Commentary on the State of the OTR Tire Market from BuyBigTires.com

If you’ve been reading our posts for any length of time here, you know that we spend very little time talking about our company. In fact, we make a habit of hardly ever linking back to our main site, BuyBigTires.com , in any of our work , save for a link at the top of the page. We never make a sales pitch,  as it is our practice to only report on news that concerns the mining and tire industries.

Today, our site, our company, and the news converge. Mobile Fleet Service, Inc. (Our company), and BuyBigTires.com are approaching their anniversaries very shortly. Mobile Fleet will be turning 7, and BuyBigTires.com hits the ripe old age of 3. Like all living things, we’ve seen our share of sunshine, and weathered more than a few storms(including the one our industry is experiencing right now.)

Regardless of what state we find ourselves in at any given time, there is one word that has come to define our company, and that is Independence. We’re an independent tire dealer, we make decisions and take on projects that cut against mainstream thinking in the tire industry.  Often that independence gets framed as a lack of sanity. I’ll never forget the reaction our President heard (from a prominent person within our own organization), when she said that she had bought a domain name, and  we were going to create a website: “What’d you go and do that for?”

Thus began our journey in the online world. We started out just offering our tire list, broken down by category on a few  web pages. It was the height of the OTR shortage, and our meager little website was growing steadily. If I didn’t have 15 messages from Chinese tire dealers in my inbox when I woke up in the morning, I felt I was missing out on something.

As traffic to our site grew, we began thinking of ways that we could reach out to our clients(and prospective companies), by providing them news and education. Out of that desire, Heavy Treaddin’ was born. We try, as always, to give our friends something to think about, free of any influence from manufacturers or mining industry interests. Have you ever noticed that there isn’t any advertising here? It’s not for a lack of paying traffic. If we accept advertising from a company, then there is the temptation to pull punches when a manufacturer does something unseemly, or questionable. That wouldn’t leave us with much of our independence (although it might add a few digits to our bottom line).

Since we didn’t have enough on our plate, we decided that we would begin producing a video magazine for our customers. Once again, free of charge, and for the general information of our clients. In the beginning, the goal was to produce one new video per week, so we called it “OTR Weekly with Tom White“. Unfortunately, the work that it takes to put everything together has reduced us to OTR Monthly. At any rate, it’s still free of charge, advertisements, and wallabies. We can’t promise that it will stay wallaby free forever, as our readers seem to love the little fellas.

So what’s the point…I mean, we’re just tooting our own horn, right? Yes, in a sense we are. We’re not saying we’re the biggest OTR Tire company the world has ever seen. We have made great efforts to be the most customer focused OTR company the world has ever seen, whether you buy from us, or just pop in for the free info now and again. Like the Motley Fool, our goal is to educate, enlighten, and entertain you. We don’t ask for anything in return.

As the saying goes, there is no such thing as a free lunch (much less, free beer). Somebody is paying the piper for the information you receive.  Those people are our founders, Lavonne Summer and Tom White.  They have continually invested time, resources(money and personnel), and thought into what you see, read, and hear. They are the embodiment of the independent spirit that runs through our company.

This spirit flows from the original ideas that our nation was founded upon: The freedom to worship, say, and do as we please, without infringement from any other person, even though they may be in the majority. In short, the right of David to walk straight up to Goliath, point at his forehead, and say “I’m putting a rock right there”.

If  I am waxing overly patriotic here( along with taking the Bible a bit out of context), you’ll have to forgive me. While we are a company that operates worldwide, our drive, determination, and overall stubbornness are entirely American in character. On the other side of that coin is our desire to see other businesses succeed. That, too, is part of the American ethic. Because no matter how “independent” we might  be, our success can only be measured by the amount that we have contributed to the success of others.

Kevin Garnett once made a statement that stuck with me. He had just been signed to an outrageously rich NBA contract, and the reporter noted that he brought all his childhood friends with him. They lived in his house, drove his cars, and charged expenses to his credit card. When  Sports Illustrated asked why this was the case, this was his reply:

“My idea is, I shine, you shine,” Garnett says. “If I’m doing well and you’re with me, you do well. I don’t have a lot of friends. I have a lot of acquaintances, but that’s different. Friends have been with you forever.”

While I am not keen on adopting an NBA player’s philosophy for our company, it does sum up how we feel about our friends/clients, and those who are a part of our business: We shine, You shine.

This seventh year contains many challenges that we, the mining  and tire industries as a whole will be facing head on. We have committed ourselves to giving back as much as we can, and making sure that you have what you need in terms of education and information. That’s our commitment to you, and to your business.

While the website may change, in terms of both features, and content, we’ll be right here, delivering the best and latest news and views of interest to the tire and mining community.

Until next time, we’ll be…

Signing off…

Well folks, with the stroke of a pen, (and a vote from their board), American Seashores International, American Tire Corporation, Washington Tire Corporation, American Tianbao Company changed their name to Colorado Tire Corporation. Before I get into the main portion of this article, I’d like to thank M. Doul, from a previous report for the tipoff.

Mr. Doul went to ATC’s website(which I rarely do), and found the following press release/message (screenshot below).

Click on the image for a larger version.

