Tire shipments to rebound in 2003. (Market Focus).

The tire industry experienced a 6.6% decline in original equipment (OE) and replacement shipments in 2001, primarily attributable to the economic recession and consumer uncertainty after the September 11th attacks, according to the Rubber Manufacturers Association.

The group's Tire Market Analysis Committee (TMAC) estimates that there were over 21 million fewer passenger and commercial tire units shipped in 2001 as compared to 2000's record setting 321 million units, and that this level is not expected to be approached again until 2003. Little or no growth is anticipated for 2002 as the economy begins a slow turnaround, but a significant 4.7% rebound is forecast for 2003, as the total number of units shipped will be approximately 316 million - just short of 2000 figures. TMAC cites the gross domestic product (GDP) and industrial production index (IPI) for 2002 as the basis for this forecast trend where leading economists expect the gdp to grow by an anemic 1% and the ipi to shrink by 1.3%. However, 2003 promises to be the turnaround year with the gdp forecasted to grow by 4% and the ipi to leap by 7.5%, according to the group.

Replacement tires for passenger cars, light trucks and commercial trucks all experienced moderate decreases in 2001, ranging from over 4% for passenger tires to nearly 10% for commercial truck tires. However, further declines in the passenger replacement markets were offset by solid 10.6% growth in the H/V/Z speed rated performance market and 10.2% growth in the p-metric light truck tire market - mostly as a result of Ford's customer satisfaction campaign coming to an end in March 2002.

Only the H/V/Z speed-rated market will continue on this growth trend in 2002 and 2003, with an annualized growth rate of approximately 11% for each year. Conversely, the p-metric replacement market will decline by over 15% in 2002 due to demand being pulled forward into 2000 and 2001 from the recall and replacement programs.

Key figures for 200l and projections for 2002 and 2003 beyond include:

* Original equipment passenger tires: Tire shipments to domestic light vehicle manufacturers decreased by 9.4% in 2001 where OE shipments totaled 54.6 million units. Much of this downturn can be attributed to the economic slowdown and greater volume of light vehicle production apportioned to outside the U.S. This market will experience another 2% decrease in 2002 and an increase to over 56 million units in 2003 as the economy picks up. However, further growth through 2007 will be limited to an additional 1.3 million units as any subsequent vehicle sales demands are fulfilled outside the U.S.

* Original equipment light truck tires: A 16.1% decline to 6.2 million units was realized for 2001 in this sector. However, growth in this market for 2002 cannot be discerned at this time as some trailer tires have been reclassified from passenger tires to LT OE tires and contribute significantly to the overall size of the LT OE market. Given this, the total LT OE market for 2002 is expected to be approximately nine million units and to grow at an annualized rate of 2.7% to 10.4 million units in 2007.

* Original equipment medium/wide-base truck tires: A combination of slow sales of commercial truck vehicles and a large inventory of commercial trucks contributed to a dramatic drop of over 2.2 million units to 3.4 million units, or 38%, in 2001 of medium and wide-base OE shipments. TMAC forecasts that this market will not see significant growth until 2003, at which time a nearly 16% jump to approximately four million units will be realized - well short of the record 6.9 million units shipped in 1999. However, this market will see a 9.1% annualized growth between 2002 and 2007 eventually reaching 5.4 million units as the industrial sector continues to expand.

* Replacement passenger tires: The end of the Ford replacement program in the first quarter of 2002 will result in the bulk of the replacement program being shifted to 2001. Consequently, shipments have been "borrowed" from 2002 and 2003, as many tires that would have normally been replaced in those years were replaced in 2001. The overall effect was a softening of the negative impact to this market from the economic recession to only a 4.1% decrease to 190.8 million units for 2001. Little change is expected for 2002, but an approximate 4% increase to over 197 million units is anticipated for 2003. Eventually, this market is anticipated to exceed 218 million units in 2007 for a 2.8% annualized growth rate. The p-metric tire segment (a subset of passenger replacement tires with light truck appearance and tread characteristics usually found on SUVs and the focus of the recall and replacement campaigns) increased by 2.7 million units to 29.6 million units. Thereafter, a nearly 16% decrease will be realized in 2002 to approximately 25 million units, followed by an 18% increase in 2003 to over 29 million units reflecting the borrowing of shipments in 2001. The net annualized growth rate over the 2002-2007 time frame will be slightly less than 11% compared to the overall passenger replacement market growth of 2.8% during the same time frame.

Replacement light truck tires: Shipments experienced a decrease of 8.2% in 2001 to 31.5 million units. However, this market segment is anticipated to increase by 4.8% in both 2002 and 2003 as a large fraction of SUV and light truck owners opt for the more rugged LT tire as a replacement for their p-metric passenger tire. This market is expected to break the 40 million mark in 2007 for an annualized growth rate of 4.2%.

* Replacement medium/wide-base truck tires: Shipments decreased in 2001 by 9.6% to 13.6 million units as a result of the contraction of the manufacturing sector and weak economy in general. A mild rebound of approximately 1% is forecasted for 2002, followed by sizeable increase of 6% to 14.5 million units in 2003, which is in concert with the growth in the IPI index.