ITEC speaker: US tyre makers in survival mode, preparing for end of China tariffs

By Ed Noga, ERJ staff (R&PN)

Cleveland, Ohio -- The heavy tariffs levied by the US government on tyre imports from China gave the US tyre industry a three-year window to get itself competitive, and that has caused an uptick in investment in domestic plants and equipment but not employment, according to a retired University of Akron professor.

“Because at the end of the three years, they have to get back out there and play the game,” said Dennis Byrne, UA professor emeritus of economics, in a speech Sept. 22 at the International Tire Exhibition & Conference in Cleveland.

The problem for the United Steelworkers (USW) union-which initiated the action that resulted in a huge increase in duties that cut back measurably imports of Chinese-made consumer tyres to the US-is much of the new technology is labor-saving, Mr. Byrne said. “That means we're still seeing falling employment in the industry.”

It's no picnic for suppliers to the tyre manufacturers either, Mr. Byrne said.

“You're going to see tremendous pressure put on suppliers to come up with new and better ways to do things,” he said, while reducing costs for their tyre manufacturer customers.

Mr. Byrne said he doesn't know if three years are enough to allow domestic manufacturing to get on firm footing in the global market. “Certainly, it appears the US is playing one trade game, and everyone else is playing another,” he said.

Mr. Byrne views tyres as a special type of product.

“Tires are a truly amazing product, technologically sophisticated,” he said. “When I was a kid the average car used 24 tyres per lifetime. Today the average car uses something like six and a half.”

Tires today can have treadwear guarantees of up to 100,000 miles, Mr. Byrne said, and there is extensive research and development occurring at all times.

“The problem with tyres is that any country can produce one. All you have to do is take it apart and see what (the manufacturer) did. If you're not worried about things like patents, you can actually find out.”

Any technologically advanced society can produce tyres, “so you see tyres made in places you really wouldn't expect them, and, by and large, pretty good products.”

In the US, Mr. Byrne sees no dramatic change in the long-term trends for tyre manufacturing-merely cyclical differences.

Tied closely to auto production-which domestically he expects will either fall or just remain stable-tyre production won't be experiencing any serious growth.

Meanwhile, Mr. Byrne said one out of every five vehicles produced in the world is from China.

“They are going to export to the US,” he said. “The first couple of years won't be any good for them, then boom, just like the Japanese and Koreans….”

Importation of tyres has a major effect on domestic manufacturing, and it isn't positive, Mr. Byrne said.

“We run a trade deficit in tyres with every country in the world,” he said.

The US tyre market has been impacted heavily by the change in production around the world, but especially from Asia, Mr. Byrne said. But America isn't alone.

“The developed economies have declined, all of them (in regards to tyre production),” he said. In European countries and Japan-production is declining or stagnant, and imports from China/Asia are rising.

Mr. Byrne said in Europe, the European Union is moving on the tyre trade imbalance much more quickly and decisively than the US did.

“The European Union is looking very heavily into what's going on with China.”

The global reality is that “clearly, the tyre industry is moving to China,” he said. “China has the largest domestic auto industry in the world…larger original equipment and replacement sales, it will be the largest producer and consumer of tyres in the world.”

He sees India developing in the tyre field, but that nation has a much smaller economy compared with China's. Mr. Byrne also mentioned Brazil as having a growing economy and expanding tyre industry-representing most of the growth in Latin America.

However, Mr. Byrne doesn't expect major growth in the tyre field in Eastern Europe, which he viewed as a riskier investment.

Where does that leave the US? In a survival mode.

“I think what the America tyre industry is doing is trying to protect what they have,” Mr. Byrne said.

From Tire Business (A Crain publication)