In the release, ATC states that it feels the need to consolidate its name and its brand behind their Colorado Tires. While I don’t sit on their board, let me respectfully submit my thoughts as to why it is a bad move:

1. By merging the Colorado brand with ATC as a company, they force the tire community to scrutinize both Colorado tires and the company itself. Up to this point, people have only questioned ATC’s statements about being an American manufacturer, being supported by the Federal Government, etc. Nobody here has touched the tires, as there is not enough independent data to prove their reliability, one way or the other.
2. ATC is not the only seller of the Colorado brand. There is another company that sells the tires as well. They run the great risk of damaging his company by association. One can only hope that he is in agreement with the board.
3. Abraham Hengyucius- Until they remove him as a spokesperson, and/or he is stopped from making outrageous, and unsubstantiated claims, he will continue to damage the company, regardless of its name or form of existence.

Speaking of unsubstantiated claims, many had asked us if the Colorado Tires were indeed, Chinese. We are now prepared to go on record, and offer proof that at least the 63″ tires are(With a few more resources, we could probably substantiate that all of them are).While we will not reveal the manufacturer here, we will reveal that they are located in a SouthEastern province of China, and that a company associated with Mr. Hengyucius received shipments from them(clearly marked as 63″ Colorado brand tires) as recently as May of 2009. All of this information is public record, and can be obtained with a bit of digging.

So, the mystery ends here: At no time, has ATC ever produced a single tire in the US, except for the ones they took from a container. Thus, their claim to being the largest manufacturer of 57″ and 63″ tires in the United States  is null and void(just in case you actually needed me to tell you that.)

Hopefully, Colorado Tire Corporation will let the tires stand on their reputation, give their spokesman the boot, and stop the name changing. Seriously, it costs money to do that.

At any rate, we’ll keep you up to date on the latest developments in the case. Really folks, we don’t go looking for this stuff. It finds us.

That all for now. Stay tuned for the latest news affecting the mining and tire industries. Until then, I’ll be…

Signing off…

Okay, so this will be the third article in a row that I have talked about China. This will be an indirect discussion regarding a   Chinese company, rather than the nation itself. Last year, we took a brief look at Double Coin in a few posts, and pondered whether they would be  a force in the tire markets long term.

I think we can answer that question today, with a resounding “Yes.” If I am not on record already, let me say that I would unequivocally recommend a REM-2  to replace an XHA if we are having a cost-per-hour discussion. “Value” seems to be where CMA is placing much of their emphasis these days. In fact, a quick trip to their website removes all doubt as to their strategy.

Why aren’t they selling more OTR? Well, people are still a bit skittish about Chinese tires, having been burned by the fly-by-night, change-our-name-like-a-bad-auto-body-shop strategy that so many manufacturers employed during the past few years. The other issue that CMA is having is one of branding.

Michelin is a household name, and that goes double for the heavy equipment industry. All things being equal, they are not, and Double Coin suffers from a tragic lack of name recognition. On the upside of things, CMA can afford to sell tires at a lower price, because they don’t have a huge marketing budget to subsidize. Let’s face it, if you’re not paying to plaster your name all over the Super Bowl halftime show*cough*Bridgestone*cough*, you have a better chance of being more competitive with regard to pricing. On the downside, Double Coin isn’t at the top of the list when a customer goes to buy a new tire.

If you aren’t working with a heavy marketing budget, you go to war on price and selection. CMA is going long on reliability, as well. How do I know that? CMA just announced this week that they are releasing their first 57″ tire(login required to view). This is significant, because out of all the Chinese manufacturers, CMA has been around the longest. If anyone could have rushed a 57″ model to market during the boom to make a quick profit, it would have been them. Instead, they ramped up production slowly, and focused on overall quality in the development process.

This is where they will  make inroads with consumers. The early adopters, and purchasing departments that are looking at actual performance, rather than the name on the tire, will probably find substantial cost savings with this new product. If it is successful, then I believe it could bring a new wave of competition in the OTR marketplace. As we all know, competition spurs innovation, and innovation is good for everyone.

In closing, while I am not a big fan of the Chinese government and their trade practices, I love quality at a decent price point. I believe Double Coin is delivering both of those things, and commendations are in order. Good on ya’, CMA.

That’s all for now. Stay tuned for the latest in news of interest to the mining and tire industries. Until then, I’ll be…

Signing off…

Normally, I don’t write posts two days in a row. This one, however, will be brief:

The BBC is reporting that Rio Tinto has halted trading of all it shares , on reports that it may be backing out of a deal worth 19.5 Bln dollars with China’s state-owned Chinalco.

That same report states that the deal was halted on concerns that China would use their stake in Rio to control the commodities markets. I have to ask, with all their analysts and highly paid consultants, is this really the first time that they considered that possibility? I wrote about this type of scenario yesterday in my piece on China, and indirectly referred to this kind of consolidation earlier this year, in our ” State of the Mining and Tire Industry“.

Update: Reuters has just confirmed that BHP Billiton and Rio Tinto will combine their Australian operations into a 50/50 joint venture.

The BBC refers to BHP Billiton as the possible answer to Rio’s woes. We’ll see what happens. Hopefully, Rio will err on the side of the world economy, and prevent China from taking any more than their current 9% stake  in the company.

