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Published: Sunday, 8/10/2003

Tires from Asia tread on U.S. plants' sales

BY JULIE M. McKINNON
BLADE BUSINESS WRITER
Cooper Tire, owner of this Findlay warehouse, is focusing more on performance models. Cooper Tire, owner of this Findlay warehouse, is focusing more on performance models.
SIMMONS / BLADE Enlarge

Akron's Goodyear Tire & Rubber Co. wants to close two or three U.S. plants. Findlay's Cooper Tire & Rubber Co. may import tires from Asia. Titan International Inc. of Quincy, Ill., is consolidating tire production into a single factory.

As imports of Asian tires increase at a time of global overcapacity, U.S. tiremakers are searching for ways to cut costs.

The value of imported Chinese tires and tubes alone has nearly quadrupled to $288 million in the last five years, and Asian imports last year totaled $1.8 billion.

Goodyear, for example, wants to trim $1.5 billion from its operations worldwide to help stem a tide of red ink. Cooper Tire is looking to import entry-level, small tires manufactured even more cheaply than the low-cost producer can. And Titan International has decided to keep its Texas factory shuttered until demand for lawn equipment and other non-passenger tires comes back.

Some tiremakers are voicing concerns about imports as talks heat up with the United Steelworkers of America, whose members are working under day-to-day extensions to expired contracts at the three biggest manufacturers. Goodyear, whose contract will set a bargaining pattern at Bridgestone Americas Holding Inc. and Michelin North America Inc., resumed talks with the union last week in Cincinnati after a 51/2-week impasse.

(The labor contract expires this fall with about 900 Steelworkers in Findlay at Cooper Tire, the nation's fourth largest tiremaker and second largest U.S. tire firm by revenues.)

“Certainly the Asian manufacturers are importing a lot more tires into this market, and the imports do make competition much more difficult,” said Chuck Sinclair, a Goodyear spokesman. He declined to talk about negotiations.

“It's the imports,” he added. “It's the global overcapacity in the tire industry.”

Overall U.S. imports picked up first with car tires in 1996, at 47.9 million. The number grew to 74.3 million tires in 2000, then tapered off because of lower demand. Last year, 70.5 million car tires were imported, according to the Rubber Manufacturers Association.

Light-truck tire imports were at 5.1 million in 1996, started gaining traction at 8.3 million two years later, and reached 17.4 million last year, according to the trade group. All together, imported passenger tires went from 47.7 million in 1996 to 87.9 million last year, an increase of 84 percent, figures show.

National tire deliveries from manufacturers in the United States, meanwhile, went from 293 million in 1996 to 322 million last year, up 10 percent.

Some tires imported to the United States are from Goodyear, Cooper Tire, and the other tiremakers. Goodyear and other large tiremakers have factories and joint venture operations in Asia and elsewhere worldwide, and Cooper Tire has a plant in England.

But most of the growth in U.S. imports is from Chinese and other Asian manufacturers. They most hurt companies making private-label tires, like Cooper Tire, because they depend on entry-level consumer sales, said James Barnett, interim dean of the University of Akron's college of business administration.

Low labor costs in Asia more than make up for shipping costs, although that may be short lived if the gap with U.S. wages gradually narrows as it has with Mexican factories, Mr. Barnett said. Eastern Europe is another region with low-cost manufacturing, he said.

U.S. wages are not so much an issue in tire production costs as are double-digit increases in health care and other benefits, Goodyear's Mr. Sinclair said.

Goodyear has talked about reducing U.S. production by 15 percent and has asked for concessions on wages and benefits, said Wayne Ranick, a Steelworkers spokesman. Talks cover about 19,000 workers at 14 plants, including some making rubber products other than tires.

Some in the union question whether Goodyear - which has had some management missteps in recent years, such as cutting production after the Firestone recalls when it could have benefited - is trying to raise capital to increase overseas manufacturing and replace North American production, Mr. Ranick said.

Nearly 3,000 Goodyear workers are idled because of declining markets, said Mr. Ranick, who declined to speculate on how many jobs would be lost if factories were closed.

At Titan's nearly five-year-old Brownsville, Texas, tire factory, roughly 300 employees have been laid off, although warehousing and distribution continue there. The company idled a plant in Natchez, Miss., two years ago.

For its part, Cooper Tire is increasing offerings of higher-speed performance tires, which make up a small but growing part of the market. In April, it launched an exotic-looking ultra-high-performance tire dubbed the Zeon 2XS, as in performance and handling “to excess.”

Although some U.S. tire-making jobs will be lost because of imports, the manufacturing that remains will be of higher-end and specialty tires, said J. David Richardson, professor of economics at the Maxwell School of Syracuse University in Syracuse, N.Y.

“The ones [jobs] we keep are usually the ones we fill with more skilled workers,” he said, and they typically are unionized and higher paid.

One potential source for relief would be an easing of taxes and regulations so companies want to invest in research and development in the United States and try to differentiate products from those made overseas, said David Littmann, chief economist for Comerica Bank in Detroit.

China has about 65 tire plants, a third more than the number - including two in northwest Ohio and four in other parts of the state - in the United States. Cooper Tire mostly makes performance, light truck, and other tires at its hometown factory, and Continental Tire North America Inc. builds commercial truck tires at a 330-employee plant in Bryan.

Japan, with more than 20 tire plants, remains by far the largest Asian source for imports at $890 million worth last year, according to U.S. Department of Commerce figures. South Korea is next at $421 million worth last year, followed by China's $288 million, the figures show.

Tires are not the only rubber products under siege from Asian imports. For example, the Big Three automakers are trying to get suppliers to match Chinese prices for production and shipping costs or to build plants there.

That shift affects Cooper Tire, which also makes auto parts. The Findlay company is exploring which of its products could be imported.

Last year, $1.7 billion worth of auto parts was imported from China, up from $805 million in 1998, Department of Commerce figures show.

Actually, experts said, nothing is exempt from foreign imports in U.S. manufacturing, which has declined by less than a million jobs a year in the past two decades, said Mr. Richardson of the Maxwell School.

University of Akron's Mr. Barnett said another disquieting factor is that, although American workers are supposed to be moving from manufacturing to service jobs, those replacement posts are being shipped overseas as well. Toledo's Owens Corning, for example, recently moved a handful of U.S. accounting jobs to India.

U.S. store shelves, meanwhile, are filled with goods from China, Mr. Barnett said.

“Nobody knows the end to this story,” he said.



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