THE RETREAD: AN ANTI-CRISIS PRODUCT
50th AIRP GENERAL MEETING
Even at difficult times like these, we must be clear-headed. The road transport situation is very negative and the forecasts are not optimistic, but the retread is an anti-crisis product. The values of retreads emerge more strongly in this economic downturn but they must be emphasized. These were some of the subjects discussed at the general meeting of Italian retreaders
Past, present and future
On 5 and 6 October, Bologna hosted AIRP’s 50th general meeting, “a historic milestone for a small association like ours” – emphasized AIRP chairman Stefano Carloni. – “Small in number of members, but big when it comes to the enthusiasm that has been shown also on this occasion by the attendance of numerous members. We wanted to celebrate this anniversary in the city of our headquarters. This year, I will depart slightly from tradition by not going into depth about the general economic situation which is, unfortunately, well-known to us all”.
The road transport situation is really disastrous. According to Acea data, the total for the first six months was down by 37%. A smaller, but nevertheless strong downturn was also recorded in other European countries: taking as a reference the 27 EU countries plus the EFTA countries (Switzerland, Iceland, Norway and Liechtenstein), the falloff is 10.3%. For trucks and cars, the most negative results are in the Euro zone most exposed to speculation. In the first six months in fact, there were downturns of 54.2% in Portugal, 49.4% in Greece, 37% in Italy and 25.5% in Spain, whereas in France the falloff was -7.2% and Germany was just under par at -1.9%. A breakdown of the data shows that bus registrations were down by 30% compared to growth of 7.2% in the EU27+EFTA zone. For industrial vehicles the contraction was 30.9%, whereas in the EU zone there was a loss of 5.2%. For commercial vehicles the downturn in Italy was as much as 37.8% compared to 11.6% for the EU27+EFTA zone. No recovery in demand is envisaged in the future. It is obvious that a segment that is as closely linked to the circulation of goods as the industrial vehicle and bus sector, is relying on a change in the economic picture, but a reversal of the trend in the short term is not expected, unfortunately.
“Fankly-speaking, even at difficult times like these, we must be clear-headed. An awareness of the need to cope effectively with the dead weights that prevent Italian industry from competing is beginning to emerge, at the level of public opinion at least. At European level, measures that will contain speculation in the Euro zone most at risk should be adopted, finally. Otherwise, every manoeuvre will have a recessionary effect that will further postpone the balancing of the books.” One of the sectors from which the most resources are drained is fuel. In the first 9 months, the industrial price fell by 1.2%, the price at the pump increased by 17.4% and the downturn in consumption stood at 9.3%. Bearing in mind that this is a mature indicator where fluctuations have always been a few percentage points, in this case, too, the data are extremely worrying. These elements highlight a situation of extreme suffering in the road transport segment and has repercussions on customer solvency. Apart from the falloff in numbers strictly associated with goods transport, there are other worrying aspects, such as the decision by some of our fleets to transfer their headquarters to countries in the east because of lower costs. As far as tyre numbers are concerned, in the first 8 months of 2012, truck tyres recorded sell in of about -37%. In general, the falloff is more marked for premium brands and this is a particularly negative element for retreading. Moreover, long haul seems to be more penalized that regional. Even the quarry sector, in which retreads hold a significant share, is being weighed down by the crisis in construction and public works. “Despite these considerations, retreads lost only 15%. Although it is a sizeable figure, it is much lower than the downturn in new tyres and this confirms that the retread is an anti-crisis sector that reveals its most important prerogatives at a time of crisis: lower costs and less use of capital. In these times when paying is difficult, for the tyre specialist selling retreads also means less risk”. Although they are not sufficient, these merits have been accepted, but it is difficult to estimate what the real potential of the segment could have been if there had been greater availability of carcasses. In fact, a rapid survey showed that there is a general lack of tyres for retreading throughout Europe. “The objectives are, therefore, to confirm that the retreaded tyre is an anti-crisis product and to create the conditions for development that will continue when there is a recovery.” With regard to tyre labelling (for rolling resistance, wet grip and noise) that came into effect for new tyres on 1 November, the retreading world is actively engaged in studying the possibility of extending the regulation to retreads. At international level, a project for researching the labelling of retreaded tyres was presented to the European Union. The project has been funded and has already begun. The aim is to identify labelling formulas that are within the reach of all retreaders.