That’s all for now. Stay tuned for our regular news reports affecting the state of the mining and tire industries. Until next time, we’ll be…

Signing off…

Occasionally, I shake my head at the Chinese. Their short term moves are, at best, a riddle. However, most riddles are easily solved given enough time. Time is something that the Chinese have in spades. When you’ve been an empire for nearly 4 millenia, you learn to think with regard to the long term.

Seeing from this perspective is the only way that their current moves with respect to metals make any sense. Recently (as in yesterday), Mining Journal reported that the Chinese are taking a risky tack with regards to iron ore surpluses. The report has the vice-president of the China Mining and Steel Association with the following quote:

“The risk of over-importing is building,” Luo Bingsheng, vice-chairman of the association, said at a conference in Shanghai. Iron-ore imports in the first four months exceeded actual demand by 27Mt…”

What is the purpose of all these imports: Infrastructure. The Chinese are building like crazy, and the imports far outstrip demand. We also know that China is stockpiling copper at ridiculously low prices. That makes sense, but why the huge stockpiles? One part of the answer is their switch from the fast dropping USD, to hard assets and commodities.

Another portion of the answer materialized yesterday, as Sichuan Tengzhong Heavy Industrial Machinery Co. said they finalized a bid for GM’s flailing “Hummer” brand. They have plans to expand the brand, worldwide. Most of that expansion will be in China, however, as unsubsidized(and highly taxed) fuel prices in the rest of the world will make it difficult for any substantial growth to take place, unless it is retooled into a smaller, more fuel efficient brand. Given the understandable  appetites of the Chinese middle class, this is an unlikely outcome. They have high demand for these types of products, and they are giving their people what they want.

While the rest of us are being all namby-pamby about “climate change”, the Chinese are wholeheartedly embracing the consumption driven lifestyle that Americans can no longer afford. Why? Because they can. China has time on its side, a lack of regulation, and cash to burn. Sure, they may make a few miscalculations up front, but long term, they will continue to gain ground. That has been the perspective of the Chinese Government from the time they became a force in manufacturing during the late 70’s.

Now, China is holding all the cards. They can afford to err on the side of largesse, because they have the capital to absorb losses. Every day, China’s net domestic consumer base grows by 8 million people per year (17.8 Million births - 9.2 Million deaths). In comparison, the USA’s net domestic births are somewhere in the range of 2 Million people. I hear you saying “Quit playing Jeopardy, and get to the point.”

Let’s say that even half of the children born in China even attempt to emulate the lifestyle of a typical American. Can you even wrap your mind around the resources that it will take to house, transport, and feed an expanding population of that size? The Chinese do. This is why they are stockpiling assets, not because they need them now, but because they can get them cheaply , and offset some of the costs that will be incurred by the long term expansion of their population.

There is another fact that has nothing to do with money. The Chinese have a goal in mind, and that goal is dominance. They don’t take kindly to frequent lectures from someone who is both a creditor, and has a brief , but shining history on the world’s stage…(*cough*the USA*cough*). To the Eastern mindset, what America is currently experiencing is not a crisis, but a loss of face. We are not in the position to boss the largest sovereign nation on the face of the earth around, anymore. We are liquidating American icons at fire sale prices.

China’s mindset is this: So what if they overbuy resources, they’ll just resell them to us at higher prices as the dollar declines. If Hummer makes a return to favor with the American consumer, they’ll resell them to us at higher prices than we would pay for domestic production. If America’s political establishment fails to repay their loans, they’ll take their figurative pound of flesh from elsewhere. That’s what China is thinking.

In America, we may quote scripture, but the Chinese understand it:

The rich ruleth over the poor, and the borrower is servant to the lender. Proverbs 22:7

Today’s report comes to us via Transport Topics Online. Evidently, folks have crunched the numbers, and overall tonnage hauled by semis was down about 13% for the month of April. That’s a big number, but it became even more distressing when they put it in this frame of reference:

The decline in the for-hire seasonally adjusted truck tonnage index was the biggest in 13 years and left tonnage at a reading of 99.2, its lowest level since November 2001.

Anybody remember November of 2001? About the only things getting shipped were crates of American flags. It was just after 9/11, and I worked at a large retail shop. We had more employees in the store than customers for about six months, we couldn’t move any inventory, and  corporate wasn’t going to ship any more product until we sold out the stuff in the back room.

It seems the same trend is developing nationwide, as retailers are doing something called “right-sizing” their inventory.  In the same article, Chief Economist for the American Trucking Association, Bob Costello explains:

“While most key economic indictors are decreasing at a slower rate, the year-over-year contractions in truck tonnage accelerated because businesses are right-sizing their inventories, which means fewer truck shipments.

So, the trucking industry is getting walloped, because physical inventories are way too high. Common sense will tell you that this  will have a proportionally bad effect on the tire industry. Standard, class 8 semis need 18 tires to run(10, if they are running “super singles”). Less tonnage means less wear on existing tires, with a decreased chance for tire failure. In addition, it means that we will probably see an increase in so-called “deadheading”, where the tractor makes the trip home without hauling any cargo. Again: No trailer = less wear.

With crude prices nearing $65 a barrel, and diesel on the rise,  some truckers may just opt to stay home. OPEC has set $80 a barrel as their target price. Demand is already at anemic levels. A modest increase in travel could send fuel prices soaring above that mark. The high cost of fuel may begin to eat into what little discretionary income people have left. When it does, you can expect the products on the shelf to stay there even longer, worsening an already bleak picture.

