Relevance of crisis to the tyre industry

Crisis of the mid 80s
We have seen how the economic situations in the mid 80s nearly drove various global manufacturers like Goodyear, Continental, and Dunlop into dire situations. Goodyear in the late 1980s was the target of takeover, and if not for intervention by the US government may have been sold way back then.

Dunlop since being acquired in 1985 by BTR, has been divested to various “owners”-in the US market, to Goodyear. In Asia, Dunlop in large part belongs to SRI.

On the contrary, we have seen how these same manufacturers prospered during the recent past few years.

Crisis of the 90s
Continental was in the doldrums prior to 2000. Prices of tyres in the mid 90s were under the most extreme of downward pressure. Demand for raw material was poor. Each European country were each his own, with Japan in a stage of recession, and US even though was beginning to grow, was trying to find its footing amidst the growing technological innovations in computing, telecommunications, etc.

Case of OTR tyres
Take the case of Off the Road (OTR) tyres used primarily for mining and other industrial uses. Back in the late 80s and early 90s, prices of minerals and raw material were low primarily as a result of poor demand. Mining activities were also minimized since further harvesting of raw material and minerals would put downward pressure on prices. OTR tyre prices then were concomitantly under downward pricing pressure. Many of us would also remember how manufacturers and distributors struggled to profit from manufacturing or distribution of this product category.

The reverse of this scenario was true over the past five years when raw material and mineral prices were at its peak, and mining activities were at full momentum. Demand for OTR tyres push prices never witnessed in the past decade. Law of demand and supply came into force and we witnessed the speed existing and new Chinese manufacturers, in a plethora of OTR production. We all know the technically demanding nature of OTR production would mean many of these manufacturers will be short-lived. I could be wrong.

The cyclical demand of raw material and minerals, which is determined by the global economic situation thus also affect the demand of the OTR tyre. A simple fact, but often overlooked.

Crisis of today
The present credit meltdown is probably to an extent which we have not witness before, the closest would probably be the great depression.

To quote Wikipedia;
“The Great Depression was a worldwide economic downturn starting in most places in 1929 and ending at different times in the 1930s or early 1940s for different countries. It was the largest and most important economic depression in modern history, and is used in the 21st century as an example of how far the world's economy can fall. The Great Depression originated in the United States; historians most often use as a starting date the stock market crash on October 29, 1929, known as Black Tuesday. The end of the depression in the U.S is associated with the onset of the war economy of World War II, beginning around 1939.”

We saw the great depression stretch across two decades; let’s just hope that this time around, without the onset of war and other related issues back then, the upswing will come sooner. We can however be certain that China, and India will be playing host to a better recovery of Asia.

Now Dunlop South Africa belongs to Apollo, and DMIB now belongs to Continental. Toyo and Bridgestone are now in cooperation. Falken belongs to SRI. And these are just to name a few.

Ler will next talk about the trends of the industry in relation with the crisis. Ler Hwee Tiong is Managing Director at Tyrepac Pte Ltd .