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30/12/2016
54TH AIRP GENERAL ASSEMBLY

Retreads

The 54th edition of AIRP’s States General traditional meeting. As always, the Italian Association of Tyre Retreaders (AIRP) met to analyze what still seems to be a decidedly unfavorable industrial framework, and yet, determination, new projects and proposals aimed at kick-starting the retreaded tire market once again aren’t lacking, though recognizing that the clock is ticking, and every year that passes the urgency becomes more stringent

Guido Gambassi

AIRP - Italian Tyre Retreaders Association - celebrated its 54th General Assembly on October 7 and 8 at the Royal Hotel Carlton in Bologna. As President Carloni noted in his explanatory memorandum, the factors involved in creating a framework of great market difficulties, as repeatedly highlighted in the past, are substantially the same: steady low-cost imports, and their unfair competition against retreads gets more aggressive every day; the transport sector is still under great economic stress and its spending power is rather limited, all reasons that make low-cost products quite attractive, not to mention the national economy which persists in its stagnantion. Despite all of these difficulties, it’s absolutely essential to multiply the efforts aimed at emphasizing the important role that retreads can still play, stressed the president: "The fundamental reasons that make retreads necessary not only have not disappeared, but, on the contrary, are becoming clearer every day. By now, everyone knows that it is necessary to prevent the creation of unnecessary waste and that we must aim for a true circular economy, which has became the subject of daily debates " said Carloni. “A second important reason justifying the existence of this industry is of a technological nature: tires will be increasingly equipped with electronic elements connecting them to the vehicles, which means that it would be absurd to throw away a casing with all that technological content, besides the fact that managing them will require great expertise”.

 

Great participation and food for thought                                

Stimulating and important technical and financial contents, were discussed by a number of speakers invited to explain the activities of some of the premium brands active in the sector. Patrizio Di Blasi, responsible for rules, regulations and technical communication for Michelin, presented the results of a study commissioned by Michelin and developed by Ernst & Young, focusing on the socio-economic impacts of the retreading industry. The study estimated at 1.2 billion Euros the value of the retread market in the European Union (2015 figures, distribution excluded). As a whole, in the EU the tire retread sector is responsible for the creation of 32,000 jobs, whether direct or indirect (suppliers). Jobs currently at risk given that the study estimates a pessimistic market scenario, unless action is taken immediately. Interestingly, given the same use and kilometers traveled, a retreaded tire produces 4.3 times more jobs than an imported budget tire that cannot be retreaded.

Mario Di Domenico, Bridgestone TBR development manager, presented an in-depth technical study on the retreadability of truck tires. The report outlined the different specifications required by various markets around the world in the trucking field. Europe represents  the most advanced market, so retreadability and low rolling resistance are key requirements, to be taken into account when designing a new tire. Furthermore, Di Domenico added that manufacturers are very busy on the subject of sensors and telematic systems, which will without fail impacts on the logistics and the evaluation of the casings. Nevertheless, sensor may not be found on premium tires before 2-3 years, and may still need the best part of 10 years to receive a sufficiently wide distribution.

Giampaolo Brioschi, Marangoni corporate product manager, produced a report on the differences between hot and cold retreading and the different future scenarios for both products. The latest market trends shows how, from 2006 to July 2016, in Italy hot retreading processes lost more ground compared to cold retreads and each makes up 50% of the market share while the total fell by 37%. In Europe, the balance between the two has not changed, yet the total loss was 18%, which means that on the Italian market retreads have lost greater market share. Hot cure methods, despite the drop in volume, remains a viable option in those segments with a critical mass of tires to be retreaded, although, in order to compete effectively with new products, these but must be of very high quality. Pre-cured retreads, on the other hand, will experience a growth in importance and volume within both premium and intermediate segments, but only if retreaders will increase the range of retreadable tires so as to justify investments in productivity and quality.

Gian Primo Quagliano, president of Econometrica, also spoke at the meeting illustrating the current Italian macroeconomic scenario as well as the performance of new commercial vehicle registrations, which, to date, is still 22% lower compared to pre-crisis levels, while the industrial vehicles market shows a 41% decline. However, the most important fact, as far as retreads are concerned,  is that the average age of circulating vehicles is slightly higher compared to pre-crisis levels, which should be a favorable factor in the sale of replacement tires. The conclusion, according to Quagliano, is that market conditions are substantially in line with pre-crisis levels, and should act as a facilitator in promoting higher retread sales: the sharp market decline, therefore, must be ascribed to other factors, well beyond the described scenario.

