ITEC: Dealing with US tariffs made GITI a stronger company

ERJ staff report (TB)

Cleveland, Ohio --- Having to deal with the elevated U.S. tariffs on Chinese consumer tyres the past three years made GITI Tire Co. Ltd. a stronger competitor because it had to focus on the added value it brings to its customers in the U.S., according to Dr. Enki Tan, executive chairman of GITI Tire, who delivered the keynote address on the opening day of ITEC 2012 in Cleveland.

Among the changes were improvements to the distribution supply chain and improvements in the products themselves, he said in remarks after his presentation, which focused on China's role in the global economy and in the global tyre industry value chain.

His comments echoed a sentiment he expressed in his talk, namely, “We cannot be ordinary anymore. We must do something exceptional to survive.”

Separately, Herve Richert, executive director, sales and marketing for the Singapore-based Chinese tyre maker, said in an interview with Tire Business that during the past three years GITI dedicated itself to delivering a premium level of support to its customers to solidify the business relationship it had built up with them, in some cases over decades.

To that end, GITI Tire has assembled a strong team of technical support staff and a “seasoned” sales force to work with customers, Mr. Richert said. GITI maintains five distribution centers in the U.S.

Despite the elevated tariffs - up to 35 percent over the previous 4-percent level - GITI said it registered higher sales in the U.S. during the three years the tariffs have been in place. Noting that Chinese imports to the U.S. remain high despite the tariffs, Mr. Richert said the tariffs affected primarily tyres priced to compete in the budget sector, below the value segment where GITI's products compete.

The elevated tariff - now at 25 percent - is set to expire Sept. 26, barring any last-second action by the Obama administration.

In his presentation, Dr. Tan called government subsidies of industry “perverse” and urged governments to resist using them, because they cause artificial expansion of protected industries.

Likewise, he criticised tariffs as largely “designed to block job losses” and therefore ineffective in solving trade problems long-term.

Addressing China's role in the global economy, Dr. Tan referred to the nation's current five-year plan, which he called “socialism with a Chinese flavor” and the “secret sauce” of Chinese development. The plan addresses growth through enhanced focus on innovation and technology, he noted, and will result in measurable transition in Chinese culture, especially affecting the demographics of the Chinese population.

In terms of the development of the global tyre industry, Dr. Tan singled out five areas where China is bound to play an increasingly important role: standards, research and development, raw materials, manufacturing and markets.

From Tire Business (A Crain publication)