Tire shipments to slide by 20 million in 2001. (Market Focus).

The tire industry will experience a significant decline in tire shipments for all tire categories as a result of the domestic economic weakness, according to the Rubber Manufacturers Association.

The group's Tire Market Analysis Committee (TMAC) projects that there will be nearly 20 million fewer passenger and commercial tire units shipped in 2001 as compared to 2000.

Overall, the combined auto and truck tire original equipment (OE) and replacement shipments are forecasted to decrease to approximately 301 million units or 6.1%, compared to 2000's record setting year of 321 million total shipments. Little or no growth is anticipated for 2002 as the economy begins a slow turn-around, but a sharp 5.8% rebound is forecasted in 2003 as the total number of units shipped will be approximately 316 million -- equal to 1999 figures.

Replacement tires for passenger cars, light trucks and commercial trucks will experience moderate decreases ranging from approximately 3% to 9%. A decline in the passenger replacement markets will be offset by solid growth in the speed rated performance market and increases in the p-metric light truck tire market resulting from the closure of Ford's 13 million-tire replacement campaign in May 2002.

The two markets that will experience positive growth in 2001 will be the "H/V/Z" speed-rated and the p-metric replacement tires, growing at a forecasted 12.3% and 8.0% rate, respectively. 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 10%.

TMAC cites the gross domestic product (GDP) and Industrial Production Index (IPI) for 2001 as the basis for this pessimistic forecast where leading economists expect the GDP to grow by an anemic 1% and the IPI to be a negative 3.1% for 2001. Key figures for 2001 and projections for 2002 and 2003 beyond include:

* Original equipment passenger tires - tire shipments to domestic light vehicle manufacturers are expected to decrease by 9.4% in 2001, where OE shipments are anticipated to be 54.4 million units. This market will again decrease in 2002 by slightly less than 3%, but then rebound to over 57 million units in 2003, or approximately 8% over 2002 levels. While much of this downturn can be attributed to the economic slowdown and greater volume of light vehicle production apportioned to outside the U.S, recent incentive programs will buoy the figures for 2001 by the auto industry.

* Original equipment light truck tires - a 12.6% decline to 6.4 million units has been forecasted for 2001. This is mainly attributed to the maturing market in light truck sales and substitution of passenger p-metric tires. However, demand is expected to remain soft in 2002, but similar to the OE passenger tire market, rebound strongly in 2003 to 7.3 million units for an annualized growth rate of 6.4%.

* Original equipment medium/wide-base truck tire - a combination of continued slow sales of commercial truck vehicles and a large inventory of commercial trucks will lead to a dramatic drop of nearly 38% in 2001 of medium and wide-base OE shipments. TMAC is forecasting that approximately 3.5 million medium truck tire units will be shipped in 2001 for a decrease of over 2.1 million units from 2000 levels. But a significant rebound is expected in 2003 to the 4.5 million-unit level for an annualized growth rate of approximately 13%.

* Replacement passenger tire - the 13 million unit Ford replacement program will effectively end by first quarter 2002, but the bulk of the replacement program will have taken place in 2001. As a result, shipments will be "borrowed" from 2002 and 2003, as many tires that would have normally been replaced in those years will be replaced in 2001. In effect, this program has softened the impact of the weak domestic economy on the passenger tire replacement market in 2001. As a consequence, shipments are forecasted to decrease by a moderate 3.4% to 192 million units in 2001, decrease again by 1.6% to 189 million units in 2002 and eventually rebound in 2003 by 4.2% to 197 million units. The p-metric light truck 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) are predicted to increase by 2.1 million units - or 8% from 2000's levels -- to the 29 million mark. Thereafter, a nearly 17% decrease will be realized in 2002 to approximately 24 million units, followed by a 25% increase in 2003 to 30 million units, reflecting the borrowing of shipments in 2001. Interestingly, the net annualized growth rate over the 2001-2003 time frame will be slightly less than the 2% or a more normal year-to-year growth rate.

* Replacement light truck tire - shipments (tires with a "LT" designation) will experience a decrease of 8.2% in 2001 to 33 million units, as both the SUV and light truck market matures. Nonetheless, this market segment is anticipated to grow in 2002 and 2003 by 4.8% and 9.1%, respectively, eventually reaching 36 million units in 2003.

* Replacement medium/wide-base truck tire - shipments are forecasted to decrease by 8.8% in 2001 to 13.7 million units as a result of the contraction of the manufacturing sector and weak economy in general. But, as in the other tire sectors, a modest rebound is forecasted for 2002 of 2.2%, followed by an additional 4.3% in 2003 to a level of 14.6 million units.