 

Operating at 360°                                                                                                   

2016 has been a year of strong revival as far as the association’s institutional activities are concerned, starting with the presentation of AIRP’s White Paper last June, which involved a significant audience of policy makers, followed by special meetings with the Ministry of Environment and the Ministry of Infrastructure and Transport in order to assert the role of retreaded products in promoting a true circular economy, and above all, to create tangible solutions in support of the retreading industry. The association's main proposal revolved around the introduction of a tax credit aimed at favouring the sale of retreaded products, which, by virtue of its sustainable features falls perfectly within a “circular economy” strategy, something that the Government has, for some time now, declared to be aiming for. At the moment, activities are being carried out in order to identify the regulatory instruments that will enable the introduction of incentives to stimulate the purchase of retreaded tires.

Revamping the retreading industry, however, will probably call for more than actions at national level. Anti-dumping excise duties, in fact, are still very much on the table. These may be required at EU level, but only in relation to products with the same customs code: therefore only manufacturers of new tires can request such measures against new imported tires. A discussion that has been going on for years, and AIRP now feels is about time to get a proper clarification from manufacturers, at least to know whether the request for Community protective measures is a policy premium tire makers wish to pursue, or not.

Excise duties, though, are not the only issues at the heart of relationships with tire makers; other AIRP members (or manufacturers) in fact, stressed the fact that the only real countermeasure against low-cost products, was to introduce, in turn, budget tire ranges, thus engaging in a “price war” that in the medium and long term is likely to cause a serious setback to research and technological development, which, for decades have allowed premium tires and retreads to progress and grow. In addition, at a time when the entire automotive industry is consistently speaking about connectivity, autonomous driving, intelligent cars and alternative power units, the technological backwardness of the "tire-wheel unit” is clearly evident, since, as some claim,  it has developed at a speed ten times slower than other vehicle components.

 

Similar policies, however, will also be necessary concerning retail and distribution. President Carloni emphasized how "the trivialization of the offer as well as budget products are a threat not only  for retreaders, but also for the dealers. It’s in the proper management of retreaded tires and guiding every customer in making the right choice where every dealer may find a considerable profit margin thus claiming a more important role in the industry. Interests are no longer as different as they appeared at one time, retailers can implement policies of customer loyalty also through retreads".

 

Hot debate, many proposals                                                                    

Despite the worries and tensions, the rich debate with shareholders concluded with an agreement on several lines of action to be pursued. In addition to institutional requests to be made to the Italian Government, direct discussions with the industry’s manufacturers and the prospect of identifying common working grounds with retailers, other interesting proposals for action emerged. One of these centered around the technical demonstration prepared by Marangoni, a mathematical study to show how the cost per km of a retreaded tire is 50% lower than a new budget product; If you add to this the difference in rolling resistance rating, than the average total saving that comes from using retreaded tires will allow fleets to run almost for free taking also the resulting fuel saving into account. "Losing market share only because the real economic benefits are not recognized or effectively promoted is no longer acceptable" was the common complaint of all participants. Hence the proposal to work on a "Testimonial Book": a document that collects from trucking companies real savings data associated with the use of retreads, a detailed benchmark that highlights the benefits of using retreded tires; fuel economy, containment of costs, etc. A tool that must be made public through communication strategies as well as  promotional and awareness campaigns.

Another element in the proposal was raised by a Bridgestone technical report: the retreadability of casings, in fact, is merely statistical, in the sense that there is no specific certification in this regard. Yet, this information is vital  for the sector’s operators, and would certainly put things in order in a rather nebulous casing market. If, therefore, retreadability is not an absolute value, than wider statistical samples must be studied, an accurate statistical basis to refer to as a benchmark. Such a study, as complicated as it may be, would also become a huge means of communication, a strong tool  for the end users but also for policy-makers, both in Italy and the rest of Europe.

 

The Association confirms its Governance posts                                                 

Being an elective assembly, during the various activities also the voting for the renewal of the Board took place. The Association's Board of Directors confirmed the previous members, that is Andrea Balduzzi (La Genovese Gomme), Brenno Benaglia (Marangoni), Giovanni Battista Busin (B.R. Pneumatici), Stefano Carloni (Carloni Pneumatici), Elisa Ferrucci (Carloni), Maurizio Gessati (La Lombarda), Mario Girardi (Veneto Gomme), Dario Gonella (Rinovis), Francesco Levorato (Ri.Gom.Ma), Massimiliano Malatesta (Malatesta Sud), Stefano Santibacci (Pe.Sa Gomme), Carmelo Valente (Tessilgomma).  Maurizio Gessati was confirmed as Treasurer, while Massimo Capecchi (Cima Impianti), Fabio Cortesi (ITG) and Claudio Matteuzzi (Matteuzzi) were confirmed as Auditors.

The first meeting of the Board of Directors also confirmed Stefano Carloni as President and Brenno Benaglia as Vice President. Furthermore, the Executive Committee was also confirmed, being made up by the President, Vice President and Treasurer (by Statute), supported by Giovan Battista Busin and Carmelo Valente as Advisers.

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