Mining Boom Pumps Up Terex

Caterpillar concurs that tires are part of the problem for truck production and confirms it is sold out through December 2007.

But industry insiders are now saying there's relief in sight.

Operational efficiency improvements alone could help boost annual OTR tire supply by about 3% this year, explains Gary Nash, director of OTR tire sales at Yokohama Tire in Fullerton, Calif.

Meanwhile, looking further out, some of the major manufacturers have made plans to grow their facilities or build new ones. For instance, in February, Bridgestone pledged to invest $600 million to boost OTR capacity by 20%, according to the Modern Tire Dealer, a trade publication.

Typically, 30% of new tires go to original equipment manufacturing with the remainder designated for replacements, says Yokohama's Nash. Based on his estimates, the 3% operational unit gains equates to about 20,000 extra tires. If 6,000 go for new trucks and with estimates that vehicles will sell for $2 million to $5 million each, the additional tires could add $2 billion to $5 billion to industry sales, assuming six wheels per truck.

It's clear that not all of the output constraint is down to the lack of tires -- at least some is due to chronic underinvestment. But just the same, some of it is due to tires, which means that as more tires roll onto the market, Terex and Caterpillar will bag easy incremental sales.