HILTON HEAD ISLAND, S.C.—State and federal regulatory challenges will have an ever-increasing impact on tire manufacturers and retailers in the coming years, according to speakers at the 26th annual Clemson University Tire Industry Conference, held April 7-9.
Anticipating the impact of government regulation has become crucial for the tire 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,” 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 tire industry, according to Wischhusen, remains the Transportation Recall, Enhancement, Accountability and Documentation 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 and other auto makers is causing federal legislators to demand a rewrite of the TREAD Act, even before it is fully implemented.
Wischhusen quoted Sen. Jay Rockefeller, D-W.Va., chairman of the Senate Commerce, Science & Transportation Committee, as demanding that auto and tire industry senior executives should be made to certify that the defect information they provide the National Highway Traffic Safety Administration is 100-percent correct and accurate—on pain of prison.
Wischhusen showed his audience a chart detailing the number of voluntary tire recalls and inconsequential noncompliance petitions by year. In 2000, he said, there were 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.
Tire shelf life
Tire age legislation—measuring tire age either by service life or shelf life—also is rearing its head, with bills already introduced in New York, California, Hawaii and Florida, Wischhusen said.
“What will consumer notification mean to retailers if they have to get signed notification from consumers that we told them the age of every tire we sell them?” he said. “And what will tire age legislation do to inventory management? If tires can't be sold after reaching a certain age, the last thing you'll want to do is buy tires and stick them in the back for a few years.”
Tire age legislation would also create supply chain issues, according to Wischhusen. Larger customers may well expect a stock buy-back for tires they can't sell before the age deadline lapses, he said.
Meanwhile, the new NHTSA tire fuel efficiency labeling and consumer information program, mandating tire ratings for rolling resistance, traction and treadwear, will be a challenge for the industry to implement, he said.
The quality of the tires themselves is not the problem, according to Wischhusen. “In a very short time, most if not all major manufacturers have developed, produced and are now selling fuel-efficient tires with good grip and wear characteristics,” he said.
The problem, he said, lies in what NHTSA will eventually 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 tires rated differently also perform differently, Wischhusen said.
“It has to be for the consumer's benefit, not the manufacturer's,” he said. “Otherwise, confidence in the system is gone.”
Since the inception of fuel efficiency rulemaking, the Tire Industry Association has put itself forward as the logical third-party organization 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.”
Dispute on labeling
NHTSA's recommendation to make the purchasing label on a new tire's tread the medium for listing the new tire ratings would be a disaster, according to Littlefield.
“A consumer rarely sees a tire'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 tires from many tire 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 Littlefield.
“We would hate to see another Uniform Tire Quality Grading System,” he said.
In general, TIA and its members are alarmed at the current climate of increased regulation, Littlefield said. “We believe the goal of government should not be to supplant private effort, but to help to make it work.”
Tire dealers and distributors have been especially hard hit by President Obama's September 2009 order increasing the tariffs on tires imported from China to 39 percent from 4 percent, 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. But by that time, he said, the damage will have been done.
“China is pursuing a remedy through the World Trade Organization, but that process will last longer than the tariffs themselves,” he said.
To add a further threat to tire dealers, the United Steelworkers union—which petitioned the Obama administration for punitive action against Chinese tire makers—now is petitioning to remove tires imported from Thailand from the Generalized System of Preference, which allows the tires to get a break on tariffs up to a certain number imported, Littlefield said.