We aren’t out of the woods yet, folks. I tend to be one of those that believes that the bottom of the market is farther away than some of us would like to believe. I’ll let you know when I see some solid signs of improvement.

Until then, we’ll be here, bringing you the latest news affecting the mining and tire industries. Right now, I’ll be…

Signing off…

Remember how I talked about how the mining industry needs some PR help. Well, here’s example uno, primero, one:

Evidently, an Australian mining company by the name of Cape Alumina Pty made a horrible PR decision.They attempted to claim mining rights on a tract of land owned by the estate of the late Steve Irwin(aka “The Crocodile Hunter”). The company purchased the mining rights for 15% of that particular piece of property in 2004. Their express purpose was exploring the suitability of the land for mining bauxite.

Silverback Properties(owned by the Irwins) came into possession of the  cattle grazing rights for the 135,000 hectare (333,600 acre property in 2006. In a highly “generous” gesture, the outgoing Environmental Minister, Malcom Turnbull, gave them $6 Million AUD in taxpayer grant money to purchase those rights. That, as most would readily gather, is nearly two years after Cape Alumina purchased (with privately raised funds, I might add) the mining rights. This was the same conclusion that the Australian courts came to in September of 2009.

It seems that Cape Alumina has found deposits of bauxite that amount to over 100 Million tonnes, during their exploration process. Not content with the courts’ ruling, Terri Irwin(Steve’s widow) and a few of their well known friends are attempting to appeal the ruling in the press. The most recent development was Russell Crowe’s visit to the David Letterman show. Check out the five minutes or so that they take to cover the subject below:

Notice how Russell skates over(never mentions) the fact that the rights were signed over before the Irwin estate took possession of the land. There’s no mention of the ruling in favor of Cape Alumina, either. The actual issues pertain to property rights, and they’ve turned this company’s legitimate right to mine into a defamation of Steve Irwin’s legacy. They are the masters of PR spin and the media domain. They’ve turned this into the moral equivalent of opening a shotgun factory in Kurt Cobain’s mansion.

What is the mining company’s response to the allegations? In an interview with Western Australia Today, the company’s head, Dr. Paul Messenger had this to say:

“I’ve written to Terri Irwin and Russell Crowe inviting him to come with me to Cape York to look at the land, to understand what we are doing, to talk to the locals,” he said.

“One of the unfortunate things about this whole process is that the rights, the interests and aspirations of the traditional owners of the land have been completely overlooked.

“And their very existence has been denied by claiming that area is Steve’s Place. It’s not Steve’s Place. This is traditional (Aboriginal) land.”

With all due respect to the native contingent of Australia, I would like to pose the following query: Since when does anyone care about the native population of a continent? Ask the Inuits, Native Americans, Mayans or Aztecs about the last time they were given even token thought(except when some country decides to trot them out to show how “diverse” their historical heritage is, during say… an Olympic opening ceremony). Cape Alumina is going to have to do better than that(not that their concern for indigenous peoples  is  insincere, or unwarranted). They are dealing with the ghost of  one of Australia’s–nay, the World’s leading conservationists and celebrities.

So they did, by citing scientific environmental impact studies, and refuting the arguments of Crowe & Co. in rather wonkish fashion here. What’s wrong with this argument? It’s a logical response to an emotional issue, that is being presented out of context, to people who do not live in Australia and are unfamiliar with the peculiars of the case. Points for facts presented, demerits for daring to present facts in their response to the general public. The general public wants outrage, a sob story, an avoidable tragedy. Hard news be hanged.

What does the future hold for Cape Alumina? Sure, they have the law on their side, for now. Given enough public pressure during an election year, the laws can change , and in rapid fashion. Since CA won’t have the equipment in place to start extraction until 2012, there is more than enough time for the Australian political establishment to “see the light”, and reject the valid claims of the mining company in question. It’s a sad situation, but in the end, I believe the spin will win.

We’d love to hear some comments out of the readers from Oz. Please sign up, and leave your thoughts with us.

Stay tuned, as we continue to bring you the lates news  and commentary concerning the tire and mining industries. Until then, I’ll be…

Signing off…

Oh, dear. This is just too much…

One of our friends in Washington(Ken, of a previous report) has been keeping an eye on Abraham Hengyucius. I present for your edu-tainment, the latest in the long saga of American Seashores International, American Tire Corporation, Washington Tire Corporation, and its latest incarnation/sister corporation: American Tianbao Company (aka Tianbao Securities and Tianbao Capital).

On or about May 1st of 2009, Mr. Hengyucius established yet another corporation. I’ve posted a screenshot from the Washington SOS below(courtesy of our friend, Ken.) This is so you can see the registrations in the state of Washington.

click for larger image

Evidently, Mr. Hengyucius is doing his best to kill two birds with a single company. His first problem is that he needs to keep the ATC logo, his second is a lack of investment(Note: this is pure speculation on my part. If whisperings are to be believed, I warrant that it is not far from the truth, if not the truth itself.)

Let’s start with the “website”, which I will not grace with a link from here. I’ll put up a screenshot for you below.

Click for a larger image

You will note that everything is Trademarked to death, as if putting “TM” after your business name actually did that. There are actual papers to be filed for this sort of thing. I guess you can’t be too careful after losing to American Tire Distributors. At any rate, this at least gives them the initials “ATC”, so that they don’t have to do a logo redesign.

