Price fixing among tire manufacturers

Hi All,

I've been recently looking for tires (size 205-70-15) and I am finding
among the retailers that for the mileage I'm looking for (80K) and
the UTQGS ratings (treadwear 700, traction A, Temp B) that the
prices are virtually identical. The biggest difference is pricing for the
road hazard warranties and for balancing, etc. from the tire dealers.

What I really don't understand is why this is the case. For example,
Goodyear tires are manufactured in the US, by an American-owned company.
Michelin, and Bridgestone/Firestone tires are manufactured in China by an
American-owned company. Lastly, Toyo/Tourevo tires are an Asian-owned
firm and are manufactured in Asia.

I understand reading from the trade rags that US companies have
outsourced manufacturing to Asia to save money. I also understand from
the trade rags that CEO's of Asian companies don't take the gigantic
pay amounts that US CEO's do.

So, in principle, the Goodyears should be the most expensive, followed
by the Firestone, then the Toyo stuff should be the cheapest.

Yet, this is not the case. Pricing differers very little, in fact the
Toyo
stuff is a bit more expensive.

Of course, if I compare a house brand (like Walmart's Goodyear Viva)
that has a much lower UTQGS treadwear rating against the others, I see
big differences. But, I would expect this to be so.

Now, maybe the tire dealers are making up the differences on the mounting
and balancing costs - but I kind of doubt it. The equipment they use is
all expensive and they are paying a lot of employee salaries, I can't
imagine
they do anything more than break even on those costs.

Anyway, the point is that there seems to be a wide difference in what the
wholesale cost of the tire ought to be due to structural differences - the
dealers I've looked at seem to have widely different purchasing power (
Comparing Walmart against say Firestone dealers) and the tire manufacturers
have widely different corporate structures and the manufacturing is also
different. I cannot believe all these dealers are paying the same money for
tires. But, they all seem to be selling them for the same money.

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

"Ted Mittelstaedt" > wrote in message
...
> Hi All,
>
> I've been recently looking for tires (size 205-70-15) and I am finding
> among the retailers that for the mileage I'm looking for (80K) and
> the UTQGS ratings (treadwear 700, traction A, Temp B) that the
> prices are virtually identical. The biggest difference is pricing for the
> road hazard warranties and for balancing, etc. from the tire dealers.
>
> What I really don't understand is why this is the case. For example,
> Goodyear tires are manufactured in the US, by an American-owned company.
> Michelin, and Bridgestone/Firestone tires are manufactured in China by an
> American-owned company. Lastly, Toyo/Tourevo tires are an Asian-owned
> firm and are manufactured in Asia.
>

I believe that Michelin is a French company. According to their world web
site, they produce tires in 19 countries, including the U.S.

Bridgestone, which owns Firestone, is a Japanese company with 58 plants in
25 countries, including the U.S.

Toyo Tire and Rubber Company is a Japanese company with plants in Asia and
the U.S.

> I understand reading from the trade rags that US companies have
> outsourced manufacturing to Asia to save money. I also understand from
> the trade rags that CEO's of Asian companies don't take the gigantic
> pay amounts that US CEO's do.
>
> So, in principle, the Goodyears should be the most expensive, followed
> by the Firestone, then the Toyo stuff should be the cheapest.
>
> Yet, this is not the case. Pricing differers very little, in fact the
> Toyo
> stuff is a bit more expensive.
>
> Of course, if I compare a house brand (like Walmart's Goodyear Viva)
> that has a much lower UTQGS treadwear rating against the others, I see
> big differences. But, I would expect this to be so.
>
> Now, maybe the tire dealers are making up the differences on the mounting
> and balancing costs - but I kind of doubt it. The equipment they use is
> all expensive and they are paying a lot of employee salaries, I can't
> imagine
> they do anything more than break even on those costs.
>
> Anyway, the point is that there seems to be a wide difference in what the
> wholesale cost of the tire ought to be due to structural differences - the
> dealers I've looked at seem to have widely different purchasing power (
> Comparing Walmart against say Firestone dealers) and the tire
> manufacturers
> have widely different corporate structures and the manufacturing is also
> different. I cannot believe all these dealers are paying the same money
> for
> tires. But, they all seem to be selling them for the same money.
>
> 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
>

It is possible that all of the tires you shopped were made in the U.S.,
which would reduce the disparity in manufacturing cost.

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.
--

Ray O
(correct punctuation to reply)

"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
> >
>
> 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

How can you say that tires are expensive? Have you examined the profit
margins of the tire manufacturers? You will find it is a crappy business to
be in. Tires may all be the same price but you haven't proven that the
price is high.



"Ted Mittelstaedt" > wrote in message
...
>
> "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
>> >
>>
>> 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
>
>

Art wrote:
> You will find it is a crappy business to
> be in.

Yeah, you're always on the road. ;^)

"Ted Mittelstaedt" > wrote in message
...
>
> "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
>> >
>>
>> 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


There arn't that many tire manufactures...


