Think industry regs are bad now? Expect greater challenges, greater impact as TREAD Act 'matures'

By Miles Moore, ERJ staff

Hilton Head, South Carolina.-State and federal regulatory challenges will have an ever-increasing impact on tyre manufacturers and retailers alike in the coming years, according to speakers at the 26th annual Clemson University Tire Industry Conference held April 7-9 in Hilton Head.

Anticipating the impact of government regulation has become crucial for the tyre industry, according to Michael Wischhusen, director of industry standards and government regulation for Michelin North America Inc.

“I started talking about regulation at Clemson when 'regulation' was still a dirty word,” Mr. Wischhusen said. “Now there is a lot of discussion about regulation. This is something that we as an industry have to pay attention to.”

Exhibit A in assessing the impact of regulation on the tyre industry, according to Mr. Wischhusen, remains the Transportation Recall, Enhancement, Accountability and Documentation (TREAD) Act, which was enacted a decade ago this year.

“After 10 years, it's about halfway to being fully implemented,' he said. “If you work in the truck world, your time is coming to have some fun with the TREAD Act.”

Furthermore, the recent safety recalls by Toyota Motor Co. and other auto makers are causing federal legislators to demand a rewrite of the TREAD Act, even before it is fully implemented.

Mr. Wischhusen quoted Sen. Jay Rock¬efeller, D-W.Va., chairman of the Senate Commerce, Science & Transportation Committee, as demanding that auto and tyre industry senior executives be required to certify that the defect information they provide the National Highway Traffic Safety Administration (NHTSA) is 100-percent correct and accurate-on threat of prison time.

Mr. Wischhusen showed his audience a chart detailing the number of voluntary tyre recalls and inconsequential noncompliance petitions by year. In 2000, he noted, there was none; in 2008, there were nearly 20. What happened in 2000, he said, was the TREAD Act.

“How will that chart look for auto recalls five years from now?” he asked.

Tyre age legislation-measuring tyre age either by service life or shelf life-also is rearing its head, with bills pending in New York, California, Hawaii and Florida, according to Mr. Wischhusen.

“What will consumer notification mean to retailers if they have to get signed notification from consumers that we told them the age of every tyre we sell them?” he asked. “And what will tyre age legislation do to inventory management? If tyres can't be sold after reaching a certain age, the last thing you'll want to do is buy tyres and stick them in the back for a few years.”

Tyre age legislation also would create supply chain issues, Mr. Wisch¬husen said. Larger customers may well expect a stock buy-back for tyres they can't sell before the age deadline lapses.

Meanwhile, the new NHTSA tyre fuel-efficiency labeling and consumer information program, mandating tyre ratings for rolling resistance, traction and treadwear, will be a challenge for the industry to implement, Mr. Wischhusen said.

The quality of the tyres themselves is not the problem. “In a very short time, most if not all major manufacturers have developed, produced and are now selling fuel-efficient tyres with good grip and wear characteristics,” he said.

The problem, Mr. Wischhusen continued, lies in what NHTSA eventually will select as the form consumer notification must take.

“There are many proposals on how to present the three ratings,” he said. “If you ignore one, it will come back and bite you.”

In any case, the consumer information rules must be both actionable-in that they aid consumers in their purchasing decisions-and measurable and observable, so that tyres rated differently also perform differently, Mr. Wischhusen said.

“It has to be for the consumer's benefit, not the manufacturer's. Otherwise, confidence in the system is gone.”

Since the inception of fuel-efficiency rulemaking, the Tire Industry Association (TIA) has promoted itself as the logical third-party organisation to administer the consumer information program.

“This is a huge issue for us,” said Roy Littlefield, TIA executive vice president. “This is a program we've got to be very concerned about and very active in developing.”

NHTSA's recommendation to make the purchasing label on a new tyre's tread the medium for listing the new tyre ratings would be a disaster, Mr. Littlefield said.

“A consumer rarely sees a tyre's purchasing label,” he said, “and even if he did, the ratings would pertain only to that particular size and model. For a consumer to compare performance and rolling resistance grades, the retailer would have to retrieve tyres from many tyre makers to let the consumer make a side-by-side comparison.”

Making the ratings available in electronic format at the point of sale, with trained sales personnel readily available to interpret the ratings for customers, would make the ratings system much more accessible, according to Mr. Littlefield.

“We would hate to see another Uniform Tire Quality Grading System (UTQG),” he said.

In general, TIA and its members are alarmed at the current climate of increased regulation, he said.

“We believe the goal of government should not be to supplant private effort, but to help to make it work,” he noted.

Tyre dealers and distributors have been especially hard hit by President Obama's September 2009 order increasing the tariffs on tyres imported from China to 39 percent from 4 percent, Mr. Littlefield said. Those tariffs will decrease to 34 percent the second year and 29 percent the third year before falling back again to 4 percent.

By that time, he said, the damage will have been done.

“China is pursuing a remedy through the World Trade Organisation, but that process will last longer than the tariffs themselves,” he said.

To add a further threat to tyre dealers, the United Steelworkers-which petitioned the Obama administration for punitive action against Chinese tyre makers-now are petitioning to remove tyres imported from Thailand from the Generalised System of Preference, which allows the tyres to get a break on tariffs up to a certain number imported, Mr. Littlefield told Clemson attendees.

From Tire Business (A Crain publication)