Price fixing among tire manufacturers

I believe that what yo are noticing is, "what the market will bear,"
pricing.

I'm sure that the marketing guys all get out to see what the competition
costs, and they price accordingly. If people that want a 700 tire will pay
$95, then the tire makers are going to charge $95. They will sell an
equivelent size 400 tire for $90, if the market will bear it. This is not
price fixing as much as it is comptetitive pricing.

There is a chance that when you shop Sears, Costco, and America's Tire for
the same size and make of tire, the price will be within pennies of the same
price. Expand the search to different makes of the same size, and the
pricing differential may or may not grow, depending on many factors.

You can grow your search from a 205 to a 215 or 225, with an attendant
reduction is sidewall -- reduction from 70 to 65 or 60 -- to arrive at the
same overall diameter, and dial in the 700 rating you want, and perhaps find
more price variances. A 205/70 is a very narrow tire, and maybe that size is
not widely used -- which makes the prices go up.

My BMW took a 225/55x15 as the standard fitment. This size came on my car as
a Goodyear Eagle, but nobody (other car makers) else used it, and as a
consequence, the size was very expensive to replace. I found myself facing a
charge of $1000 out-the-door for them, $250 each for four. I switched to a
225/45x17, bought 5 new rims and tires, and paid only about $150 more than I
would have paid for 4 tires of the 15" size. Now, I can fit a new set of
tires (4) on my car for about $450 instead of $1000.

I'm not suggesting you buy new rims, I'm only illustrating that a tire size
that is more widely used will be cheaper than a tire with a very narrow
market space.




<snip rest>

 

Well, they said that about gasoline prices. They said that people
wouldn't pay more than $2.00 per gallon. Oopsie. The market will will
obviously bear $3.00 gasoline. An oil company can price the gasoline at
$10.00 per gallon if they want. They won't have many takers, though,
unless the gas station is the only one near an airport or in a wide area.

What he's noticing is competition.

 

Forget about buying name-brand tires. The off-brands are made by the same
companies.
Go to your local one-man garage mechanic and tell him you want decent tires
that are 'Blems'. Blems are Blemmished tires meaning they have a slight,
often unnoticable, cosmetic defect... like a letter on the sidewall is not
perfect but the price is up to 1/3 lower. You might also want to consider
re-caps which are cheaper still, sometimes as low as $35-40 a tire. My
neighbor buys her tires from the junkyard and has come home with like new
Goodyears for $10 each.

 

Some off-brand tires are made by the same companies. Some are made by
other companies, like companies in China. In addition, even if off-brand
tires are made by the same companies, they may be made with different
materials or to lower standards than the brand tires. I am not saying
that you can't save money this way, but only that the tires are not
necessarily the same, although they might be.

Jeff

 

.... or the other stations nearby also price their gas at $10. Sure, most
will not stop and pay that kind of money, but if that is the only number
they see, and they need gas, they will have to pay. Granted, they will only
buy a gallon or two at that price in the hopes they find another station
with better pricing before they get to the end of that load of fuel.

Personally, I do not buy into the idea that gasoline is priced on a strictly
supply & demand model. I think there is a huge, "why charge $1.00 for one
gallon if you can get away with charging $2.00 for a half gallon?" mentality
going on.

Yes, the price of crude rises and this pushes up the price at the pump. But,
I'd suggest that prices at the pump rise faster than the price of crude, and
they rise occasionally when the price of crude is falling. I've even noticed
crude prices go up and pump prices remain flat. But, I've noticed on far
more occasions that the price of gas shoots up a quarter or so in a couple
of days, then floats back down ten or twelve cents over several weeks, all
while crude prices have not moved.

Rising crude prices should have a fixed affect on prices at the pump because
crude is a fixed quantity of oil, and it produces the same quantity of
gasoline, no matter how much it costs. So, if a barrel of crude is 55
gallons <or whatever it is> and this much crude can make 20 gallons of
gasoline <or whatever it can make>, then a rise in crude prices of a dollar
should translate to a rise in gas prices of about 3 cents. (I do not know
how many gallons in a barrel, not how many gallons of gas a barrel of crude
makes, and it isn't really important here. I wanted to illustrate that a
dollar change in a barrel of crude works through the system to affect a
3-cent change in a gallon of gas.) The bottom line is, gas prices change for
many reasons other than fluctuations in the price of crude, many of those
reasons come out of the refineries themselves.

