North American Tire Makers Scrambling to Meet Demand

Recent tire plant closings and increased demand for low volume specialty tires have created a shortage of tires for North American automakers. As supplies have dwindled and demand has grown, automakers have been forced to pay significantly higher prices for tires than they paid just a year ago.

Michelin North America Inc., for example, has raised prices on car and light-truck replacement tires three times over the past year. North American automakers pay between $75 and $300 per tire depending on the model.

Continental Tire’s vice president of original equipment in the Americas David O’Donnell said, “We have been bombarded from every side for additional tires, and we can’t keep up. We are at maximum capacity, and all shifts are maxed out.”

O’Donnell said Continental plans to invest over $400 million to expand its production capability at its plants in Mount Vernon, Illinois and Camacari, Brazil. The company also plans to build a new plant in North America but estimates that full production at all these facilities will not be achieved until sometime in 2013.

Chrysler Group’s senior vice president of purchasing and supplier quality Dan Knott believes the shortage of tires is a problem that won’t be solved in the near term. He predicts, “The tire shortage will not clear up over the next year. It’s going to take awhile.”

Michelin Tire’s vice president Rob Murray said the company’s North American plants are struggling to meet demand even though they are operating at full capacity.

HIS Automotive’s director of North American consulting Bruce Harrison agrees that the problem is a long-term one. He said, “There are a lot more tire sizes in the marketplace now, and it doesn’t look like that trend is slowing.” The addition of tire sizes and lower-volume specialty tires result in lower production capacity for tire makers.

Making matters worse, tire makers closed four U.S. tire plants in 2006 and 2007, reducing capacity by 71 million units annually according to president of replacement tire sales for the United States and Canada at Bridgestone Americas Tire Operations John Baratta.

According to a recent forecast by HIS Automotive, North American automakers will demand 62 million original equipment tires this year. In 2010, those automakers bought 55 million tires. The consulting firm predicts that demand will increase to 79 million tires by 2016.

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