Price fixing among tire manufacturers

clare at snyder.on.ca wrote:
> On Mon, 31 Dec 2007 01:07:44 -0800, "Ted Mittelstaedt"
> > wrote:
>
>> "Ray O" <rokigawaATtristarassociatesDOTcom> wrote in message
>> ...
>>>> What happened to competition? Seems to me there ought to be a big
>>>> case here for an anti-trust price fixing lawsuit against the tire
>>>> manufacturers.
>>>> Anyone have any ideas?
>>>>
>>>> Ted
>>>>
>
> In checking prices for tires for my daughter's car, I found the
> difference in price for THE SAME TIRE to vary 15% from the cheapest to
> the most expensive tire reseller in my market area. The difference
> between the private branded tire built in an American BFG owned
> (Kelly) plant and Michelin, Toyo, and Bridgestone for the same quality
> tire was about 10-13% at a dealer that sold all of them except the
> private brand, and accross the market, about 15% between the highest
> and lowest across brands.
> I bought the private branded (Moto-Master from Canadian Tire) because
> they had them in stock, could install them in a short time, and the
> price was near the bottom of the range.
>
> The chinese built tire from the same retailer was only a few bucks
> less, and I don't buy Chinese CRAP if I have another alternative that
> makes sense.

I don't buy crap, regardless of where it is made. Of course, I do buy
good quality stuff from China as well as the US, India, Singapore,
Canada, Europe, Isreal, and other countries.

Just because it is from China doesn't mean it is (or isn't) crap.

Jeff

> That is in the Kitchenr/Waterloo trading area in Ontario Canada.
>>> It is possible that all of the tires you shopped were made in the U.S.,
>>> which would reduce the disparity in manufacturing cost.
>>>
>> That might be true, and it is true that there are not a lot of other tire
>> manufacturers
>> that make that size AND that mileage and UTQGS rating I looked at.
>>
>> But, if I went to a treadwear and UTQGS rating of about 1/2 of what I
>> surveyed,
>> then there's an order of magnitude larger number of tire manufacturers
>> making that
>> size. But, they are ALL the same tire price ALSO (or within very small
>> amounts
>> of each other) for that treadwear and UTQGS rating. I'd find it hard to
>> believe
>> they all make tires in the US.
>>
>> After surveying I found NOT a lot of price coorelation between tire mileage
>> warranty and price, but I found a LOT of price coorelation between different
>> tires of the same UTQGS rating. I found a LOT of tires with DIFFERENT
>> mileage rating but the same UTQGS specs. So I tend to discount the stated
>> mileage as marketing fiction. What matters is UTQGS. And another telling
>> indicator of the importance of UTQGS is that some manufacturers hide it.
>> Goodyear, for example, doesen't post that on their website - they tell you
>> you have to get it from the tire brochure at the tire dealership.
>>
>> However, it's pointless. The cheapest tire I could find in that size is a
>> 40K tire and it's only 1/3 cheaper for 1/2 the treadlife. For
>> only 1/3 again more of the price you get double the tire life. Plus the
>> mounting
>> costs are all the same cost as well as the road hazard warranty. In other
>> words
>> I can buy a road hazard warranty for 40K miles or a road hazard warranty for
>> 80K miles - but they both cost the same. If the road hazard warranty was
>> 1/2 the cost for the lower-mileage tire it might be worth it - but the way
>> it's
>> priced at the tire dealerships, it's cheaper-per-mile for the more expensive
>> higher mileage tire. Not to mention with a 40K mile warranty you have to
>> replace the
>> tires twice as often so your doubling your installation costs.
>>
>>> Tires are a competitive business and a company whose products are priced
>>> higher will have a tough time competing without a product attribute that a
>>> consumer is willing to pay for, especially in the most common sizes like
>>> 205/70-15.
>> That I understand well. But that isn't how competition is carried out these
>> days. In most commodity markets there are maybe a maximum of 2-4
>> manufacturers who are
>> dominant players plus dozens of small fry. For example, in computer software
>> it's Microsoft
>> and Linux distributions. In computer hardware it's Dell, HP & IBM. In hard
>> disk
>> drives it's Seagate and Western Digital. In soft drinks
>> it's Coke and Pepsi. In cars it's GM, Ford, Toyota, Honda & maybe Chrysler.
>> In US crude oil it's Exxon, Texaco and a few others. And so on and so on
>> and so on.
>>
>> All these commodity markets got this way because these dominant players
>> gobbled
>> up competitors until they ran up against the anti-trust regulators of the
>> world's
>> governments who prohibited further market acquisitions. Manufacturing
>> economies of scale in today's markets dictate that the larger you are the
>> cheaper you can make things. In most markets, consolidation sets in
>> and continues until the governmental regulators put a stop to it, or declare
>> a monopoly market and start regulating the dominant monopoly.
>>
>> Naturally, in these markets the few dominant competitors have the same
>> product price since the margins are so thin - these companies make money
>> on volume.
>>
>> It's only in niche markets (ie: specialty foods, etc.) that there's still a
>> large
>> number of companies, or in commodity markets (like milk) where the
>> product cost is so low that freight charges make global distribution
>> uneconomical, and you cannot reduce the product bulk (ie: freeze
>> dry it) to reduce shipping But tires are very expensive and they are also
>> very complex and take a lot of technology to manufacture.
>>
>> As you say, tires are competitive. And since there are so many many cars
>> out
>> there, there's huge amounts of tires sold. And since tires are complex and
>> not
>> easy to manufacture in the barnyard, the product lends itself to a commodity
>> manufacturing model of single-source manufacture with wide distribution.
>> But
>> the reality is that the market does not appear to work this way. It seems
>> to me
>> that in reality, tires are far more expensive than they should be, because
>> the
>> tire companies have spent so much money on making hundreds if not hundreds
>> of
>> thousands of slightly different but almost the same model of tire. So you
>> have
>> a situation where there's a lot of small manufacturers all making small
>> production runs,
>> instead of a few large manufacturers making a few giant production runs.
>>
>> The situation seems really ripe for a well-heeled tire manufacturer to start
>> acquiring
>> other ones and killing off product lines right and left, and substituting a
>> few
>> much cheaper product lines, then making their profit on bulk. That is the
>> pattern that has happened in the past in most other commodity industries
>> with
>> this kind of product, and the only reason I can come up with that it hasn't
>> happened in the tire industry is that all of the tire manufacturers have
>> gotten
>> together and formed a secret cartel of some kind to fix prices.
>>
>> Is this it? Or is there something I'm missing about the tire market that
>> lends
>> itself to this incessant brand fracturing.
>>
>> Ted
>>
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