WASHINGTON — As Foreign Tire Sales Inc. struggles to meet its government-ordered recall of 450,000 Chinese-made light truck tires, several U.S. senators want a faster recall and more oversight on Chinese imports.
Experts in both Chinese trade and the tire industry, however, doubt government scrutiny of either tires or Chinese goods will increase long term. They don´t expect a repeat of the Firestone-Ford Explorer controversy, which led to the creation of the Transportation Recall Enhancement, Accountability and Documentation Act.
"In the short run, there will be heightened scrutiny," said Dennis Byrne, professor emeritus of economics at the University of Akron. "However, in the long run the impact will be nil. There are too many Chinese imports into the country, and most are quality products."
The situation is not an industry issue, nor necessarily a Chinese manufacturing issue, said a spokesman for the Rubber Manufacturers Association.
"We seem to have stumbled upon an unanticipated problem with the recall regulations, in which an offshore manufacturer with no U.S. footprint sells a defective tire in the U.S., and the importer claims it´s not financially able to conduct the recall," he said.
FTS moving ahead with recall
Foreign Tire Sales notified the National Highway Traffic Safety Administration on June 11 of potential defects in the tires, and disclosed on July 2 it had filed an amended defect report with NHTSA.
The Union, N.J.-based company said the new report contains a plan to begin recalling the tires made by Hangzhou Zhongce Rubber Co. Ltd. on July 16. Earlier, the importer said it would be hampered in conducting a recall because it had received few registration cards for the tires and Hangzhou ignored repeated requests to give it the U.S. Department of Transportation identification numbers.
FTS originally told NHTSA a recall would bankrupt it, and didn´t propose a remedy. The agency said that was unacceptable, and warned the importer it could face fines of up to $16.4 million if it didn´t follow through with a recall.
Lawrence N. Lavigne, FTS´ attorney, estimated the full cost of the recall at $50 million to $80 million. FTS-which has 13 full-time and three part-time workers-has enough financial assets to recall maybe 10 to 15 percent of the tires, he said.
"We do not (warehouse) tires, and we do not have tires to give people, so under the law we´ve got to buy them," Lavigne said. Because Hangzhou is not cooperating with FTS in the recall, he said, the importer has to negotiate with other companies to supply replacement tires.
According to FTS, the recalled tires were sold between mid-2002 and mid-2006 under the Westlake, Compress and YKS brand names. No specialty tires or bias-ply tires are part of the recall.
At press time, FTS said it would establish an 800 number for the recall.
Focus on China trade
FTS sued Hangzhou May 30 in the U.S. District Court in Newark, N.J., with an amended complaint June 4. FTS seeks unspecified damages against the Chinese company and an injunction against the importation of Hangzhou tires.
Also seeking action are four Democratic senators-Carl Levin and Debbie Stabenow of Michigan, Robert Casey of Pennsylvania, and Sherrod Brown of Ohio. They wrote President Bush June 26 urging him to push NHTSA to expedite the recall and Hangzhou to provide the missing DOT numbers.
"These defective tires are the latest in a string of dangerous products coming from China," the senators wrote. "Chinese companies have too often demonstrated a flagrant disregard for U.S. safety laws. Mr. President, your administration must investigate how all of these dangerous products made it into the U.S. market and make enforcement of these safety laws a top priority."
Sen Charles Schumer (D-N.Y.) on July 1 called for the appointment of an "import czar." This official, he said, would oversee all aspects of import consumer safety, including product inspection, and issue public reports on defects his department uncovered, as well as on difficulties U.S. agencies have in monitoring imports.
Schumer didn´t give details on how he would try to implement this initiative, and members of his staff didn´t return telephone calls.
Economics professor Byrne said most Chinese import tires are made in state-of-the-art factories that are owned or controlled by the world´s major tire makers.
"Politically, this is a good chance for a coalition of folks who are against trade, China, fast track for the president, etc., to make a fuss," he said. "There will be some increased oversight, but it will have almost no long-term effect."
If there is a big impact from the recall controversy, it will be that Chinese tire makers will close or consolidate their smaller plants, according to Byrne. "A shakeout was coming, and this may speed up the process," he said.
One thing the FTS recall points out, the RMA spokesman said, is the necessity of tire importers to have good relations with their suppliers.
"It´s not going to do anyone any good if FTS goes out of business," he said. "It seems a little out of sync not to go back to Hangzhou. It´s not unusual or inappropriate for members of Congress to look at this."
Saul Ludwig, an analyst with KeyBanc Capital Markets, said the Chinese tire market was being shaken not only by the recall but also by the Chinese government´s change in export credits.
"The Chinese got used to getting export tax rebates, but the government reduced the rebate by 8 percent," Ludwig said.
Ludwig agreed with the RMA that the recall should prompt a caveat emptor with U.S. tire importers.
"It alerts dealers to be mindful of both the risks and the opportunities of buying foreign products," he said. "When you buy foreign products, you need to have someone to back them up should you be taken to court. This puts tire importers on notice that they need to know who they´re dealing with."