The Italian View of Retreading

The Italian retreaders' organisation, AIRP, is perhaps the largest in Europe and perhaps one of the most influential of the national retreading organisations. Retreading Business visited AIRP's headquarters in Anzola dell' Emilia, outside Bologna, to talk to secretary general Renzo Servadei about the current issues facing retreading in Italy.

With so many dynamics currently impacting on the market it was difficult to choose where to start, but Renzo Servadei cut straight to what he believes is the key issue for retreaders.

"There needs to be an emphasis put on the proper valorisation of the recycling of tyres. It is important for the future of the environment, the economy and for tyre manufacturers and retreaders that in the recycling process the best casings are retained for retreading. If we simply burn or shred all casings without grading them for other purposes then we are missing out that key element of the recycling circle of reuse.

"We have to ensure that a system that grades tyres on collection ensures that those casings that are suitable for reuse are directed to the retreading avenue. It will be important that when producer responsibility for waste tyres comes into force after the minister signs off the law, that Ecopneus (the Italian body to be responsible for end of life tyres) ensures a proper supply chain for the retread sector."

With truck tyre sales down dramatically in the past 12 months, as much as 17% according to some figures, the economic crisis has to have had some impact on even the Italian market. Servadei agreed, "Yes the crisis has hit everyone, and the new tyre manufacturers have been particularly badly hit. However, the impact on the retread sector has not been quite so dramatic, though at 12-13% reduction in the first three quarters of 2009 the sector has been feeling the draught of the credit crunch. Of course we are not happy with the situation but we can take solace from the fact that we have not seen the falls that the new tyre manufacturers have had. Moreover, September - October, 2009 saw a slowing in the decline, and in some places perhaps even a turnaround."

The Italian style of business is very different from that experienced in Northern Europe. Whereas in the UK, Germany, Netherlands and Scandinavia there has been an ongoing consolidation of retailers into large chains, and as a consequence a consolidation of fleets into larger and larger operations, in Italy the traditional family business has largely retained its status. The consequence being that there has been no real demand for large scale transport fleets in Italy, and the one or two truck family haulier remains king in Italy. Renzo suggests that there are some 100,000 one and two truck fleets operating across the country.

For the multinational tyre manufacturer seeking national contracts that makes Italy a real challenge for there are no economies of scale, there is no Willi Betz, no Eddie Stobart, no Norbert Dentressangle, just Momma and Poppa with the boys driving the two family trucks. That creates a market where business relationships depend as much on families and friends as they do on economics. Renzo says, "There are still some 60 retreaders spread around Italy. Most operate in a very local area and have traditional customers. This reflects the Italian tradition of small businesses. The difficulty for AIRP is that we need to ensure that all these retreaders are offering quality products that meet homologation and comply with E108/ 109. They all should meet these standards, but who knows about the small retread shop out in the rural village? How do we ensure that they offer the quality, that they match the standards required by the wider industry?

"We want to see the whole industry working towards increased quality of product and service: If there is no quality, there is no economic advantage and no emotional element that will drive people to purchase retreads."

The market is further confused by the number of outlets selling tyres. The large equities do have chains in Italy, but with chains of only around 100 outlets these pale compared to those in France, Germany or the UK. The market is dominated by some 6,500 independent retailers who have no tie to any given manufacturer. In addition there are another 20,000 outlets selling tyres alongside vehicle servicing and repairs. Over the years the larger players in the tyre sector have tried to establish typical fast fit chains, but with trade often based on personal contact and family relationships, they have all struggled to develop national brands. "It is a question of the regional mentality here in Italy," said Renzo Servadei.

"The situation is changing," continued Renzo, " 20 years ago there were over 350 retreaders across Italy, that has rationalised to 60, and that figure is probably still too high. However the Italian market is changing, though not at the same speed as elsewhere in Europe. It is very difficult to judge the outcome, but we expect to see further rationalisation/ consolidation in the coming years."

One of the recurring questions that arises in the retreading sector is that of imported retread material from outside the EU. Each time that Retreading Business talks to a materials supplier from almost any continent they all claim to be making inroads into the European market. With ongoing consolidation, whether in its terminal stages as in the UK and France, or in mid stages as in Italy, surely the market is getting tighter, and any imports must impact on the local markets? "To be honest," explains Servadei, "imported rubber is not an issue. We do have a very competitive industry but the Italian manufacturers produce a very good product at a very competitive price. Further, because there is a very strong cooperative approach in Italy the market is resistant to these imports.

"Price does have an impact but when we look at the savings made on the cost of rubber imported rubber may win, but when we look at the other issues, quality, service, returns and other problems, most Italian retreaders prefer to remain with European produced quality products backed by the sort of service that they are accustomed to. Traditional suppliers remain in a strong position. The economic crisis may be having an impact but the majority are remaining loyal to local products. This subject was discussed at AIRP's AGM and the consensus was that the important question was one of quality rather than savings."

On the question of quality the EU has driven various issues and Low Rolling Resistance, as an example, is one area where the whole retread sector could have an issue. How does AIRP think these new standards will affect retreading? "Again, we discussed Low Rolling Resistance at our AGM. It is important that we meet these challenges. When the rules take force it will require investment, not only in the field of dealing with problems but in developing opportunities. The future lies in improving the quality of the new tyre, and the retreaded tyre following that improvement in quality in co-operation with the new tyre manufacturer. If we don't do so, then selling a new tyre will become solely a question of price. That is not good for anyone as low selling prices mean low margins and lower levels of investment in improvements.

"If we can match the relevant new tyre proposals. If we can do that we can create new opportunities for the retread sector. This was the consensus from our AGM and we will be working with BIPAVER to meet the standards and will be monitoring the situation closely. Ultimately, rather than being a challenge, these new standards create an opportunity."

In concluding Retreading Business asked Renzo Servadei to comment on retreading in general. "We need to save retreading as an element of whole tyre life. To do so we must improve quality across the board. If we leave the decision to be based on price alone we will lose out both as retreaders and new tyre manufacturers. We cannot compete solely on cost. However, we can develop technologies and we can retain a strong retread sector.

Issue 2010/1