Evidently, they are quite the outfit, as they provide their

…portfolio companies the assistance in the areas of strategy, executive team recruiting, operational execution and capital-raising.

Umm…my question would be…shouldn’t you get it right, before you attempt to provide that same service to others. If I am wrong here, then it must be part of their “strategy” to hide all that expertise from the general public. As an aside, I don’t know what the “newest pulse” is, but I’m pretty sure that ATC has no clue, either.

As to the second requirement, who wants to bet that American Tianbao is now an investor in the Ephrata, Washington plant? I would be willing to bet that ATC won’t fully disclose that to any potential investors. You will note that Tianbao invests in

…large projects in heavy industry, mining industry and high-tech companies.

What a coincidence. ATC could be described under all three categories. In fact, the entire description of the companies they invest in read like a press release for ATC(The tire company.) It’s just so transparent.

That pretty much wraps things up, save for a little lesson in law. Since ATC has copyrighted and trademarked everything, without understanding what it means, I have posted a link to understanding fair use laws, for the general benefit of all concerned.

So, there you go. I honestly don’t know when they are going to stop all this nonsense. I’ll give them credit for not giving up, but that is the extent of it.

We’ll keep you updated on any developments in this never-ending story. Until next time, I’ll be…

Signing off…

Canada is doing it again. First, they pushed out into the sea, and explored the feasibility of ocean mining. Now, they have set their eyes on space, more precisely, the moon.

In an excellent article over at the Financial Post, they lay out  the CIM’s agenda for their yearly conference. Canada has great concerns that their mining innovations are trailing the rest of the world. My guess is that our neighbors to the North get tired of hearing about the US, and how we are the leaders in innovation all the time. So, instead of building a moon base(as NASA intends to do), they are taking the more practical approach of mining the moon’s metallic deposits.

The metal/chemical composition of moon soil

This is quite a forward looking move by Canada. The only question seems to be whether they will be providing their services to the US or China. Evidently, the Chinese will be attempting to build  a moon base. Knowing the Chinese, they would use this as grounds to claim the moon as their national property. After all, the US only has a flag up there, and China has long known it is running out of resources for a burgeoning population.

Interestingly enough, Canada is not just looking at metals, but mining and converting the moon’s surface ice into water for use at the space station. Since this is often cited as the next great crisis, you can’t help but wonder if China is in the hunt to shore up extraterrestrial water supplies.

This is guaranteed to become a contentious international issue, as the rights to the moon are of very great real and symbolic importance. The world is destined to have a turf war, and Canada will most likely stay out of it entirely. By focusing on the development of the methods and equipment needed to handle and extract resources, it seems that Canucks will be the ones who will hold the dominant position when it comes time to pay the piper.

Unfortunately, none of this is great news for the OTR tire industry, as the tires needed for such equipment are relatively small. As technology improves (and with an optimistic start date of 2020), it may well be that tires won’t even be a consideration as the technologies mature.

At any rate, our congratulations go out to Canada for their spirit of innovation. We’ll keep you up-to-date with any progress or regression in this area. Stay tuned for the latest news affecting the mining and tire industries.

Until next time, I’ll be…

Signing off…

According to an upcoming report on the global tire markets, Bridgestone just slipped by Michelin to become the number 1 manufacter of tires, worldwide.(This is taking into account all categories. ) The report summary, available by clicking here, states that Goodyear still holds at number 3, but the distance between its sales and Michelin have widened, mainly because of what the report calls “shrink in the North American Market”.

The financial crisis has made an impact this year, most notably, the current crisis in the automotive industry. It doesn’t take a rocket scientist to predict that lower production of cars means less OE tires. This could possibly be offset by the Replacement Tire market. Speaking from the viewpoint of someone who has replaced the tires on two separate vehicles within the past month, it is probable that things won’t be quite as dismal when the numbers are run at the end of ‘09. The percentages will shift, but things could even out.

The most interesting figures out of the summary state that the top 10 tire manufacturers have less than a 40% share in China. They make up nearly 73% of the market worldwide. I’m sure price is somewhat of a factor, but it possibly has something to do with the 577 tire companies located in China. Not retailers. Manufacturers. The major problem that the Chinese have is getting a foot in the door where OE is concerned, as their share is mainly relegated to the RT market. While that’s ok, there’s nothing like the (until now, virtually) guaranteed business from car and truck manufacturers.

What I did not find in this report(probably because it is written by someone from China) is a focus on the Indian market. The $3000 “Nano ” from Tata Motors has taken off. It’s backordered. The success has been so great, that Suzuki India is producing a vehicle to compete with it. Sure, the go-cart sized tires won’t put huge profits in the pockets of tire manufacturers right away, but should Indians decide to motorize en-masse, it could be a decently profitable niche market. In addition, the Nano could serve as a gateway drug to larger, more expensive automobiles with standard size tires. The 200,000 pre-ordered Nano’s will need 800,000 tires, so somebody should go in and start bidding. View the Time Magazine report on the Nano.

Well, that’s all I have for now. If you want to read the summary of the report, click here. The entire report is $2000, should you have the curiosity and spare cash to buy it.