“With regard to ELTs, it is an epoch-making change in the sector which has created numerous management problems that we are trying to correct. As well as the problems, we must also see the positive sides, first and foremost the fact that a retread is not subject to the environment contribution. Current problems concern the interpretation of numerous aspects, about which we are in close contact with the Ministry for the Environment”. One of the other activities in which the Association is energetically engaged is the fight against VAT evasion. “We are doing it not only for ethical reasons, but because it is difficult to define industrial logic if the product has to fight with firms that operate completely outside the rules”. One of the Association’s very important actions is the promotion of the retread, the financial and ecological benefits and safety. Various investments have been made in communication actions and advertising campaigns, the latest of which was about retreaded winter tyres. The quality of the product is at the centre of AIRP actions; the latest interventions include the renewal of the specifications for LHT materials which have gone from 100 to 110. The aim of the new specification is to further increase the quality level of the material to keep retreads in step with technological evolution.
As chairman also of Promotec, Carloni talked about Autopromotec: “Despite the profound crisis in the entire automotive segment in general and fairs in particular, our event still has the same numbers as past editions and it is the tyre and related equipment pavilions that are the first to be sold out. However, we know that he who hesitates is lost in the sense that either we are capable of making a leap in quality and become a real centre for the distribution of automotive services, or the fact that we have contact with exhibitors only once every two years will become increasingly risky because of an extremely volatile economic situation. In conclusion, I want to remind you about the work, value, quality, expertise and trust that goes into customer relations. I am convinced that it is the only way in which our sector will have a dignified future”.
The prospects of retreaded tyres according to Michelin
Giorgio Paggiarin, truck commercial manager at Michelin Italiana, spoke about retreads from the point of view of a manufacturer of new tyres and retreads. A more detailed and comprehensive perspective, therefore.
Making a carcass that can be retreaded requires more complex design. Making a disposable product is certainly not the same as making a quality, long-lasting one. The manufacture of a retreadable carcass requires constant research and development, because every new product must guarantee that it can be retreaded. It is a considerable technical commitment that involves the manufacturer in two aspects: the new tyre and the retreaded tyre”. They are two aspects that are sometimes different and also have problems of integration. There are technological innovations that are more difficult to integrate in a new product that must also be retreaded.
“Making a retreadable carcass also means more precise work on compounds, it is not enough just to make a carcass with stronger steel. All the material used must follow the logic of retreadability”. The tests on tyres to ensure this are also longer and more complex because they must verify the tyre’s capacity to have more than one life. The ability to propose new products that guarantee retreading has a different timescale compared to a disposable product. Obviously, added to this complicated balance is the question of labelling and the difficulty in finding the best possible compromise for all the properties that are frequently contradictory, while bearing in mind the need to have a retreadable carcass. The sales model for a tyre with the added value of retreadability is also different from the sales model for a disposable tyre. “When I sell a Michelin product I must convince, I have to explain that the new tyre must be used before it is retreaded, even several times to the point of regrooving. It is a slightly more difficult model for the user to accept and understand. I must support this model also with regard to qualified retailers who will convey the real value of the product. To do this I must always have specific and direct knowledge of retreading through a retreaded tyre that we make. This is an important investment. Moreover, the value of the work of designing and manufacturing a retreadable tyre is really difficult to put across”. In Italy in particular, it is even more difficult, given that here the tendency to retread is less than in the all the mature markets in Europe. There is a risk of trivializing the product and being limited by the lowest price irrespective of product quality. In practice, the entire market focuses on the purchase price and not on the investment required and the effective optimization of tyre management costs. “For Michelin retreading means believing in your business, believing in your product, in your abilities and maintaining a tradition: Michelin has always made good, retreadable tyres. Retreading is an important contribution by the tyre world. It is differentiation from the competition and for the user it is a reduction in running costs. It is the creation of value for retreaders, for retailers, for users. And, last but not least, it helps sustainable mobility”.
So how can we evaluate recent years in the Italian market? Let’s take as indicators new tyres, the carcasses available and the predisposition towards retreading. The predisposition towards retreading is measured by the ratio of retreaded carcasses to new tyres. If we take the total market in Italy, original equipment and changeovers, we can estimate that from 2008 to 2012 volumes decreased by about 30%. As a consequence, there are fewer carcasses and the reduction is due to fewer sales of new tyres, original equipment and changeovers, and the inferior quality of the carcasses in circulation, because the sales of lower quality new tyres have increased.
