Aug. 24 (Bloomberg) -- Titan International Inc.’s bid to break into the oversized-tire market hit a roadblock after tires installed on trucks hauling Canadian oil sands lasted just 1 percent as long as expected.

Titan has halted production of 13-foot (4-meter) tires used on dump trucks to install pressure-monitoring devices, Chief Executive Officer Maurice Taylor said in a telephone interview. Four tires failed after 100 hours of work on the 400-ton trucks used to haul oil-soaked sand for Royal Dutch Shell Plc and other energy companies in Alberta, rather than the minimum expected lifespan of 10,000 hours, he said.

The tires, which cost about $42,000 each, carry Caterpillar Inc.-built 797B trucks at oil-sands operations such as Shell’s Muskeg River Mine 270 miles (434 kilometers) north of Edmonton. Taylor, who in March said expanding into oversized tires would triple sales to $3 billion in five years, blamed the early failures on local dealers who set air pressure too low, raising internal temperatures and causing steel belts to separate.

“The tire dealers up there demanded a 7 percent to 10 percent kickback, but I refused to pay it,” Taylor said. “If you don’t give them some money, they let a little air out of your tires, and no one sees it.” He didn’t identify the dealers.

Titan fell 68 cents, or 7 percent, to $9.07 in New York Stock Exchange composite trading. The stock has plunged 67 percent in the past year.

Production Stopped

Titan idled the oversized-tire production line at its Bryan, Ohio, factory, in the second week of August to test new tread designs intended to reduce heat buildup, Taylor said. Output will resume by the end of this month, he said.

Taylor said oil-sands producers are unrealistic to expect tires to last at least 10,000 hours, given that the average lifespan is about half of that. He’s scheduled to visit Shell and other producers to discuss tire failures on Aug. 31.

The oil sands, home to the world’s largest petroleum reserves outside Saudi Arabia, account for half of Quincy, Illinois-based Titan’s sales of giant tires, Taylor said. He declined to provide a dollar figure for those sales.

Taylor, a 64-year-old Michigan Technological University- trained engineer, this year expanded the company’s capacity to produce oversized tires 10-fold to challenge dominant rivals in the market, Michelin & Cie. and Bridgestone Corp.

$2,700 Sensors

Taylor seeks to boost sales to oil-sands, gold, aluminum and copper miners to compensate for declining demand from the farm-tractor industry. Titan’s net income tumbled 56 percent to $5.91 million during the April-to-June period, its largest second-quarter decline in six years, amid slumping sales in the farming and construction industries.

To prevent a repeat of the tire failures in Canada, Titan is installing sensors on each unit at a cost of $2,700 to alert the company if air pressure is too low, Taylor said.

The Hague-based Shell and producers such as Irving, Texas- based Exxon Mobil Corp. use heavy-duty dump trucks to carry 400 tons of oil-soaked sand, rocks and mud from mines to processing plants.

Shell employees celebrated with a barbecue at the Muskeg River Mine this month after a tire was retired after 10,600 hours of service, John Goodman, a pit manager at the mine, said in an Aug. 19 interview.

Moving Mountains

The tires usually aren’t recycled because no equipment exists that’s large enough to shred them, said Fred Kuzmic, head of reclamation and research at the mine. On a few occasions, a tire has been sliced in half and turned upside down to serve as a water or feed trough for cattle, he said.

At Muskeg River, which is part of the Athabasca Oil Sands Project that Shell operates, a fleet of 39 dump trucks move 400,000 tons of earth a day, Kuzmic said.

Some loads are dirt, brush and other detritus that have to be removed so shovels can reach the oil-soaked sand underneath. “We literally move mountains every day,” Kuzmic said.

Titan’s expansion into oil sands and other mining sectors coincided with production increases by competitors, resulting in a glut of 13-foot tires. The surfeit probably will cut prices by 17 percent to $35,000 each by the end of this year, Taylor said in a July 31 statement.

Salaries of Titan managers were reduced by 5 percent, effective July 1, and Taylor’s own pay was cut 10 percent, according to the July 31 statement.

To contact the reporter on this story: Joe Carroll in Chicago at jcarroll8@bloomberg.net.

Last Updated: August 24, 2009 16:08 EDT