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Posted on 08/09/2006 8:54:06 AM PDT by Incorrigible
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China's Prices Undercut U.S. Tire Makers, Causing Plant ClosingsBY THOMAS W. GERDEL |
[Massillon, OH] -- Rapidly rising imports of tires, especially from China, are increasing pressure on American tire makers to close more plants and cut domestic production.
Passenger-tire imports, which have been steadily increasing every year this decade, topped the 100 million mark in 2005, with Chinese imports up 47 percent from 2004. And while imports have climbed 38 percent since 2000, U.S. tire output has been steadily decreasing year by year.
The trend is expected to continue, given the low cost of tires made in China and tire-making costs in the United States, said Saul Ludwig, an analyst at KeyBanc Capital Markets in Cleveland.
"Imported tires, particularly from China, are much lower cost than imports from any place else," Ludwig said.
Passenger tires imported from China last year had an average cost of $25.23, while a passenger tire from Canada cost $38.67, a tire from South Korea $37.58 and one from Japan $48.29.
Ludwig said that nearly all these imports are going to the replacement tire market, with very few sold to domestic automakers for equipping new cars.
This import trend hovers over contract negotiations between the United Steelworkers union and major domestic tire makers including Goodyear Tire & Rubber Co., Bridgestone-Firestone and B.F. Goodrich, which is part of Michelin of France. Companies want to cut costs, while the union seeks to preserve wages and benefits, and prevent further erosion of production and jobs.
Passenger tire production in the United States has fallen from 223 million tires in 2000 to 176 million in 2005, a drop of 21 percent, Ludwig said. The union is facing another round of plant shutdowns, due partly to the rising imports and a sluggish tire market.
While tire import levels held steady for the first six months of 2006, industry sales of passenger and light-truck tires fell about 7 percent. Industry observers said consumers are postponing replacing tires as they struggle to pay higher gasoline prices.
At the same time, Goodyear and other tire manufacturers have been raising prices to cover the soaring costs of oil and other raw materials.
The 7 percent drop is highly unusual for the North American replacement market. Robert Keegan, chairman and chief executive officer of Goodyear Tire & Rubber Co., said the market has been down by 3 percent or more only in four of the last 50 years. Keegan said consumers are buying fewer tires per store visit and driving fewer miles per vehicle. He also said technicians are noticing less tread depth remaining on tires being removed from cars.
Announced or potential closings include:
Continental Tire will halt production indefinitely at its plant in Charlotte, N.C., ending jobs for most of the 1,000 union workers there. The German company also said it was shutting down the remaining operations at its tire plant in Mayfield, Ky. -- a factory that once employed 2,400.
In June, B.F. Goodrich said it would cut output 30 percent to 40 percent at its Opelika, Ala., plant, which has the capacity to make 8 million tires a year.
Bridgestone-Firestone has said it will close its Oklahoma City tire plant by the end of this year. It said the plant, which employs about 1,200 hourly workers, is not competitive in the global marketplace and is suffering from substantial losses.
The industry is bracing for another potential shutdown as Goodyear follows up on its recently announced plans to reduce its private-label tire business in North America by a third, or by about 8 million tires annually.
Ludwig said he would not be surprised to see additional closings, "one for sure, maybe two," as the production cuts are made.
Private-label tires -- which are made in major tire plants such as Goodyear's but sold under a different name -- appeal to price-oriented consumers, and sellers are using low-cost imports to offer greater value to consumers than if they bought domestically produced tires.
In addition, Cooper Tire & Rubber Co. has shifted manufacture of medium truck tires from its Albany, Ga., plant to China. Cooper, which is the fourth-largest tire producer in North America, soon will start up a plant in China that will be owned by Cooper and Kenda Rubber Industrial Co. of Taiwan. The plant is expected to eventually produce 10 million to 12 million tires a year, all for export to other countries for the first five years it operates.
To keep jobs in this country, the United Steelworkers union is pinning its hopes on the growing consumer demand for larger and more specialty-type tires -- the higher-margin kind used in SUVs and other high-performance vehicles, as well as tires built from specialty materials for added safety, a more comfortable ride, increased vehicle stability, fuel economy and other features that help persuade consumers to pay more money.
"We don't want them to take this high-value work out of the country," said Wayne Ranick, a spokesman for the United Steelworkers.
The union is urging the tire companies to spend more on automated equipment for faster changeover of production, so plants can more efficiently produce a wider range of sizes and premium-priced tires.
When the old United Rubber Workers merged with the United Steelworkers of America a decade ago, the union had more than 98,000 rubber workers, but now it has less than a third of that number -- about 30,000 -- who work in tire and rubber plants in the United States.
With tire factory wages in the United States around $22 an hour, versus 73 cents an hour in China, KeyBanc Capital Markets' Ludwig does not see much chance that the rapid growth of tire imports from China will end soon.
The gap could be narrowed eventually if the pace of industrialization in China forces wages up there or if China raises the value of its currency. In the meantime, imports will continue to be a major challenge for domestic tire plants.
"The gap has to be closed," Ludwig said, "whether their costs go up or our costs go down."
Aug. 8, 2006(Thomas W. Gerdel is a reporter for The Plain Dealer of Cleveland. He can be contacted at tgerdel@plaind.com.)
