But the good times may not last in the face of higher costs and stiff competition. The Aug. 9 recall of 6.5 million Firestone tires has sent motorists scrambling to find replacement tires. Tiremakers have responded by ramping up production and shipping more product to retailers. But despite the uptick in sales, Wall Street analysts are not predicting a corresponding jump in earnings. Goodyear is the world's largest tiremaker.
Raw materials are half the cost of building a tire.
James Fessel, an equity analyst with PNC Advisors, says the tire business was not strong before the recall and will likely remain weak after it's over. You have increasing raw material costs, increasing interest rates, and you have automakers trying to pressure their suppliers to cut costs. The long-term problems won't go away. Analysts say if Firestone finds people shying away from its tire, the company may decide to put big discounts on its tires to boost sales. That could force other tiremakers to discount to remain competitive.