We’ll be back next time, with the latest news affecting the mining and tire industries. Until then, I’ll be…

Signing off…

(Update: As promised, Twitter for the Tire Industry has been posted. You can watch Parts 1 & 2 by clicking here.)

Two hectic Saturdays ago, something interrupted the normal flow of my day. My wife and I started the car to leave the funeral we were attending, and felt the unmistakable drag of a flat tire. The irony was not lost on us, as the funeral was for a friend of ours who worked in the tire industry for over 30 years.  We had planned on replacing all four tires, as the tread was getting a bit thin, so I was less than concerned as I removed my suit jacket and grabbed the jack and donut  waiting inside the trunk.

I was now faced with a dilemma: Who would I buy tires from? There were many options, including the big-boxes near my house.  I have to admit that I thought of calling the local BJ’s Wholesale first, as I hold a membership there. Usually, they have coupons, and it is around $50 cheaper for a set of tires installed. We were also right down the road from a very large chain that specializes in tires, and the ever-present Wal-Mart was a short distance away. In the end, I chose none of the above.

Why? A very short word: Twitter. Now, if you’re wondering what a “Twitter” is, you won’t be the first. It is, in the most simple explanation of things, a website where text messages are posted that everybody in the world can see. You can read other people’s messages, also called “tweets”. As it happened, I had been monitoring tweets about different tire companies. Most of them had bad things to say about the tire services at wholesale clubs, especially Costco. They ranged from tires that were defective or badly installed, to 3 and 4 hour long waits to get 2 new tires. Evidently, someone would rather talk on the telephone than take care of a customer ready to buy in-store.

A search for “Wal-Mart” and “tires” on Twitter turned up the same kind of results. Interestingly enough, I saw a Discount Tire on the way to the store I eventually decided to buy the tires from. They are relatively new in my neck of the woods, and so I didn’t really have any news on them. It turns out that most things being said about them on Twitter are extremely positive. Had I read these reviews before the flat hit me, I most certainly would have chosen them as my tire installer.

So what does Twitter have to do with the average tire store today? Of what benefit is it to you? First of all, Twitter allows you to monitor comments about your business. When was the last time you received an honest, unfiltered opinion about your service. This is a non-confrontational way for your customers to let you know what they liked, and what they did not. If there are positive comments, you have something to show your manager, or your employees. If there are areas you need to work on, you can follow up with that customer directly, to make sure any complaints they might have are resolved, and that you don’t lose future customers via word of mouth.

Monitoring tweets is also a great way to see what a customer’s expectations are. In many cases, customers expected to wait less than an hour for installation of tires. While this may be fine on a day that is not busy, a walk-in should expect to wait over an hour when the bays are full. Many times, especially with younger customers, it is a lack of knowledge that makes them impatient. Nobody has explained prepping rims, balancing, or the fact that valve stems need to be replaced from time-to-time. They often think it’s as simple as removing the lugs, and popping a new tire on.

Customer education is the  advantage that you have over your competitors. The tires may well be $50 cheaper for a set elsewhere, but  they’ll probably only buy 2-3 sets of tires during the ownership of the car.  I am more than willing to pay someone who knows what they are doing to install my tires. It’s a part of the braking system of the car and even affects my suspension. The wheels on the car rival the engine for importance, and yet they get very little consideration when it comes down to dropping cash. A little education and experience will more than make up for the money they might save elsewhere.

So, what is my suggestion for  independent tire shops who are struggling to beat the big boxes?

• Offer free tire services… as in plugging a flat.  It takes a few minutes to plug a nailhole, and they will be well spent. My entire family gets their tires from a shop in our hometown, simply because they never charged us  for this service.  We offered to pay, and the guys in the bay said “no charge”. While some will take advantage of your generosity, a good many more will drive word-of-mouth business, and become paying customers in the future.
• Use Twitter search, and find out what customers have to say about your local competitors. Are they doing something right,or something horribly wrong?. You don’t even need a Twitter account to do that. Just click here, and search something like “tires Costco”. You can also see how large chains like Discount Tire communicate with their customers, and implement some of the better ideas you pick up on. Discount Tire’s Twitter profile is here.
• Educate your customers in-shop. Ask them what their expectations are for the service you will be providing, and then let them know if what they are asking for is impractical. If you have to, explain step-by-step what goes into the installation of the tire. Make the conversation about the tire’s application and safety over the long-haul, rather than price. Stress your experience in the business, and how that experience in picking and installing the perfect tire can give them confidence on the road.

It’s easy to fail in this economy. You can just give up, as people with a better media strategy than you take huge chunks out of your market share, or you can get smarter, and make sure your employees are providing the best  service available. Even if you don’t personally care for being on a computer, someone in your organization loves it. Get them to talk with customers, and assure that quality service was performed.

Here at “Heavy Treaddin’ “, we realize that learning how to use new technologies can be a daunting task. To that end, we will be releasing a “Twitter for the Tire Business”  video tutorial shortly. Bookmark this post, as we will update it is as soon as the video is released.

We’ll keep you up-to-date with the latest in technology and trends for the tire and mining industries.

Until next time,  I’ll be…

Signing off…

It seems that the Mugabe administration found out what happens when the government tells private interests what to do with their resources: They slow down or stop producing them altogether. In response to this, they repealed the lousy law, and like magic, Zimbabwe’s gold mines are resuming operations.