Not for commercial use. For educational and discussion purposes only.
hehehehehehehehehehehehehehehehehe
bttt
Is that why our real per-capita income and productivity continue to increase? In your world of darkness, the US wouldn't be a world leader in just about every area of technology; but we are. We also wouldn't be the engine for the world economy; yet we are. I still don't understand why you continue to try and equate the freedom to trade with illegal immigration. No rational person buys into that lame association.
Whoa! You mean I pulled a hedgetrimmer?
I'd be happy just to get the number of years the chart covers right for once on the thread. LOL
LOL
Did you check out her link?
The Japanese company, with North American headquarters in Nashville, Tenn., said it had not been served with the lawsuit, but said the claims were "completely without merit.' Bridgestone Firestone North American Tire is a unit of Bridgestone Corp.
She's right, can't trust them foreigners. LOL!
Apart from all that, I'm willing to let the court case play out . . . I'm reluctant to treat allegations as proof.
Yes. On paper. And that doubling you talk about is manifestly paper inflated valuations.
The evidence is in our shriveling industrial capability which is again masked by inflation and double book-keeping.
Ask yourself, what can we actually make with that paper if, over time, we have dismantled the factories that were the basis for the accumulation of that paper...relocating them and their critical tooling to China. And our own ability to maintain our weapons is now at risk, as even the talent pool has been allowed to dissipate...without indigenous U.S. replacement of a new and capable generation being trained and allowed to step up, as reported by the Defense Sciences Board last year.
And our own energy resources are held captive to Enviro-NAZIs running the U.S. Senate, and the States of California and Florida in particular.
There is a game of economic musical chairs being played, and the Giant U.S. "Gulliver" is being tied down by Lillipution phoney "Free Traders" and Chi-Comm Agents, Dupes and Fellow Travellers for no good end.
And it isn't like something like this hasn't happened before. It happened to England. No ifs, and no buts. It happened to England. They tried to pull out of their industrial tail-spin during WW-I but found in many industries it was just too late, and industrial re-constitution just could not be successfully achieved.
The other issue with all the manufacturing plants offsoring is there isn't any EPA in these countries. The environmental laws cripple manufacturing in this country.
Not if they aren't accepted. This too has happened in countries before. The Bannan Republics could no longer issue their own debts...and had to buy European and U.S. debt monetized in their home currencies. Hence, after a crash, the ongoing continuing debt operation will no longer be able to be monetized in dollars for the fresh capital the phoney free traders keep insisting we need to be borrowing.
You just like to hear yourself talk, don't you? You never add any information to the discussion. At least no correct information.
Excuse me, but this sounds like you talking about yourself, as usual. Pretty bad case of "projection", Todd. You need help.
So according to your own charge from '94 to '04 wages went up less than a dollar an hour in ten years...and yet the costs of most everything such as houses and food has easily more than doubled...
Feel free to post price inflation figures for the same period.
Of course dollars will be accepted for dollar debt. You really shouldn't try to post about markets or economics. Your ignorance is just too obvious.
Pretty bad case of "projection", Todd.
All of your "facts". All of your reasonings. All brought to nought.
China isn't doing this to deliberately depress their currency against the dollar, but to prop it up. China's economy is so backward that the yuan is a worthless currency on the world market except for the fact that it has a defined relationship with a stable currency like the U.S. dollar. Most people believe that the yuan would rise in value against the dollar if it were de-linked from the dollar, but it would probably collapse instead.
I believe your view is a delusory-construct...one that is counterfactual... to maintain your continued dogmatic indifference to the need to respond intelligently to China's manipulations.
Silmilar degree of doctrinaire intransigence prevented England from correcting its dogma in the face of reality...untill too late, until finally WW-I forced them to try and rebuild their industry.
The facts are that China spends US$195b to maintain yuan peg That is $195 Billion each year to manipulate the currency DOWN. Not prop it up. Hence it is accumulating massive trade surplusses and foreign currency account surplusses.
If they were trying to prop it up, they wouldn't have either of those surplusses.
Nope.
You really shouldn't try to post about markets or economics. Your ignorance is just too obvious.
Projecting again, Todd.
Especially when you say this: All of your "facts". All of your reasonings. All brought to nought.
Indeed, you have been confounded...and mostly by your own side. Your economic ignorance of Bananna Republics, or England's free trade historical experience, as prehistory and example shows that you have never been a serious student.
Indeed, but not the way you think... phoney free traders = Mother Lode of Economic Ignorance.
Our real household net worth in 1945 was $6 trillion. Today it's $54 trillion. Is that increase all paper inflated wealth too? LOL You have a real talent for tunnel-vision.
The evidence is in our shriveling industrial capability
Because we manufacture more now than at any other time in our history?
which is again masked by inflation and double book-keeping.
You believe inflation is higher than what's being reported?
..the Giant U.S. "Gulliver" is being tied down by Lillipution phoney "Free Traders" and Chi-Comm Agents, Dupes and Fellow Travellers for no good end.
The free traders continue to wait for all these negative consequences to manifest themselves somewhere in our economy. No sign yet, but we're a patient bunch. Our military strength is predicated on our economic strength. How hurting the latter will help the former remains a mystery.
It happened to England. No ifs, and no buts. It happened to England. They tried to pull out of their industrial tail-spin during WW-I but found in many industries it was just too late, and industrial re-constitution just could not be successfully achieved.
England's economic tailspin was caused by the very protectionism you're advocating. If we've learned anything from history we'll run fast and far from your suggested remedies.
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