CLEVELAND—The heavy tariffs levied on tire imports from China gave the U.S. tire industry a three-year window to get itself competitive, and that has caused an uptick in investment in domestic plants and equipment, according to a retired University of Akron professor.
“Because at the end of the three years, they have to get back out there and play the game,” said Dennis Byrne, UA professor emer- itus of economics, in a speech at ITEC in Cleveland Sept. 22.
The problem for the United Steelworkers—which in- itiated the action that resulted in a huge increase in duties that pretty much ended importation of Chinese-made consumer tires in the U.S.—is much of the new technology is labor-saving, Byrne said. “That means we're still seeing falling employment in the industry.”
It's no picnic for suppliers to the tire manufacturers either, Byrne said.
“You're going to see tremendous pressure put on suppliers to come up with new and better ways to do things,” he said, while reducing costs for tire manufacturers.
Byrne said he doesn't know if three years are enough to allow domestic manufacturing to get on firm footing in the global market. “Certainly, it appears the U.S. is playing one trade game, and everyone else is playing another,” he said.
In praise of tires
Byrne views tires as a special type of product.
“Tires are a truly amazing product, technologically sophisticated,” he said. “When I was a kid the average car used 24 tires per lifetime. Today the average car uses something like 6½.”
Bryne said tires today can have treadwear guarantees of up to 100,000 miles, and there is extensive research and development occurring at all times.
“The problem with tires is that any country can produce one. All you have to do is take it apart and see what (the manufacturer) did. If you're not worried about things like patents, you can actually find out.”
Any technologically advanced society can produce tires, “so you see tires made in places you really wouldn't expect them, and, by and large, pretty good products.”
In the U.S., Byrne sees no dramatic change in the long-term trends for tire manufacturing, merely cyclical differences. Tied closely to auto production, which domestically he expects will either fall or just remain stable, tire production won't be showing any serious growth.
Meanwhile, Byrne said one out of every five vehicles produced in the world is from China.
“They are going to export to the U.S.,” he said. “The first couple of years won't be any good for them, then boom, just like the Japanese and Koreans.”
Impact of tire imports
Importation of tires has a major effect on domestic manufacturing, and it isn't positive, Byrne said.
“We run a trade deficit in tires with every country in the world,” he said.
The U.S. tire market has been heavily impacted by the change in production around the world, but especially from Asia, Byrne said. But America isn't alone.
“The developed economies have declined, all of them (in regards to tire production),” he said. In European countries and Japan—production is declining or stagnant, and imports from China/-Asia are rising.
Byrne said in Europe, the European Union is moving on the tire trade imbalance much more quickly and decisively than the U.S. did.
“The European Union is looking very heavily into what's going on with China.”
The global reality is that “clearly, the tire industry is moving to China,” Byrne said. “China has the largest domestic auto industry in the world … larger original equipment and replacement sales, it will be the largest producer and consumer of tires in the world.”
He sees India developing in the tire field, but that nation has a much smaller economy compared to China. Byrne also mentioned Brazil as a growing economy and expanding tire industry, and representing most of the growth in Latin America.
Byrne doesn't expect major growth in the tire field in Eastern Europe, which he viewed as a riskier investment.
Where does that leave the U.S.? In a survival mode.
“I think what the America tire industry is doing is trying to protect what they have,” Byrne said.