So the Justice Department is investigating possible price-fixing by U.S. tire manufacturers.
It's got to be kidding.
Say what you will about tire makers: Call them greedy, unfeeling and wimps when it comes to big (re: Original Equipment) customers. But price fixers?
Give me a break. If Goodyear, Bridgestone/Firestone, Michelin, Pirelli Armstrong, Cooper and Dunlop are price fixers, they're the Three Stoog-
es (OK, Seven Stooges) of anti-competitive practices.
The goal of price fixing is to act in concert to increase what is charged for a product. Everyone benefits.
That doesn't happen in the tire business, for the simple reason no one holds to the prices they announce.
Take a look at the Producer Price Index, a government-generated document. The PPI shows what percentage increase (or decrease) has occurred in prices. In the June 1994-95 period, tire makers several times announced price increases, varying in the 3-8 percent range each time. Yet the PPI shows only a 2.6-percent actual increase in prices in that period. When it comes to pricing, what tire companies say and what they do are two different things.
Tire makers are just too competitive-way too competitive-to work in concert on pricing. Heck, over-competitiveness is what caused them to catch the Justice Department's eye, anyway.
When one tire manufacturer raises prices, everyone else jumps on the bandwagon. No one wants to be left behind. To a federal watchdog agency, that smells.
Then, typically, one of the ``followers'' comes in with a slightly smaller price increase than the leader, and everyone reaches for the lowest-common denominator, through discounts, temporary price reductions, etc., etc.
And that doesn't take into account the OE factor. The Justice Department is investigating competitive practices with OE customers, too. Tire companies conspiring to fix OE prices? They'd have to get off their knees and ask permission from Big Auto first. If selling below costs to get tires on new cars was illegal, then the Justice Department would have something to investigate.
This sounds like another example of the government showing its lack of knowledge about the tire and rubber industry. Sure, there are only a few tire companies, and they mimic each other in pricing, tire development, management techniques and union-busting tactics.
But conspirators? No way. Sheep is more like it.
Noga is editor of Rubber & Plastics News.