RETREADABILITY, AN INNATE QUALITY
AIRP 52nd General Assembly
At Autopromotec’s headquarters, the assembly of tire retreaders makes the point on the current situation and discusses the future. The crisis of the freight sector and the spread of low-cost tires can be faced by making the right choices without ever compromising on quality
"After more than half a century of life, our national assembly can be finally held in our own home, in this building that will be formally opened today. This is certainly a time of pride, not only for a small association like ours, but for anyone who, in difficult times like these, continues to believe in his work and to bet on its future".
With these words president Stefano Carloni opened, on October 3, AIRP’s 52nd General Assembly- (Italian Association of Tire Retreaders)- at "Casa Autopromotec", the new multipurpose building on the outskirts of Bologna able to offer a wide range of services, association and exhibition related activities, officially opened during the two days of work dedicated to the late Luigi degli Esposti.
The meeting was an opportunity to feel the pulse of the retreading industry, a sector that has been affected greatly by the economic downturn affecting areas related to construction and freight handling, the traditional catchment area of the retreading sector. To make matters worse, poor political choices, rather than cutting unproductive expenditures, make the tax burden heavier.
Labor costs and regulations make relationships between companies and their employees rather difficult and cumbersome: "On this, a major political debate is currently in progress, however, in our view the main issues are still not completely addressed ," said Carloni. The real problem, in the opinion of the AIRP President, is that Italian and European companies are to compete in a free trade regime with companies from countries where the same protection of workers' rights is not guaranteed, nor the environment . As long as competition does not include rules common to all players involved, the abolition of customs barriers will only lead to the de-industrialization of our countries and double-digit growth in countries where labor and environment are still greatly exploited.
AIRP is engaged in raising the sector’s awareness, so that all, before proposing products of dubious quality, should consider the consequences of their behavior in the short and long run alike, both locally and abroad. To understand the crisis in fact, stated the president, the sector needs to face a bit of healthy self-criticism. Although in the past we spoke with unanimous consent about service quality, the retreading industry is still burdened by prejudice stemming from bad customer experiences: a tire that is not properly retreaded jeopardizes the market not only of those who produced it, but also, and especially, for all those who make great efforts to offer the best quality products. Carloni stressed, as in the past, the need to work with medium and long-term perspective, choosing wisely materials and relying on trained personnel and a strong innate quality of the product.
"The problem was made even worse by the fact that so far controls were insufficient or non-existing, and this has produced a flurry of wrong and distorted information. Things may change in the near future as a new vehicle inspection system will soon be mandatory, which will bring serious and effective controls, becoming an important opportunity to create the necessary awareness about retreaded tires".
The scarcity of adequate casings is yet another noticeable effect of the economic crisis: motorists postpone tire replacement as long as possible so the casings collected for retreading are, in many cases, rather worn-out. The association could develop a working system promoting transparency as far as the selection of suitable casings is concerned, in the interest of the producers themselves.
But there is light at the end of the tunnel. AIRP’s president, anticipating a normalization of the current scenario, said that European transport will increasingly lean towards greater overall efficiency employing vehicles with adequate fuel consumption, tire pressure control, driving courses to promote eco-friendly driving and choice of quality tires , whether new or retreaded. It is important for the retreading sector to be ready and prepared starting with establishing a standard of quality products. "Do not wait for an end to the crisis to make the right choices, but make the right choices to help end the crisis” concluded Carloni.
Road transport, a look at potential retread customers
Certainly there are no comforting news from the freight sector. Dr. Emilio Di Camillo, Director of the Centro Studi Subalpino and a truck market expert was invited by AIRP’s members to illustrate the evolution and future prospects of the freight sector both in Italy and worldwide. Looking back, we observe how the truck market has been severely impacted by the recession that has recently characterized the world economy. In Europe, following a brief recovery in 2011, after the heavy slumps of 2008/09, there has been a further decline in 2012, as a result of new recession. A modest recovery is currently under way in Europe (EU + EFTA), especially in relation to commercial vehicles below 3.5 t, but the situation remains critical as far as sales of heavy transport vehicles are concerned. Globally, the industry is now currently on the same level as in 1997.