 

We pretty much agree here.

It takes a few months to go from well to gasoline pump. So the prices at
the pump often reflect the prices from a few months ago, but usually
only if the price is going down (as you point out, prices tend to shoot
up faster than they go down).

Yeah. Stations rise gasoline prices as soon as the cost of the next
truckload goes up, even if they have enough gas for a week. However, the
keep the price of the gas up as long as they can. What would you do?

That's pretty close. A barrel is 42 gal., but after refining, it makes
nearly 50 gallons of fuel and other petroleum products, because ethanol
and other additives are added. So each rise of $1.00 in the crude oil
price should raise the cost of a gallon of gasoline by about $0.02 to
$0.025.

And the price does clearly stick pretty close to this:

<http://inflationdata.com/inflation/Inflation_Rate/gas_vs_oil_price_comparison.htm>

Obviously, there are other factors at play than just the cost of crude oil.

There are many reasons, not the least of which is the desire of everyone
who sells crude oil and gasoline to sell it for the highest price
possible. If they can keep the price up, they will. However, the people
who don't make more profit is the gas stations. Their costs go up about
$0.01 to $0.02 for every $1.00 the gas goes up, because the credit card
processing fees are fixed (usually around $0.20 + 2% or so), so when the
price shoots up by $1, it costs them $0.02 more to pump it when someone
uses a credit card.

They other things that do affect the price of gas are production
problems (that's why the price of gasoline went up after the hurricanes
in the Gulf two years ago), temporary or anticipated shortages when
there are refinery fires or when the refineries change the type of fuel
in the spring and winter (winter blend <--> fuel oil for heating houses
<--> summer blend <--> diesel). Even where the gas station is located
affects the cost that the gas station pays for fuel (gas stations near
interstates or airports often pay more for gas than if they are located
in small cities away from the interstate; gas stations in CA also pay
more because it costs more to make the fuel mandated by CA law).

Jeff

 

Nobody puts whitewall or white lettering tires on the side of a minivan
unless they want to look like the local neighborhood child pervert. I think
the opportunity for blemished tires in the size I'm looking for is low since
most blems deal with lettering/ whitewall problems.

I bought a set of recaps once when Les Schwab was still selling them They
did their
own recapping. All 4 tires had different carcasses. The tread wore out
very quickly.
This is yet another 1950's stunt. It worked fine with Bias Ply tires (and
still does with
semi truck tires which aren't radial) but passenger car recappers aren't
setup to categorize
tire carcasses on anything other than size, so your never going to get a set
of tires with the
same handling characteristics. It's a non-starter for modern radials and
likely would make
the car handling dangerous for the average driver.

My

Chances of finding a decent set of FOUR in a wrecking yard are next to
nothing.
The reason is there's 2 kinds of cars in a wrecking yard. The first are old
POS cars
that engine failed. The people that ran those cars knew they were dying and
so
didn't maintain them worth shit - which means they put the crappiest cheap
tires they
could find on them. The second type of cars are new nice cars that got
smashed up.
What happens with those is if the tires are really nice, really expensive
tires, the places
that sell used tires (there's a few in our area) all have deals with the
yards where they
get called when those cars come in and they get first dibs on them.
Otherwise they
go right into the yards. And 90% of the time, 1 of the quadrants of the car
is really
smashed up bad, and that side wheel and tire are hashed.

If the car has aluminum mags, the yards immediately dismount the tires and
throw them
into the big pile of old tires and they go off to the tire recycler, and the
aluminum
mags go to the smelter. My van has aluminum mags. If they have steel rims,
they sit,
on the rims, until the steel price on mixed metal goes up, and then the
wreckers start
smashing cars and throwing the rims and tires in with the steel that goes
off to the steel
shredder.

Sometimes you can find a set of TWO or THREE nice tires with less than 20%
treadwear
on them. You will be competing with the Mexicans in the yard who are
looking for cheap
tires for their beater cars of course. They will still
be on the steel rims and your going to have to pay to have them dismounted.
And, there
will be no road hazard warranty on them so a year down the road if one goes
flat, your
going to be paying for a flat repair, and if one gets punctured to where it
can't be fixed,
your going to be headed back to the wrecker to find another.

