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FINLAND
Business as Usual for Finnish Retreaders
wholesalers. And this practice for some reason is especially common for the cheapest Chinese brands, probably because in their cases the price appears to be not simply the most important competitive advantage, but in fact the only one. Moreover, some particular companies in Latvia and Lithuania do not add anything to the wholesale price at all. Some Chinese plants are cooperating with wholesalers offering special bonuses for the distribution of some huge batches of their products. And some importers are happy to earn these bonuses only and nothing more. For retreaders these trade practices mean the lowest prices possible, and they can simply forget about being price-competitive in such circumstances. But this is not the case in Finland, where trading practices are different, probably because of the higher average wages and living standards compared to the Baltic States.
Speaking about these things it is worthwhile to note that since early 2017 Finland has made its way to the headlines of the international
media with the trial of a universal basic income. The Finnish government has been paying 2,000 of its citizens an unconditional income for the last five months, and some are already seeing the benefits, reporting decreased stress, greater incentives to find work and more time to pursue business ideas. The scheme is the first of its kind in Europe and sees participants receive €560 (£473) every month for two years. If the pilot programmes work well, the scheme could be stretched to the entire nation.
In this regard, it would be quite interesting to see how this measure would affect the retreading industr y in general. Would it add some challenges to the industr y as young people at the plants leave employment searching for more business opportunities? Would that mean a shortage of skilled staff as a result? Or on the contrary would people opt for more expensive products, thus reducing the demand for Chinese tyres as a result? It seems that nobody knows the answers to these questions yet.
It is no secret that the retreading industry in Finland is going through hectic times, as together with retreaders in the rest of Europe the industry is being affected by the invasion of cheap Chinese tyres. For many market participants it is not actually clear where this situation leads to and whether these Chinese tyres represent only a temporary challenge that is going to wind down soon enough or whether the current problems have come for the long term and represent actually only the beginning of harsh times. However, it is enough to visit some retreading facilities in Baltic countries, specifically in Latvia and Lithuania, to say that the situation in the Finnish retreading industry, in fact, is not so bad. Whereas in the Baltic countries some retreading plants are seeing production output collapsing by 2-3 times in several years, in Finland, by comparison, retreading plants are reporting decreases in operational performance limited to some tens of per cent during the same period. Simultaneously, while some Baltic retreading plants are staying empty, in Finland the work at retreading facilities is humming along. But the key difference one can notice is associated with the people’s mood – in Finland retreaders keep doing business as usual and when visiting
them you eventually will not obtain a feeling like the Apocalypse is just around the corner. In the Baltic States, by contrast, some retreaders simply refuse to talk about their business, saying that this is because they’ve got no good news to share, and their forecasts for the future are far from bright.
This is quite understandable with the tough economic landscape in the transport industry of Latvia and Lithuania, where truck companies have been heavily affected by the Russian /European sanctions. In Finland, retreaders have not been focused primarily on serving the needs of Russian-oriented entities, so no similar challenges have been observed here. But still, the wholesalers believe there is also some difference in selling practices between Finland and the named Baltic countries that puts retreaders at such a disadvantage.
According to the staff of the Green Tread Group, which has regional sales offices in each Baltic country and headquarters in Finland, the problem is that in the Baltic States local dealers importing Chinese tyres to the country only add 1-2 euro to the purchasing price, selling Chinese products to the final customers at prices that do not differ much from the price the plants are negotiating with
KL-Rengas is a Pieksämäki-based Finnish retreader, and part of the Rengas Center group of companies that includes various tyre outlets across the country. According to the company’s heads, Kari Oksanen and Mika Luukkanen, KL-Rengas, just like everyone else in the industry, is not able to avoid the negative impact of Chinese tyres,
so in the past five years its operational performance has reduced by nearly 25% from
4,000 retreaded tyres at the peak
in 2011 to 3,000 tyres in 2016. However, they said, the company
is not expecting operational performance to drop further.
Kari Oksanen also claimed that everything is not so simple with these Chinese tyres, as some of
his clients really shifted to them, moving away from retreads for
some time. However, eventually many of these clients discovered Chinese tyres were not operating
so well, particularly due to problems with winter patterns. Nowadays, KL-Rengas retreads nearly 2,000 truck tyres on customer casings and another 1,000 tyres on its own casings. Kari Oksanen revealed that the company purchases casings both from the domestic market and imports some quantities from abroad, primarily from Europe. He said they focused on the top European brands, such as Goodyear, Bridgestone and
Michelin.
KL-Rengas was originally established at another site in Pieksämäki in 1998, but by 2003 the company had expanded its production volume, so it faced the need to move into a new building with larger space to house production equipment and provide warehouse
KL-Rengas in a State of Operational Balance
34 Retreading Business
Kari Oksanen and Mika Luukkanen
space.
In 2011 KL-Rengas became the member owner of RengasCenter allowing it to provide new passenger and truck tyres to this company. The last important development came in 2012 when KL-Rengas opened a site in the Juva municipality 60 km away from Pieksämäki. K ari Oksanen explained