What are/were the problems? For starters, private interests in the mines are limited to 49%. This means that even though you pour your capital and efforts into running an efficient operation, you will still be getting less than half the profit. In addition, Mugabe ruled that all gold sales had to made through the Central Reserve Bank of Zimbabwe. Once the bank sold the gold, the private interests would receive 40% of the proceeds….in Zimbabwean dollars. According to a report over at Mining Weekly, this method eventually failed (Short on paper?),   and they resorted to issuing a “special” type of bond, in lieu of the money they owe mines.

In case you haven’t been paying attention, Zimbabwe is in the midst of insane hyperinflation. According to the Cato Institute, the monthly inflation rate of their currency is 79,600,000,000 %. So, as soon as they paid the money to the mines (even if it was paid out the same hour as they sold it),  it would be worth roughly 110,555,556 % less. This was if the payments didn’t get “lost” on their way to the mines. Given these factors, it’s not hard to see why mines closed up shop.

So, what do the new laws allow? It allows the mine to bypass the Central Reserve Bank, sell their gold directly to foreign commodities markets, and keep all of the proceeds. While I am occasionally critical of the mines’ lack of social responsibility (perceived or otherwise),  the Mugabe administration is far worse by an infinite measure. The return of mining will bring jobs to a country that desperately needs it, along with benefits for surrounding businesses.

While gold mines may jump at the chance to resume operations, investors are still leery of putting down a stake. It seems that they are waiting for the chaos to subside. Robert Mugabe is getting on in years, and the chances that he will either die, or be replaced by a younger, more charismatic figurehead are high. What his successor will do is anyone’s guess, and the people putting up the capital don’ t really care for guesswork.

What does this mean for the tire industry? Well, someone has to get the equipment readied for service. As we speak, inventories are being taken, needs are being assessed, and the Requisitions Dept. stands ready to write out the purchase orders. In a year with little good news  thus far, Zimbabwe is a bright spot of potential supply and demand.

We’ll keep an eye on the situation as it unfolds, and report on the overall impact on the mining and tire industries.

Until then, I’ll be…

Signing off…

If world demand for a specific commodity was going down by 15-20%, wouldn’t you expect the price to fall? Well, that depends on how you define “demand”. If by demand, you mean the actual need for copper in various products, then yes, demand is falling. Except, we must now define demand as speculation, for this is exactly what China is doing: They are speculating on future demands for copper.

As the price of extraction grows, along with with worldwide population, the price of existing copper supplies will increase along with it. China is unsure about the long term value of fiat currencies, and has chosen to put some of its monetary resources into commodities. As a result, copper futures are showing strong price increases. They are approaching levels not seen since last September, when the bottom fell out of the commodities markets.

30 Day Copper is headed towards $2.50 a pound.

On a more interesting level of subterfuge, they seem to be using their stockpiles of USD to buy  assets. This gets them out of the volatile USD, and into something that can be exchanged for the most stable currency, at the greatest possible profit.  If nothing else, they get the added security of knowing they have the raw materials to keep their infrastructure projects growing.

What’s China’s real angle here? In an interview with Ambrose Pritchard of the London Telegraph, Nobu Su has this to say about China’s motivations:

“China has woken up. The West is a black hole with all this money being printed. The Chinese are buying raw materials because it is a much better way to use their $1.9 trillion of reserves. They get ten times the impact, and can cover their infrastructure for 50 years.”

“The next industrial revolution is going to be led by hybrid cars, and that needs copper. You can see the subtle way that China is moving into 30 or 40 countries with resources,” he said.

The question is, how long will they continue this practice? The answer is “Until all the US currency is gone”. It’s a smart, strategic move. Why? Because when inflation takes hold (and given the amount we have printed this past year, it most certainly will) they will be in a position to make a massive profit, and take hold of massively devalued assets like  commercial real estate.

Also, while the Chinese aren’t particularly high on environmental reforms, the rest of the world is, and they have positioned themselves as a controller of the goods needed for the  so-called “Green Revolution”. It’s quite brilliant.

So what does this mean for the OTR community? Will we see mines kick-starting operations anytime soon? If they do, then they have to hope China keeps buying. If they don’t, then supplies will dwindle, and the Chinese profit even more. Even now, there’s some brilliant guy poring over the economic models, and determining when the best time for profit is. My guess is, when the support level for copper hits $2.50 or thereabouts, we will see machinery being refitted for operations, and regular shifts  will resume at the mines.

In the meantime, futures traders will continue to push the spot prices higher, and spot prices will continue to advance, even in the absence of present demand.

(Update: As with all issues, there is a counter-argument. Shanghai Scrap contests the London Telegraph report. They have a very convincing contrarian viewpoint.We think you will enjoy the information Mr. Minter puts forth.)

That’s all I have for now. We’ll continue to bring you the latest in news affecting the tire and mining communities.

Until then, I’ll be….

Signing off…

You’re going to have to bear with me folks. News is coming in from all sectors right now, and it appears I missed a very important milestone:  Goodyear is going to get around $14 million from the state of Kansas.

They were approved through the State’s IMPACT program, which evidently subsidizes worker training through the issuing of bonds. In the interest of full disclosure, I should note that Goodyear can receive up to $14.2 million dollars. I am sure that someone in the accounting/legal department will make sure that they get no less than that sum.