The picture is particularly worrying if we focus on the Italian market. The commercial vehicle sector saw, in 2003, over 200,000 new vehicles registered, below 3.5 t, with a peak of almost 250,000 in 2007: following the recent crisis, sales have more than halved, and although the market is now slowly recovering, it is still well away from the volumes of the last decade. The truck industry in 2002 saw sales for 40,000 units, while in 2014 sales are expected to be around 13,000. The market for 16t vehicles has been struggling for a number of consecutive months while the situation for trailers is even more dramatic: in 2008 about 4,500 units were sold per quarter; today just about 1,500, half of which come from abroad.
An extremely old running national fleet (which at December 31, 2013, had approximately 5.2 million vehicles), highly unsafe and polluting, said Dr. Di Camillo. ANFIA has calculated the running vehicles’ average age: vans have are average 10 years old, trucks> 3.5 t 20 years, trailers even more than 20 years. 21% of commercial vehicles <3.5 is still Euro 0 or Euro 1; more than 50% of trucks are still between Euro 2 and Euro 0.
It is clear that in this disastrous situation Italy cannot certainly benefit from technical developments that are improving the sector especially with regard to active and passive safety, reduced fuel consumption by increasing aerodynamic devices on trailers and low-drag cab design.
Despite these figures, road freight remains the favored mode of inland transport, accounting for over 70% of all European transport. Freight traffic has grown steadily from 1995 to 2007 before starting to lose volumes: the current contraction compared to 2007 is around 10-12%. But while some countries struggle, others are doing much better: if the volume of freight recorded in 2006 is 100, in 2012 in Italy we are only at 66%, while some East European countries scored an excellent 128%. The cause, confirms Dr. Di Camillo, is international cabotage, fully operational at European level and increasing without being subject to relevant controls. The share of international transport made by carriers based in East European countries has increased, including West European transport companies that have set up offices in new EU member countries in order to benefit from lower costs for transport operation and local purchasing of new trucks.
Low-cost VS retreads
Scheduled for the second day of meeting was a particularly hot topic for the category. After the unanimous approval of the report of the treasurer and adviser Maurizio Gessati, who produced the 2014 financial statements and the budget for the coming year, Andrea Balduzzi, the association’s adviser, spoke to illustrate the result of a survey submitted to the members about the impact of new low-cost tires on the retreading industry.
Whether this phenomenon is perceived as detrimental to the sector was confirmed by 2/3 of the survey sample. 73% believe that low-cost tire manufacturers are the biggest competitors for the retreading industry, 15% feel that the competition is rather relative, while 12% think that they are not competitive at all. In fact, the general perception in recent years is either of a growth (73%) or is viewed as stable (27%), a perception, said Balduzzi supported by data that, during last three months, has seen the market share of low-cost tires rapidly reach 12.5%. The main motivation that drives a motorist to purchase low-cost tires is, according to the survey sample, the price, while price/quality ratio still leans in favor of premium tires and retreads. Almost all of those contacted believe that the reliability of low-cost tires is lower compared to retreads and therefore believe in the validity of their product compared to the alternatives. The panel, however, recognizes that the propensity to the use of low-cost alternatives is also affected by the limited availability of casings, which is also closely related to the spread of low-cost tires that are often not retreadable. Therefore, having such products on catalogue would prove to be a boomerang to their primary activity. In fact, the majority of members interviewed declare a scarce or low inclination to market them, and all those who are not doing so today will not sell them in the future either.
Those who have an inclination to commercialize low-cost tires were divided on the unit margin provided by these compared to retreads. About 50% of those interviewed believes that low-cost tires provide a greater margin and create less problems compared to retreads, the second half, on the other hand, has exactly the opposite opinion. A significant 80% is aware that low-cost tires undermine retreaded tires, but about 87% of the survey sample thinks that it’s the market that demands low-cost tires, although 2/3 of the panel declares that these products make-up less than 10% of total sales.
Commenting on the questionnaire about low cost tires, AIRP president Carloni wanted to emphasize once again the importance of not compromising quality: lowering the level of what is being sold looking for shortcuts means to trivialize one’s professionalism. Companies have value only if they are driven by method and quality. The scene will evolve and change, said Carloni, especially considering the seriousness of the scenario. If the industry continues to be guided by correct and sensible thinking even in this time of crisis, positive results will be reached once the situation is back to normal. The wish of President Carloni for all AIRP members is to have the ability, willingness and strength to wait for things to take a different direction.