ETRMA Italy puts the new changeover market at -37% at the end of September. I estimate that if things go well in 2012 we will end up with -25%. The retread (ETRMA Italy data) is about -14%, so it is losing less than new tyres”. There is a positive sign: the increase, albeit slight, in the predisposition to retread, the understanding by some users of the effective savings with retreaded tyres.
Another interesting element is the retread to new (changeover) ratio. In Europe it goes from 0-25% to 25%-50%, from 50%-75% to over 75%. It is over 75% in Nordic countries, France and Portugal. Between 50% and 75% in Spain, Germany, UK, Switzerland, and from 25% to 50% in Italy, Turkey, the former Yugoslavia, Hungary and other countries. Lastly, there are countries with extremely low levels of retreads, below 25%, like Greece, Bulgaria and so on. Let’s say that our situation is fairly stable, but it has not improved greatly. In general, the weight of the retread increases in the European truck market. In Italy retreads have a market share of 42.7%, it was slightly lower before, but still in the lower segment at 45%-50%. “An estimate for 2013. With reference to new tyres, in Europe considerable growth in volumes is estimated for original equipment and changeovers. In Italy, we believe that the growth percentage in the two markets will be less than the European average, consistent with the speed and time at which the country comes out of the recession. But we come from a year with significant negative signs so this data means a partial recovery of losses. The retread trend in Europe and in Italy is estimated to be higher than for new tyres in the changeover market.
These trends are not cause for enthusiasm but they do show that perhaps this year we have touched bottom, so the only place to go is up. The key elements for the future of retreads are: new products, labelling, the availability of quality carcasses and the retreadability of the carcasses”.
ReTyre: a project for labelling retreads
Andrea Balduzzi, AIRP director, explained the ReTyre project, a complex subject that represents a determining stage for the future of the sector. The project is a feasibility study of retread labelling. With Regulation 1222/2009, the European Commission introduced the labelling of tyres with ratings for noise, rolling resistance and wet grip. With some rare exceptions, the regulation covers tyres for cars, light and heavy commercial vehicles (C1, C2 and C3) and currently does not apply to retreads. “The reason the Commission issued this regulation stems from the need to lower the number of road accidents, primarily, and to increase sustainable mobility with the reduction of CO2 emissions and rolling noise. The legislator wanted to be sure that tyre manufacturers would not cut back on wet grip to the benefit of noise and rolling resistance which, as we know, is closely linked to fuel consumption”. Although retreads are exempt, the regulation does mention the possibility of including retreads in the future. From a product image point of view, including retreads, obviously with a grading appropriate to their characteristics, would give them greater value also with respect to new tyres. The real heart of the matter is not inclusion or exclusion from labelling, but how to label retreads with procedures and costs that are within the reach also of small independent firms.
The challenge is primarily scientific: how can it be done? Our basic idea was to study all the parameters regarding carcasses, the retreading process and the tread in order to determine their influence on tyre performance as required by the label. The tests being carried out at the Idiada centre in Spain and at BAST in Germany are oriented towards determining the impact of these parameters and clarifying the predictability of the product’s environmental and performance characteristics. These major test centres are equipped with sophisticated machinery that is also used by the manufacturers of new tyres”. The ReTyre project began on 1 April 2012 and will continue for 30 months. Cross-referencing the data for different real and measured situations should lead to achieving the objective of identifying a valuation method and the relevant tools that will enable retreads to be graded. If this objective is achieved, it will be possible to promote an amendment that will include retreads in Regulation 1222/2009.
The ReTyre overall strategy and technical approach is divided into stages:
Stage 1-3 (WP1-3)
The project began with the collection of data from retreading firms, truck tyre manufacturers, tread suppliers and research institutes to investigate all the important parameters for carcasses, the retreading process and tread application in order to determine their influence on tyre performance. The information will be used to define a series of algorithms and to develop a model for predicting the performance of truck tyres. This model will be based on the total observance of Regulation ECE ONU 109.
Stage 4 (WP4)
The next stage is the development of an intranet tool, software for the management of the abovementioned data.
Stage 5 (WP5)
The intranet tool and the technical information acquired will be available for retreading firms and their associations. Feedback will be used to improve the software. There will also be validation and monitoring procedures with random tests at tyre retreading firms. The method (software and optimal procedures) will be valid if the results of tests on randomly selected retreads are in line with the aforesaid performance standards. The validation of the method will be the basis of its possible homologation.