On the other side of things, Goodyear reportedly signed a contract with the local union that lets them cut 225 union jobs. By my reckoning, this allows Goodyear to get nearly all the money they originally asked for.

Let’s do the math:

• 225 jobs @ 50K a year = $1,125,000
• 8.5% * $1,125,000 for  SS and Medicare withholding = $95,625
• Health Insurance @ ~$2400 year, per worker retained(I am aware that I am lowballing the actual cost here.) = $540,000
• Total cost per year(excluding unemployment insurance and other costs of doing business) = ~ $1,760, 625 per year
• Total savings over the course of 10 years: ~$17,606,250
• Add in the contributions from the state of Kansas: ~$14.2 Million
• Total savings to Goodyear: ~$32 Million( like I said, this doesn’t include training costs and pensions)

Goodyear found a way to get their $38 Million, it just didn’t come directly from the Kansas legislature. I give them half-hearted applause on this one. The state of Kansas has put stipulations on the money as well: If Goodyear does not retain at least 1,400 jobs, then it must repay the $14.2 Million. Notice I said repay, because as I originally claimed, this is only a grant in loan’s clothing.

So there you go…Tire Review did an excellent job covering this situation when it occured on March 23rd. My apologies for missing it. Back to work everyone. I’ll attempt to keep an eye on all the happenings taking place in the tire and mining industries. When I find something of import, I’ll report.

Until then, I’ll be…

Signing off…

Here we go again. Another of our faithful readers has been digging into the ATC story, and this time, they’ve done research on the land. I’m just going to reproduce the email in full, and I’ll comment shortly afterwards. Stay with this one, as it is a bit technical.

Via Ken:

1st email:

I was investigating this company that I had never heard of before which  is causing such a stir in my community.

I live in the Ephrata area.

Seems ATC still has not finalized deal yet, but they have purchased at least  172 acres of  residential land in close proximity of my home, in addition to the Port of Ephrata.

I have my suspicions that a headfake is going on.

The parcel of land that I am aware of  (there may be others) is apprx 172 acres zoned “rural remote” which prohibits “most” industrial uses. The only “conditional” use I noticed in this zone is a both temporary and permanent asphalt batch plant. The commisioners here have historically been opposed to “spot” zoning for individuals, so the only zoning change on this parcel that I would see being concievable would be zoning change to RR1(5 acre minimums-residential use).

To view this parcel go here: http://gismapserver.co.grant.wa.us/default.asp

and allow popups on your computer, you can view it by entering parcel #161638000

(Ed. Note: Or, you can just click on the pictures that we snapped from the Grant County GIS)

At the bottom of the left hand frame you can get the actual sales history and recording number.

The image from Grant County GIS (Click to view full screen image)

The Sales history. ATC payed $128,550 for the land. The tax value is assessed at around $25,000.

In “layers” tab, you can get “comp plan” designation (zoning) as well as aerial photography, but don’t try both at the same time. This land is located centrally between Port of Ephrata and Grant County International Airport, which is the Port of Moses Lake. This parcel has no apparent legal public access and may even be landlocked. It is vacant sagebrush land with a slope facing the highway.

Here is the language of Rural Remote:

23.04.350 Rural Remote (RRem)

1. Purpose: The purpose of the Rural Remote (RRem) zoning district is to differentiate from the higher density rural land use to reflect the area’s remoteness and/or limited opportunity for development, to provide land for very low density, single- and two-family residential development. Rural remote areas are generally not suitable for intensive farming and are generally not attractive for residential development. Rural Remote zoning district is intended: (1) to provide opportunities for resource-oriented activities (farming and mineral extraction); (2) to be sensitive to the site’s physical characteristics and protect critical areas; (3) to provide opportunities to create open space corridors; (4) to enable efficient road and utility systems; (5) to provide for recreational uses and facilities. The Rural Remote zoning district is not intended to create demands for urban levels of service.

Permitted Uses: In addition to those listed in Table 4, the following uses are allowed in this zoning district subject to a conditional use permit:

1) Outdoor shooting and archery ranges; and

2) Golf courses, with accessory uses, such as eating or drinking establishments, pro shops, and clubhouses may be allowed, subject to a conditional use permit, to provide such functions; and

3) Un-named Recreational Uses.

I will keep you informed of any news.

Regards,

Ken

1. ATC is planning on using this as office space or warehousing of some sort. Given the fact that it is a good physical distance from the port of Ephrata land, this would be the only logical use. Since this land is far cheaper than the land near the airport, they may have made the investment hoping that the county commissioners would rezone this land especially for them, so they could ditch the more expensive 95 acres at the port. If Ken is correct, this probably will not happen, given the past history of the county zoning board.
2. ATC is buying this much cheaper land so that they can bring their total acreage count to 500, so that they can show progress to any prospective investors. In doing so, they feel they can escape the criticism that they have not actually progressed in any of their much-vaunted plans, and keep the hopes of a tire plant alive in the coming days. Given ATC’s history of stretching the truth, or just outright lying, I am not inclined to give them the benefit of the doubt.

That’s all for now. Thanks again to Ken and M. Doul for their independent investigative work in the past two posts. If you have any comments or questions, you can always reach us via email at blogfeedback@buybigtires.com .

We’ll keep you abreast of any breaking developments. Until then, I’ll be…

Signing off…