Tire Manufacturers
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Industry Overview
The US tire manufacturing industry consists of about 100 companies that operate 160 plants with combined annual revenue of $13 billion. Large companies include Goodyear, Bridgestone, Michelin, and Cooper. The industry is highly concentrated: the top four companies hold more than 75 percent of the market. About 35 plants have annual revenue over $100 million.
Competitive Landscape
Demand is driven by sales of new vehicles and the need for replacement tires. Because tires are largely a commodity, profitability depends on cost-efficient operations. Small companies can compete by producing tires or tire-related products for niche markets, such as bicycles or farm equipment. Large companies can afford the research to develop tires from new, technologically advanced materials, and can invest in improving production efficiency. The industry is capital-intensive: average annual revenue per employee is over $200,000.
Products, Operations & Technology
Companies in the tire industry manufacture new tires, inner tubes, and materials for tire repair and retreading, primarily from synthetic and natural rubber. Tire manufacturers may specialize by type of vehicle or size of tire, such as for cars, trucks, airplanes, farm equipment, or children’s vehicles. They may also specialize by type of tire: pneumatic (inflatable); solid; or semi-pneumatic, and may make tire repair and retreading materials.
The top revenue-producing products are tires for passenger cars (55 percent of industry revenue); trucks and buses (30 percent); and tractor, farm and industrial vehicles (5 percent). About 300 million tires are produced in the US each year.
A major tire manufacturer may design, manufacture, and sell thousands of different products for a wide range of vehicles and sizes. Bridgestone has over 8,000 different types and sizes of tires: the largest is a 13-foot-tall giant radial tire for earthmoving equipment; the smallest is a 10-inch-high kart tire.
The basic tire-making process consists of mixing rubber and various additives in a large mixer called a Banbury machine, then cooling the mixture, rolling it flat, and cutting it into strips. Tires are assembled as layers of rubber strips along with reinforcing materials and adhesives on a tire-building machine to produce a "green" (uncured) tire. The tire is then heated in a curing press at a high temperature, which "vulcanizes" the rubber and produces the final shape. The process is capital-intensive, uses a fair amount of energy, and produces polluting vapors.
The primary raw materials used are synthetic rubber; carbon black (for traction); natural rubber; various chemicals; and reinforcing components such as steel wire, steel cord, and polyester. Both synthetic rubber and carbon black are derived from petroleum or natural gas. Other components used in manufacturing synthetic rubber are styrene and butadiene. Natural rubber is collected as sap from rubber trees on large plantations in Indonesia, Malaysia, Thailand, and Brazil.
A wide variety of compounds are used in various types of tires. The compounds in passenger tires differ from those in truck tires. Traditionally tires are made from rubber, but newer compositions include chemical compounds called elastomer polymers, which are elastic, rubber-like substances. Some tires are made from new types of polyurethane foam, used for wheelchairs, golf carts, and other “low-cycle” purposes. Companies often use proprietary chemical engineering processes and different ingredients to compound their tires.
Non-tire products include tread rubber, accessories like mud flaps, and repair materials. Tread rubber, also called camelback, is the patterned rubber bonded to worn tires. In 2003, Goodyear and Bandag had about 70 percent of the tread rubber market segment. Products that compete with new US-made tires include retreads (treads bonded to existing casings) and imports from Asia and South America.
Designing and building a new tire model can be costly. Advanced processes use state-of-the-art “virtual” technology that simulates three dimensions and the sense of touch, so that design engineers can modify the tire without building a non-production model.
The industry depends on technology for competitive advantage in design, development, and manufacture. Designers use CAD systems to create visual models and drawings of tires that an engineer has specified in a design-specification document. Production plants use computer-aided manufacturing (CAM) systems to pinpoint exactly where to put each compound on the tire. Manufacture of low-volume products, however, often isn't automated. Some companies produce low-volume products, such as motorcycle tires, in addition to high-volume products.