Stage 6 (WP6)
The first version of the software will be accessible on the Internet by inserting the user name and password of participating retreading firms and associations (WP5). At this stage, a determining role will be played by Bipaver, the coordinator of the entire project. Subsequently, this tool will be accessible to all members. In conclusion, the main results expected are: the development of a method for classifying truck retreads in accordance with the parameters of rolling resistance, noise and wet grip; the transformation of the method into an intranet software tool accessible to all retreading associations and their members in such a way as to provide a service for labelling retreaded tyres. “Also envisaged is a stage during which the project can be interrupted if the results differ significantly from those expected. If everything goes well, the results could also help the European Commission in the harmonization of the labelling regulation with the integration of the results and findings for retreads. This is a genuine research project, an important investment in people and means, with the conviction that it is only by raising the perception of quality that the product’s ecological and economical properties can be appreciated to the extent they deserve.”
Association balance sheet
Maurizio Gessati, treasurer and director of AIRP, presented the Association balance sheet. “In a world that is in the throes of a crisis, fortunately there are some organizations that not only survive but also do well. One of these is our Promotec which also last year, when many fairs were having substantial problems or had even closed, made the Bologna fair a successful event that continues to improve”.
At the last edition, the total exhibition area of about 150,000 m2 hosted 1,473 exhibitors. There were 85,142 visitors from Italy and 18,524 from abroad.
A positive balance sheet means that we can support the retreading industry’s promotion and communication actions and the Association will continue to invest in re-launching the sector.
The contribution made by retreads to reducing CO2
AIRP secretary Renzo Servadei talked about the important role played by retreading in reducing CO2 emissions.
One of the Association’s long-standing activities is telling users about the advantages of retreads. Currently, a subject that is of great interest concerns the so-called carbon footprint. It is the measurement of the impact that various activities have on the environment in terms of CO2 emissions, which are one of the causes of climate change and the reduction of which is one of the objectives of the Kyoto protocol.
“In order to be heard on the subject of the environment, the demonstration that a business reduces CO2 emissions is therefore a determining factor. This applies not only to communication but also to lobbying”. How are retreads positioned with respect to these parameters? Very well. This is demonstrated also in a survey by Best Foot Forward (BFF), an independent British body that specializes in this type of analysis, which compared the carbon footprint of a new tyre and a 17.5” retread. By using special conversion formulas, the study determined the carbon footprint at various stages of tyre manufacture and demonstrated that making a new tyre produces 86.9 kg of CO2 emissions compared to only 60.5 kg of CO2 emissions for a retread. In practice, it means a 30% reduction of emissions.
As expected, the majority of carbon saving is the result of using less material, almost 49 kg of CO2 compared to 31 kg. Moreover, the energy required for manufacturing plays a fundamental role: the production impact of a new tyre is 31 kg of CO2 and 22.5 kg for a retread. The impact of delivering the product is also interesting; for retreads it is lower simply because they are manufactured much closer than new tyres. CO2 emissions generated by manufacturing waste is very low, bearing in mind that in many cases it is reused.
It may seem strange, but at end of life the impact on the carbon footprint is negative because scrap tyres are used by cement works instead of coal thereby reducing emissions. Because some of the savings from retreading is the result of reusing the carcass, by retreading it more than once and increasing the possibility of doing more miles with the same tyre, the grams of CO2 emissions per mile per tyre decrease considerably. “As can be seen, also from the point of view of saving CO2 emissions, the retread is totally in line with environmental demands”.
The organizational structure: forgetting the inevitable
Prof. Roberto Vaccani, organization and organizational behaviour consultant and senior lecturer at SDA Bocconi, gave an interesting talk about the organizational structures of companies. An authority on macrostructures, let’s say that he is an “expert on corporate general medicine”, to use a clinical metaphor. He handles in-house training and consultancy with an awareness, as he says himself, that “the further you stray from the concrete reading of a specific company, the greater the risk of becoming abstract, superficial”.
From the point of view of company organization, the first element is the size of the company, which is fundamental from some aspects and secondary from others. For example, if the company is small and its current margins are very low, it will have significant problems; if the company is a certain size, has a number of employees and makes maximum use of resources, it will probably have a little more flexibility with regard to margins. For a firm of 3-4 people, the concept is not that of a “company” but, rather, of a group of artisans. So, we go from the concept of a small group of people linked by relationships of good sense, like: “let’s get organized, let’s be honest, who knows how to do what, we have technology, we have regulations, let’s do it”, to more complex structures, the multinationals where it is essential to pay attention to aspects of organizational architecture and organization charts, the size of economic resources, the number of employees, space, time, methods, procedures, specifications. The second element is the characterization of production and commercial activities. Retreading is a production activity with commercial aspects. Normally, the mental barycentre of organizations that for years have been accustomed to producing and selling, also because they are demanded by the product, is production capacity, staying within specifications, quality compatible with what is requested or certified by the market, and then decisions. Salespeople are not the same as those who produce because the former not only sell products or services, they also sell their relational skills, they sell themselves. Because creating loyalty for the standard of the product or service is also linked to the reliability of the salesperson, it depends on the differentiating and personalized relationship with customers. People who produce and sell are tied to successful routines, to making products and to selling.