The wreckers are fine if your just looking for ONE tire that matches a set
that you already
have, for example, you ran over a pothole and destroyed the tire sidewall of
a set of 4
that are worn down only 15% or so. The alternative is of course buying a
new set of 2
tires to get even tread on both sides of that axle.

Ted

 

So they're priced like bikinis: The less material, the higher the price.

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

 

Many "off brand" or "private brand" tires are/were actually built to a
HIGHER standard than the OEM quality brand name tires. When UniRoyal
built the Shell branded tires in the Kitchener Ontario plant, Uniroyal
employees would come and buy the SHELL tires because they were better
tires than the Uniroyal tires.

 

If you're a mechanic, you call that the ratchet effect. If you're in
electronics, you call that the diode effect. If you are in hydraulics,
you call that the check valve effect.

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

 

With treadware ratings of 200 to 350.

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

 

At least some gas is sold on the commodities market. That really sends the
price structure into the twilight zone.

mg

 

Christ, I hope not!

 

So it costs AM General 5x as much to produce a $100,000 Hummer than it
costs Honda to produce a $20,000 Accord (hey, back on topic!)?

You must be aware why the US automakers loved selling so many SUVs these
past several years - enormous profit margins. It obviously doesn't cost
twice as much to produce a $40,000 SUV than it does to produce a $20,000
sedan.

This is fine in Adam Smith's world of free entry/exit from a business,
no other barriers, etc. The real world is quite different, of course.
What might be the startup cost for bottling soda, or opening a new car
dealership, etc.?

There are some highly competitive industries, of course, e.g., the
commoditized PC business that you mentioned, which is why I didn't say
"all" in my original post. But even in the personal computer business,
laptops and Apple are exceptions.

Finally, please don't claim any significant advantages to the consumer
from any putative competition in the oil & gas industry - Exxon Mobil
hasn't posted record profits the past few years because they're cutting
prices to the bone.

The recently retired CEO of Exxon Mobil had an attractive retirement
package, of course, in the neighborhood of $400 million.

http://abcnews.go.com/GMA/story?id=1841989

 

Which planet are you from again?

Yeah, and?

 

You need to chat with Edwin.

 

So what? So was I and millions of other people, no one was *the*
computer business.

 

I never said it wasn't sterile. Here's the problem:
The normal saline concentration of human blood is about 9,000 ppM.
The saline concentration of human urine is about 22,000 ppM.
If _all_ you drank was your urine, the saline concentration of your
blood would rise; normally your body deals with this by dilution,
adding more water (you get thirstier). So, you have another glass of
urine. Now, remember, you're also losing water via perspiration and
respiration. Sooner than later, you will collapse from dehydration.

Excess salt doesn't get metabolized any further. It will just get more
concentrated.

--Gene

 

They don't all have deals. Most wrecking yard sell their own tires right in
their own front office, at least the good sets.

No such thing, you either have aluminum wheels or you have magnesium wheels
(mags) you do not have aluminum "mags" (magnesium) wheels. "mags" is short
for magnesium alloy wheels, not "fancy" aluminum wheels.

Magnesium alloy wheels, or mag wheels, are sometimes used on racing cars, in
place of heavier steel or aluminium wheels, for better performance.
http://en.wikipedia.org/wiki/Magnesium_alloy_wheel

Today, I would never purchase used tires, the safety issue is just not worth
any possible savings, period.

 

Yes - since you mention that, why don't you give us their profit figures
- IN PER-CENTAGES! Almost everything is higher than it used to be IN
DOLLARS when you look at it on long term running averages - what we get
paid, what we pay for cars, groceries, and yes gas.

IN DOLLARS, I guess everyone who moves to a higher paying job or gets
good raises in place is evil because they are making more money (IN
DOLLARS) regardless of what it looks like against inflation. IOW - a
person who is now making X% more today than he did 20 years ago is bad
because he's making "record highs" in dollars. Yet when you look at the
numbers as percentages of cost of living, it may or may not be a
*relative* increase.

What *cowards* will do to denigrate the oil companies is talk about
"record" profits IN DOLLARS - *never* IN PER-CENTAGES. Come on - be a
man. Give us percentages and compare to typical expected business
profits IN PER-CENTAGES.

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