AAH #810 - Tires Are A Key Part of Vehicle Development

SPEAKER_1 (0:00)

Autoline After Hours is brought to you by Alex Partners. For more than 40 years, we have helped companies and their stakeholders around the world harness opportunity, overcome challenges, and achieve outsized outcomes. Alex Partners, when it really matters.

And by Bridgestone Tires, solutions for your journey.

John McElroy (0:25)

Everybody, thanks for joining us on Autoline After Hours. Gary, good to see you. Good to see you, John.

I was gone last week, I'm back here now, though. So all's good. Here you are. Yeah, right, we gotta let everybody know our special guest today is David Colletti. He's the president of Consumer and OE Tires for Bridgestone here in the Americas. David, welcome to the show.

David Colletti (0:44)

Thank you, John.

John McElroy (0:45)

Thanks for your sponsorship too, by the way.

That's what keeps us going here. And we got Sean McElroy joining us as well. Yeah, good to be here.

Gary Vasilash (0:53)

So David, I gotta ask you first before we begin. So you have a degree from Santa Clara University. Why are you not in Silicon Valley right now?

David Colletti (1:03)

I like cars. That's pretty simple.

My son's actually at Santa Clara right now, following my footsteps. But I grew up on the West Coast, loved the West Coast, and then I wanted to be in the car industry. So I've been in the Midwest ever since I graduated from Santa Clara, and I've just addicted to cars and tires.

John McElroy (1:27)

And we're going to get into that. But let's talk to business side, then we'll get into some more of the fun stuff. But what's your outlook? I mean, automakers have to buy tires. It doesn't matter if it's a plug-in, an ice, a bev, or a small car, they got to buy tires. So where do you see things going right now?

David Colletti (1:46)

Yeah. I think the industry is fairly stable in terms of overall volume. The mix is changing a lot. I mean, a couple of years ago, everyone was talking about all EV, and now it's like no EV.

So the mix is changing. The price of vehicles are going up, so that's a concern. But a lot of the, I think, the OEs and a lot of the suppliers are focused on cost. Because the EV bets didn't pay off, the China threat, all that stuff, it seems to be the big focus now is cost. What can we do collectively as an industry to reduce cost?

And not as much about technology. Technology was a big thing, I'd say, five years ago. EVs, we have to have all this new gadgets and everything, but affordability is an issue for vehicles. And the OEs want margin, so it's like, how do we take cost out of the system? I think a lot of us as suppliers are seeing that. There's a lot of cost pressure on the supply base that take cost out.

Gary Vasilash (2:53)

So in terms of tires, I mean, you use a lot of natural rubber, and we have no natural rubber in the United States, so you've got to import this. Imports mean tariffs.

Other constituents that go into making a tire are largely imported, maybe the steel for the belts or what have you. How are you guys dealing with that?

David Colletti (3:14)

Well, some of it's exempt, actually, because natural rubber you can't get here. We have an exemption on that, so that's not tariffed, steel is, chemicals are.

But some of the stuff we get here locally in the US, we have a lot of production in the US. So some of the stuff, except for natural rubber, we can actually source from the US. So the exposure to tariffs for us is less because we're not importing full tires. Most of our tires are made in the US. And some of the materials that we can actually source in the US, we will.

Sean McElroy (3:49)

What about recycling? Can you recycle old tires and get new materials that way?

David Colletti (3:54)

That is an interesting conversation with End of Life. What do you do with tires? And most of them go in the landfills or they get chopped up. To actually take apart a tire through paralysis and decomposition, a tire, it's very difficult.

We had some investments in it, I'd say, five years ago, three to five years ago, but it's expensive. And who's going to pay for it?

John McElroy (4:25)

So what can you do to take out cost?

Describe the ecosystem. So you're looking beyond just cutting the prices of your tires and eating into your margin or giving it away. Or is there things that you can do to design cost out?