Innovative decisional process
In the decisional process we reduce the process to the concrete and visible result of the decision. For this reason, the attention centres on final output and neglects the process that precedes it, a process as hidden as it is qualitative and on which successful decisions depend. The preliminary and project stages of the decision constitute the process that is not seen, the final decision is the visible product of that process. As with a company, the preliminary proceedings for individuals are determined by how they listen to the ambient, how they process the information, how they analyse possible solutions and their adaptation to the ambient. For example, listening to market inputs opens up innovative ideas that are not necessarily tied to the traditional practices of selling and producing. Usually, those who listen to the context and the market, not only get the best from the production and sales aspects, but also mark out new opportunities for doing business. Decisional processes were a subject that interested a group of philosophers in Ancient Greece called the Heurists (from the Greek for heuristic meaning “discover” or “find”). Today, experts in the human decision-making processes are called Neo-Heurists and they investigate the mental and decisional processes of individuals. Many technological innovations in software are nothing other than the translation of more or less complex physical neuronal programs of individuals in terms of dephysicalized computer programs, the transfer from neurons to chips.
Vaccani proposes four steps, which we all take, consciously or otherwise, when making non-routine decisions. The first two steps are often implicit and invisible, because they take place in the privacy of our thoughts, and can be described as “classified listening” and “comparable analysis”, the combination of these steps is usually called “diagnosis or preparation”. Then there are the other steps: definable as the “project” and the “decision”, these last two steps can be called “intervention”. Usually, when a trade or entrepreneurial activity is characterized by formulas and routine decisions that have been shown to be successful, we become unaccustomed to leaving space for innovative decisional processes and we shut ourselves into the claustrophobic environment of the last step of the decisional process - repetitive decisions. We end up by apathetically repeating traditional decisional practices, slaves to the paths of the “already successful”. When the conditions of the context change (as in the current market context), it is better to change the mental approach and open up the mind to new and strategic decisional processes, thereby also getting out of the rut of routine decisions. Often opening the mind to listening, to processing and planning activities and work means revolutionizing everything. Usually it is a case of combining historical practices that are still successful with ideas and strategies that will innovate and make a business profitable at a time of crisis. Nowadays, if you don’t review your business formula every two-three years, even if it is only to confirm that it still works, you run the risk being out of the market.
Vaccani stated: “To take an example applicable to your business of the historically successful manufacture and sale of retreads, which is currently suffering because of considerable changes in context, it no longer seems profitable to insist only on traditional production and sales routines. Only those of you who can open up the decisional processes to input from the classified listening of market events, to comparative analysis and creative design, will be able to see new successful strategies to be combined with traditional ones. It is this mental opening up that has enabled some of you, when faced with the lack of retreadable carcasses, to see the owners of trucks and fleets not only as customers for buying tyres (company output) but also as suppliers (company input) of retreadable carcasses. This new reading has opened up a new source of business and the creation of customer loyalty that will foster the start of new tyre maintenance services in exchange for the supply of retreadable carcasses. In this way, end-customers will also become the initial suppliers of the production process. This creative strategy means that customer loyalty can be increased in that they become joint partners with a shared interest in the entire production process. Joint participation that will enable you, the proposer, to add to the attention and professional enrichment of all the links in the production chain (from maintenance as a service to the dependable acquisition of carcasses to the traditional production and sale of retreads). Usually, when the chain of values has more attachments that are objectively perceivable (in the previous example, the customer seen also as a supplier), business that creates profitability also increases”.
The company not analogically distant from the decisional processes can be represented as a complex decisional flow made up of input factors that need to be listened to, production procedures that are the result of processing and planning, and the output factors of production and sales. When the market is stable and profitable, we fall asleep on output and repeat the historical dividing up of production and sales. But when something changes in the context, it is necessary to restart innovative listening to the entire business process in the search for the incremental spaces that have yet to be taken into consideration.