My Kingdom for a Tire

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The retreading process is labor-intensive and hard to automate Brownie Harris

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RDH's output has ballooned from 3,000 retreaded tires a year in 2004 to 7,000 last year. At Purcell Tire & Rubber in Potosi, Mo., the country's biggest retreader, sales have nearly doubled over the past three years, to $265 million in 2007.

EXHUMED

The world's biggest tires lead short, brutal lives. Purchased new, they can cost up to $50,000 apiece. They roll underneath mammoth two-story trucks, ferrying million-pound payloads from the gaping mouths of mountaintop mines, bounding up and down unpaved trails at up to 40 miles an hour. Their treads wear out after about 5,000 hours. It used to be that, rather than paying to have those tires shipped to a landfill, mining companies would find an out-of-the-way place to bury them. Recently some miners have gone so far as to unearth such used tires at old job sites and send them in for retreading.

As demand for the giant tires soared, manufacturers weren't able to churn out enough of them. For the tiremakers, the retreading business is a sideline, albeit a profitable one. Michelin, for instance, says its profit margins are 18% on OTR tires—very healthy compared with its overall margins of 5%—but the market accounted for less than 15% of Michelin's $25 billion in revenue last year. In August, 2007, Michelin announced a $110 million expansion at its earthmover tire plant in Lexington, S.C. And in late February, Michelin dedicated a $200 million OTR tire plant in Brazil. Still, the big tiremakers have struggled over the past several years to stay in the black, owing to the vagaries of the auto business and rising costs for raw materials. Rubber, for instance, has tripled in price since 2003. Loath to get stuck with too much plant capacity when the mining sector cools, Michelin, Goodyear (GT), and Bridgestone are rationing supplies to their biggest customers in the form of a yearly tire allotment.

TIRE JOCKEYS

Amid such scarcity, spent tires have become a hot commodity. That has led to the emergence of so-called casing hustlers who, according to the retreaders, are usually former tire salesman or mineworkers. Casing hustlers know where to find a cache of abandoned or buried tires. At the height of the shortage, Brad Courtnage, president of WWF, an OTR tire dealer in Ft. Lupton, Colo., recalls one "tire jockey" offering a single big haulage tire for $150,000 that would have sold for about $25,000 new. "So many opportunists have entered the business," sniffs Courtnage.

Companies now are looking beyond the U.S. for anything in good enough shape to be repaired. RDH's Brau has fielded calls from Colombia, Morocco, and Suriname, with offers of access to stores of used mining tires. Last summer he traveled to Monterrey, Mexico, to meet a tire jockey. They drove three hours into the desert, crested a ridge, and looked out over a sea of burned rubber baking in the sun. But a closer look was disappointing. "Most everything that I saw was basically no good," he says, too damaged to lug back to North Carolina for repair. On the way back to Monterrey, Brau stopped at a shop that had 100 or so spent casings. Some looked promising, but the shop owner said the good ones had already been claimed by an Arizona mine.

Big scores are rare these days. Bradley Ragan, whose grandfather co-founded RDH, says the plant can use only one or two of every 10 tires a hustler tries to sell them. "You're not going to find anything good," says Ragan, who helps manage the facility with his brother, Scott. "It's all been picked through." Courtnage, the tire dealer, says the business of finding used tires has become so competitive that he deals almost exclusively overseas. Where? "I don't want to disclose my sources," he says.

RDH relies to a greater degree on big mining clients for a steady stream of tires that flows into its North Carolina facility and a smaller one in Glasgow, Ky. It's a chore just to get them to the plant. Every one of RDH's 20 or so truck drivers has to ponder the basic question of how to pack them up. If you stack the tires vertically, the load will be too high to traverse many roads. Piling them on their sides creates a wide load. Once a driver gets them on the truck, there's the matter of winding down rural roads "made for Model Ts," says Scott Ragan.

Retreading is surprisingly labor-intensive. Once the tires arrive at the Cleveland plant, Bradley and Scott inspect each one, looking it over for damage and marking trouble spots with chalk. Then the tires are forklifted inside to the buffing machine, which leaves a smooth surface on which a new tread can be applied.

There's little about this process that can be automated. After the tread is buffed, workers cut out the remaining imperfections in the tire by hand, a process called "skiving." They bang out stuck-in rocks or nails, smooth torn rubber, and shave down exposed steel wire. Once it's skived, the tire gets an application of cement gum, and any holes are filled in with globs of warm rubber. Then the tire is mounted on another spindle, this time to receive a layer of newly applied rubber. To seal everything together, the freshly retreaded tires are cooked in enormous kettles. Finally, new treads are cut out by machine, and the grooves are hand-smoothed.

Retreaders are aware that their fate is to be whipped around by the commodity boom's tail. In the past year, as the outrageous demand for tires slackened from its peak, RDH has laid off about 20 workers. Fuel costs are going up, too. "We can't afford to run our [trucks]," says Bradley Ragan. "But we can't afford to have them not running."

Hindo is BusinessWeek's Corporate Strategies editor in New York .