High rubber costs in 2010 led to losses among large tire manufacturers - and negative effects for smaller companies.
Rubber prices have tripled in two years, with more increases expected throughout 2011. In response, car and truck tires are becoming more costly, and so are tires for specialized equipment. Everyone can expect pressure on transportation and maintenance costs in the coming year.
Specialized equipment - for material handling, construction, lawn and garden maintenance, and transportation - uses tires of all sizes, which will cost original equipment manufacturers 5 to 6 percent more, year over year. Companies will have to either take the hit or pass the increase along to customers.
In addition, most manufacturers will see higher factory maintenance costs. Tires for forklifts, cranes, tuggers and other utility vehicles will account for more of the maintenance budget. Delaying tire replacement may be one way to reduce the impact of the increases, but companies that used that strategy to make it through last year's market risk safety problems and greater costs for fuel or batteries.
Beyond the plant, company cars for executives and sales reps will be more expensive to keep on the road. Tire replacement will also affect freight costs for companies that have their own transportation fleets. Shipping prices from UPS, FedEx and commercial carriers may also increase if the tire prices continue to rise and fuel costs remain elevated.
A high-level view shows that price increases on this commodity used for numerous products in the burgeoning global auto market will exert broad inflationary pressure. Companies will need to factor that effect into their long-term business strategies.
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