> 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.
>

In my business, I have found that if I want to (and I don't generally) have
the cheapest price (cheaper than any or all of my competitors) every dollar
beyond one dollar cheaper than the competition is a dollar flushed down the
toilet. Why do it? I am not involved in "price fixing", but I do monitor
the market, and if my prices are substantially lower than the competition I
will generally raise mine. not unlike the airline industry, or your local
gas stations. There is absolutely no benefit to being half the price of
your nearest competitor.




> 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.

Unless you do not keep the car for more than 40,000 miles...

>
>> 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.


You can't earn 11,000,000,000 in quarterly profits, if you limit yourself to
some predetermined small profit margin now can your? These corporations
legal obligation is to earn a PROFIT, as high as the "market will bear, not
supply their goods at the cheapest possible price.


>
> 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


NOT UNLIKE gas and oil!!!


> 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.
>

I really don't think it has anything to do with "price fixing". I think it
simply has to do with corporate greed, plain and simple.

Besides, if all the competition is selling x type tire for $250 a copy, you
would be negligent to your share holders, if you sold your x type tire for
more than a few dollars less than that...


> Ted
>
>

My Name Is Nobody wrote:
> "Ted Mittelstaedt" > wrote in message
> ...
>> "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
>>>>
>>> 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
>
>
> There arn't that many tire manufactures...
>
>
>> 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.
>>
>
> In my business, I have found that if I want to (and I don't generally) have
> the cheapest price (cheaper than any or all of my competitors) every dollar
> beyond one dollar cheaper than the competition is a dollar flushed down the
> toilet. Why do it? I am not involved in "price fixing", but I do monitor
> the market, and if my prices are substantially lower than the competition I
> will generally raise mine. not unlike the airline industry, or your local
> gas stations. There is absolutely no benefit to being half the price of
> your nearest competitor.
>
>> 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.
>
> Unless you do not keep the car for more than 40,000 miles...
>
>>> 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.
>
> You can't earn 11,000,000,000 in quarterly profits, if you limit yourself to
> some predetermined small profit margin now can your? These corporations
> legal obligation is to earn a PROFIT, as high as the "market will bear, not
> supply their goods at the cheapest possible price.

The so called magic of the market is supposed to see to the best prices
for the buyers (ref. Adam Smith & the like), but that has little to do
with real world prices in the 21st century IMHO.

"Tony Harding" > wrote in message
...

> The so called magic of the market is supposed to see to the best prices
> for the buyers (ref. Adam Smith & the like), but that has little to do
> with real world prices in the 21st century IMHO.

I don't think Adam Smith would agree with your assertion, at least if you
mean the best price is the lowest price for you. I think even Mr. Smith
understood things were a lot more complicated than that. And very few
current markets are truly free markets or even truly competitive. All tire
makers try to distinguish their brands and create the opinion (fact or
illusion) that their particular brand of tires are inherently more valuable.
If all tires of a given size and type truly were identical and there were no
marketing impediments, then you might have a free market but this does not
guarantee that you would get the lowest possible price. A manufacturer might
decide that they would rather sell fewer tires at a higher price in order to
maximize their profits. They might induce you to pay more by creating the
illusion that there tires were better (even if they were not) or by
providing superior service, or because they had outlets more convenient than
a competitor that charges less.

Ed

"Ted Mittelstaedt" > wrote in message
...
>
> "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
>> >
>>
>> 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.

As Mark A pointed out, in a free economy, selling price is determined by
what the market will bear. The more competition there is, then the closer
the prices will be for products that the buyer perceives to be the same.

> 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.

The UTQGS was developed to provide a uniform method of comparing tires, and
since mileage ratings are not part of the grading system, tire makers have
and use mileage ratings for "wiggle room" in their marketing.


> 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.

Due to R&D, raw material, overhead costs, and competition, the price of
tires is not linear, and so the selling price of a tire with twice the
treadlife is not necessarily twice the price of the tire with the lower
treadlife.

People who research the UTQGS and who have the money will buy the tire with
better ratings, but there are a lot of people who know little or nothing
about tires, who do little or no research, and/or who do not have the money
to afford the better tire so the tire makers offer lower priced tires to get
a piece of that market segment.

>
>> 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.

I think you answered your own question here.
>
> 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.

While the most common tire sizes have become commoditized, tire makers offer
a lot of products in other sizes and areas, like earthmoving, farm, and
industrial equipment; aircraft; racing (which has a huge number of sizes and
types - Indy, Nascar, F1, off road, and everything in between); truck and
tractor trailer; and niche tires (low profile, snow, rain, high security).
Most tire makers also make other non-automotive products that use rubber
like bellows, gaskets, seals, shoe parts, etc. This diversity in product
lines enables them to make money on niche products with less competition.


--

Ray O
(correct punctuation to reply)

Ray O wrote:

> The UTQGS was developed to provide a uniform method of comparing tires, and
> since mileage ratings are not part of the grading system, tire makers have
> and use mileage ratings for "wiggle room" in their marketing.

You're saying the mileage ratings (400, 620, or whatever) are not part
of the UTQG? UTQG is only temperature and traction ratings?

Bill Putney
(To reply by e-mail, replace the last letter of the alphabet in my
address with the letter 'x')