LLC (BS/FS) and Michelin North America announced tire price hikes, which they attributed to higher commodity prices, including steel and rubber. This year Michelin also announced an increase in its tire retreading pricing thanks to rising rubber costs.

Of course, tire value does not begin and end with the purchase price. Original miles to removal are a crucial measure of tire performance as is retreadability or the number of caps attained per casing.

Yet ensuring that tire value is never gambled away to ignorance if not malfeasance is a matter of knowing what goes into the tire and who will back it up after the sale.

To be the best-informed tire buyers they possibly can, fleet managers should forget about scoring on deals "too good to be true."

Instead, the focus should be on three key factors influencing how truck tires get sold. These are the so-called gray market (which can afflict all tire suppliers and buyers); the tiered brand strategy followed by major truck tire players; and the recent arrival of very cheap and very unknown "no-brand" truck tires, often from far-away manufacturers.

The gray market is a perennial problem that doesn't get much press outside the confines of tire makers and their dealers. Ending up with "gray" tires may not hurt a fleet directly but it can negatively impact their impression of a tire supplier. And in the end, that could cheat both the tire maker and the customer out of a worthwhile business relationship.

There are really two subsets to the tire gray market as it relates to trucking. Like other goods that end up in the gray market (most notably consumer electronics), a tire falls into this category when it ends up being sold in a market other than the one for which it was originally manufactured.

So, we're talking about a tire engineered for use in Europe or Asia or even Latin America that ends up running on U.S. roads. Now, these tires more than likely will carry a U.S. DOT number - because manufacturers the world over seek to meet that quality standard - so they will be protected by a maker's original warranty.

RUNNING A RISK

What someone who winds up running such a tire risks is not getting the full measure of performance they'd get from a product designed for U.S. vehicles, loads and roads.

The second type of gray market tire is the domestic variety. These are tires sold off while still new by the original purchaser, which for example, might be a fleet that bought too many. Such tires are also protected by original warranties. But tire makers, naturally enough, discourage this type of sale, which they regard as double-dipping.

According to the Alliance for Gray Market and Counterfeit Abatement (AGMA), the gray market is "the unauthorized sale of new, branded products diverted from authorized distribution channels or imported into a country for sale without the consent or knowledge of the manufacturer. It is the unauthorized sale or improper diversion of new products obtained under deceptive circumstances. This would mean new, branded products being diverted from authorized distribution channels or imported into another country without permission of the original manufacturer."

AGMA says that gray market products are "shopped" globally and move multiple times before reaching an end user. The group notes tactics that foster gray marketing include abuse of discount programs and fraudulent or falsified contracts. Other untoward practices include over-ordering on valid accounts with discounts and selling those products in a manner not permitted by contracts or the terms and conditions of a program. Inappropriate disposal of excess or obsolete inventories also feed the gray market.

Speaking at BS/FS's annual truck-tire dealer meeting this Spring, Singh Ahluwalia, president for commercial products, stated that "rising gray market activity is a major concern." He challenged the company's dealer body to "do the right thing and help stop this cancer."

Not everyone views the gray market so starkly. Marc Laferriere, vp-marketing for Michelin America Truck Tires, says gray market tires "have always existed and are heavily dependent on the currency [exchange]. I don't believe they are more of an issue to North American tire makers."

STEER CLEAR

Nonetheless, Laferriere does recommend steering clear of gray market tires - and emphasizes the value of relying only on reputable suppliers. "In order to make sure a fleet obtains the best before-sale recommendations and after-sale service, they should make sure they know the entire supply chain for each component they purchase," he remarks.

"Working with the people that have the most to gain for the long term is good policy," Laferriere adds. "The short-term deals often mean taking additional risks on tire warranty and retreadability. A good track record is worth a lot."

Art Campagnoni, director of North American commercial sales for BS/FS, says that gray market tires bubble to the surface from a number of sources, including cross-border shipments and even national fleet account programs. He says gray market activity, whether by dealer store or fleet customer, will not be tolerated by Bridgestone/Firestone.

According to Larry Tucker, Goodyear Tire & Rubber Co.'s marketing manager for commercial tires, gray market tires typically fall into two categories.

There are tires brought into the U.S. from Canada and sold here at $25 to $75 below regular retail because importers of record do not report excise tax. "These could be brought in by a dishonest broker," Tucker notes, "someone who'd cross the border with new tires hidden in the back of a trailer by some used casings in the front."

Then there are the tires people go through all the trouble of sending here from beyond the sea. "No matter where it comes from," says Tucker, "if the tire carries a U.S. DOT number on it, it will be considered legally tendered in the U.S. and warranted by its manufacturer. While the buyers of such tires will be protected by warranty, they will run the risk of operating tires that were not engineered for our roads, loads, vehicles and climate."

MADE FOR HIRE

Cliff Armstrong, director commercial marketing for Continental Tire North America Inc., concurs that tire design varies enough across markets that "we really recommend not using tires here that were not designed for the U.S. We build tires, right down to their compounding, for the specific applications of each market."

While the U.S. DOT number is respected as signifying a quality tire around the world, Goodyear doesn't use it universally. "There are specific tires we make in Europe for the conditions found in that market that we do not want to see end up here so we don't produce them with DOT numbers," says Tucker. "That dries up that source - those tires can't legally be here."

BS/FS's Campagnoni says that no matter a tire's origin, it is "hard for a manufacturer to walk away from the warranty on a tire with a DOT number on it."

Campagnoni notes that "double-dipping" occurs when a fleet customer sells tires it purchased on a national account discount to a dealer who then resells them.

"We are doing our part to thwart this," he points out. "Our national account agreements expressly forbid these customers from reselling our tires, and it is also understood within the BS/FS dealer network."

ACTION TAKEN

Campagnoni states that BS/FS has gone so far as to take action against dealers and to cancel business with some fleets over double-dipping. "We actively and consistently work to eradicate this practice because if it is allowed to grow out of control, everyone's marketing plan goes out the window."