In late 2001, not long after the disastrous recall of tyres fitted on Ford's Explorer sport utility vehicle, French tyremaker Michelin launched a new promotional campaign in North America.
It involved using a small version of the company's famously bloated Bibendum "rubber man" mascot. "Baby Bibendum" was transported around the US in an effort to help to promote awareness of tyre safety.
Michelin's rubber man caught the attention of former First Lady Barbara Bush, who made a point of congratulating Edouard Michelin, chairman, on the campaign's attempts to get Americans thinking about tyre safety.
It is two years after the Firestone debacle, which almost destroyed the Bridgestone-owned brand, triggered a flood of costly lawsuits and terminated Firestone's century-old business relationship with Ford.
However, the expectations by Michelin and some of its rivals that US consumers would no longer view tyres simply as commodity purchase have proved unfounded.
In the months that followed Firestone there was a temporary shift "up in the brand scheme", says Keith Price, a spokesman of Goodyear, the world's largest tyremaker. It and other companies did benefit for a short period from customers seeking re-assurance in tyre brands that were perceived to offer a safer ride. Goodyear even raised its prices in the wake of the Firestone recall.
However, the hoped-for trend did not last. One reason for this, says Phil Pacsi, executive director for North American consumer brand marketing at Bridgestone, is that consumers ultimately view tyre purchases much the same way as they view a trip to the dentist. "People do not like going . . . it's something they have to do. It's really unfortunate because people need to think what their tyres really are," he says.
That hasn't stopped tyre companies investing in educating consumers in the need to pay attention to tyre safety. Bridgestone sales staff hand brochures to consumers and a website - at www.tiresafety.com - sends drivers monthly reminders to check tyre pressure.
"We are not going to back down on this issue at all. Whether we see a needle movement right now or whether it takes five years, we are going to continue to preach this message," says Pacsi. Actions such as this have helped to restore the Japanese tyremaker's fortunes. Last month, Bridgestone reported a 161 per cent surge in group net profits to 45.4 billion yen on brisk exports and a strong rebound in its US operations, where its Firestone brand is sold.
However, the issue for any company selling tyres in North America since the Firestone saga is not really about customer perceptions. It has been that the market has been intensely competitive and, like the car industry in North America, is mired in overcapacity. "It's a very competitive market with a lot of folks out there making tyres and it's only grown at 1 to 3 per cent historically," says Dan Zielinski of the Rubber Manufacturers' Association (RMA) in the US.
It is difficult to find evidence of significant future growth in the market that serves vehicle manufacturers buying tyres for fitting on to new vehicles - the original equipment (OE) market. The RMA predicts that the OE market will be flat this year.
However, there is some encouragement from the replacement market, which accounts for about 80 per cent of total tyre sales and is therefore more important to tyremakers.
This market, which focuses on drivers replacing worn-out tyres on existing vehicles, is set to grow 4 per cent this year after two years of stagnation caused by a surge in new vehicle sales as customers have rushed to take advantage of financing incentives.
The hope is that incentive-driven purchases may be slowing down and that people who bought vehicles more than two years ago may be ready to replace their tyres this year. The average life of a tyre in the US is 43,000 miles, or just over two years.
Mr Zielinski says the RMA expects the replacement market to return to pre-Firestone levels by the end of 2004.
Mike Barker, vice-president of sales and marketing at the North American division of Continental, the German tyremaker, is a little less optimistic.
He says: "Certainly it's not the growth we had in 2000. There is still overcapacity on the part of a lot of manufacturers. With all the new cars sales in 2002, somewhere around 2004 or 2006 some of that will start coming back." As one of the smaller players in North America - Continental is the fourth largest tyremaker in the world - the company nevertheless increased its OE business 15 per cent last year. This has marketing value as many consumers tend to fit their vehicle with replacement tyres from the same company that fitted the new vehicle's first set of tyres.
In addition, Continental sees growth in niche areas, such as performance tyres. "We have a tremendous opportunity because our portfolio had a lot of gaps in it. But we have introduced more product in the last two years than in the last 10," says Barker.
By contrast, Goodyear, the dominant player in the market, is struggling to reverse a decline on market share since the Firestone recall as its costs - principally pension and healthcare costs - have come perilously close to outstripping its ability to generate cash. Goodyear's market share in North America fell last year to 28 per cent from 31 per cent in 2001. Michelin has about 23 per cent, a figure that has remained virtually unchanged since Firestone.
Goodyear's problems stem largely from its attempts to build market share, post-Firestone, by raising prices. It also, by its own admission, damaged relations with its dealers by failing to consult them on product development, which contributed to many dealers switching to selling tyres made by Goodyear's rivals.
Its predicament is confirmation that the North American tyre market is set to remain highly competitive, and that there is little room for taking gambles in a business where tyres are still viewed by most consumers as just that: tyres. ... - Financial Times