merc
09-05-2005, 01:54 PM
Four major tire makers have announced price increases for this fall, following similar announcements by most manufacturers earlier this year. Goodyear Tire & Rubber Co. has announced three price hikes this year alone as oil nears $70 a barrel, and with prices for steel and natural rubber also rising.
The latest Goodyear hike, a 5 percent to 8 percent increase depending on the tire model, took effect Thursday. So a tire going for $100 could potentially go for $108. The Ohio-based company also increased prices in February and June.
"If you look at it from a tire manufacturer's perspective, an oil price increase is a triple whammy for us," said Jim Davis, a spokesman for the world's largest tire maker, based in Ohio. "Oil is a major ingredient in the production of tires. It affects the cost to make tires, it affects the cost to heat or cool the plant where we make tires and of course the trucking cost to ship the tires."
A $1 change in the cost of oil costs the company about $20 million, Davis said. The latest increase in Goodyear's prices came after natural rubber prices hit a 12-year high and rose 40 percent over a 60-day period this summer.
Ray Weatherbee's wife hit a curb Thursday and popped a tire on her Acura Legend. Weatherbee, 82, decided it was time to replace all four tires when he visited a Goodyear service center in the Kansas City area Friday. Price wasn't a factor.
"I always buy the premium quality tires," said Weatherbee, a semiretired Caterpillar salesman in Independence, Mo. "You have to. They're better, they last longer."
He said the $400 tab for a set of 15-inch Goodyear radials didn't surprise him as much as the $3.19 per gallon he paid for gas, a jump of about 30 cents from the day before.
Vinay Hazare, a 19-year-old New York college student who was meeting a friend in at a tire center in Philadelphia, said he should have bought tires for his 2003 Acura before prices went up.
"It was wearing down and performance wasn't as good," he said. Hazare said he would delay buying tires if there was a chance prices would come down.
Since most drivers buy tires only every few years, many may not know about the higher prices, said Wilson Beach, sales director for the Tire Industry Association. Some dealers have enough inventory that the increases won't show up for months.
"People aren't gasping for air at the price of tires," said Heath Heimlich, manager of the Discount Tire in Englewood, Colo. "I think the price of gas has people a lot more freaked out."
Kumho Tire USA raised prices up to 8 percent on passenger, light truck and commercial truck tires this summer. It plans to raise prices on medium truck tire prices up to 4 percent on Oct. 1, due to higher costs for shipping and raw materials.
Raw materials typically are 40 percent of the selling price of tire, so percentage increases in the mid-single digits are in line with what companies have to charge to cover costs, said Saul Ludwig, who tracks the industry at KeyBanc Capital Markets in Cleveland.
"In my judgment, the average consumer doesn't appreciate the value in the product," Ludwig said. "More often they'll spend more for a pair of tennis shoes than for a tire that travels 70 mph, hits potholes and protects their life."
Tire companies point out that the price of a set of tires has been far more steady than the price of oil. Swis Tire & Auto Service in Denver said it will wait until its inventory runs out before passing on increases to customers.
"The last two years we seem to have had more increases than what I would consider normal," general manager Tom Steger said. "The start of the year is the time we normally see an increase. Now we're seeing it at the start of the year, midsummer, mid-fall."
Goodyear said it expected costs for tire raw materials to rise 10 percent for the year. In dollar amounts, Bridgestone Firestone North American Tire expected raw materials costs to rise $176 million this year, after going up $150 million from 2003 to 2004. Bridgestone Firestone announced up to 8 percent price increases for tires this spring.
The tire price increases are coming just as supermarket deli manager Tim Smith is ready to buy new wheels.
"I need tires so it's something I have to get anyway," said Smith of Lakewood, Colo.
___
Associated Press reporters Don Mitchell in Denver, Jeff Douglas in Kansas City and Deborah Yao in Philadelphia contributed to this report.
The latest Goodyear hike, a 5 percent to 8 percent increase depending on the tire model, took effect Thursday. So a tire going for $100 could potentially go for $108. The Ohio-based company also increased prices in February and June.
"If you look at it from a tire manufacturer's perspective, an oil price increase is a triple whammy for us," said Jim Davis, a spokesman for the world's largest tire maker, based in Ohio. "Oil is a major ingredient in the production of tires. It affects the cost to make tires, it affects the cost to heat or cool the plant where we make tires and of course the trucking cost to ship the tires."
A $1 change in the cost of oil costs the company about $20 million, Davis said. The latest increase in Goodyear's prices came after natural rubber prices hit a 12-year high and rose 40 percent over a 60-day period this summer.
Ray Weatherbee's wife hit a curb Thursday and popped a tire on her Acura Legend. Weatherbee, 82, decided it was time to replace all four tires when he visited a Goodyear service center in the Kansas City area Friday. Price wasn't a factor.
"I always buy the premium quality tires," said Weatherbee, a semiretired Caterpillar salesman in Independence, Mo. "You have to. They're better, they last longer."
He said the $400 tab for a set of 15-inch Goodyear radials didn't surprise him as much as the $3.19 per gallon he paid for gas, a jump of about 30 cents from the day before.
Vinay Hazare, a 19-year-old New York college student who was meeting a friend in at a tire center in Philadelphia, said he should have bought tires for his 2003 Acura before prices went up.
"It was wearing down and performance wasn't as good," he said. Hazare said he would delay buying tires if there was a chance prices would come down.
Since most drivers buy tires only every few years, many may not know about the higher prices, said Wilson Beach, sales director for the Tire Industry Association. Some dealers have enough inventory that the increases won't show up for months.
"People aren't gasping for air at the price of tires," said Heath Heimlich, manager of the Discount Tire in Englewood, Colo. "I think the price of gas has people a lot more freaked out."
Kumho Tire USA raised prices up to 8 percent on passenger, light truck and commercial truck tires this summer. It plans to raise prices on medium truck tire prices up to 4 percent on Oct. 1, due to higher costs for shipping and raw materials.
Raw materials typically are 40 percent of the selling price of tire, so percentage increases in the mid-single digits are in line with what companies have to charge to cover costs, said Saul Ludwig, who tracks the industry at KeyBanc Capital Markets in Cleveland.
"In my judgment, the average consumer doesn't appreciate the value in the product," Ludwig said. "More often they'll spend more for a pair of tennis shoes than for a tire that travels 70 mph, hits potholes and protects their life."
Tire companies point out that the price of a set of tires has been far more steady than the price of oil. Swis Tire & Auto Service in Denver said it will wait until its inventory runs out before passing on increases to customers.
"The last two years we seem to have had more increases than what I would consider normal," general manager Tom Steger said. "The start of the year is the time we normally see an increase. Now we're seeing it at the start of the year, midsummer, mid-fall."
Goodyear said it expected costs for tire raw materials to rise 10 percent for the year. In dollar amounts, Bridgestone Firestone North American Tire expected raw materials costs to rise $176 million this year, after going up $150 million from 2003 to 2004. Bridgestone Firestone announced up to 8 percent price increases for tires this spring.
The tire price increases are coming just as supermarket deli manager Tim Smith is ready to buy new wheels.
"I need tires so it's something I have to get anyway," said Smith of Lakewood, Colo.
___
Associated Press reporters Don Mitchell in Denver, Jeff Douglas in Kansas City and Deborah Yao in Philadelphia contributed to this report.