Rubber industry associations optimistic about Biden's infrastructure plan

Fixing it is half the battle.

That's why, when it comes to America's infrastructure, the Biden administration is taking a broad approach.

President Biden is calling for investments that not only repair critical components for transportation, water and energy, but modernize and reinforce those areas as well. Doing so, he claims, better prepares the U.S. for next-generation, energy-efficient technology and addresses vulnerabilities exposed by climate change as well racial and socio-economic inequities.

The administration also is betting that these investments lead to job creation, and that is why the $2 trillion infrastructure proposal set forth by Biden is dubbed the American Jobs Plan. It's not only an investment in the infrastructure around roads and bridges, homes and businesses, electrical grids and water systems—it's also an investment in manufacturing, job training and education.

Although it's labeled as a "jobs" plan, the proposal is, at its core, an infrastructure proposal. And, according to the administration, America's infrastructure is long overdue for a hearty investment.

"After decades of disinvestment, our roads, bridges, and water systems are crumbling. Our electric grid is vulnerable to catastrophic outages," the White House said in a statement issued March 31. "Too many lack access to affordable, high-speed Internet and to quality housing."

The National Association of Manufacturers, in "Building to Win," an infrastructure plan it released in 2019, cited a PricewaterhouseCoopers finding that a $1 trillion infrastructure investment could lead to 11 million jobs created.

"The President's proposal for historic levels of infrastructure investment reflects many of the investment priorities in the NAM's 'Building to Win' plan, and we look forward to reviewing the details," NAM said in a statement. "President Biden's clear focus on strengthening manufacturing and the work force of the future shows that he is truly committed to building the next post-pandemic world—one that is stronger and more resilient than in pre-pandemic times."

Making the grade

The American Society of Civil Engineers knows well the state of U.S. infrastructure, offering quadrennial assessments of key facets such as roads, bridges, railways and energy grids. The latest report card, issued in February, examines the state of 17 separate areas across transportation, energy and public services.

Overall, the ASCE gave U.S. infrastructure a C-.

Eleven of the 17 evaluated categories received D ratings: aviation, dams, hazardous waste, inland waterways, levees, public parks, roads, schools, stormwater, transit and wastewater.

Bridges, drinking water, energy and solid waste received grades in the C range, while rail and ports received grades of B and B-, respectively.

"This is not a report card anyone would be proud to take home," ASCE Executive Director Thomas Smith said in a statement. "We have not made significant enough investments to maintain infrastructure that, in some cases, was built more than 50 years ago.

"As this study shows, we risk significant economic losses, higher costs to consumers, businesses and manufacturers—and our quality of life—if we don't act urgently," Smith added. "When we fail to invest in infrastructure, we pay the price."

The ASCE contends that price comes in the form of job losses and out-of-pocket costs. Without urgent action, ASCE estimates that 3 million jobs could be lost by 2039 and that American households, on average, will bear $3,300 in hidden costs per year.

"If the U.S. does not pay its overdue infrastructure bill," the ASCE said in a statement, "by 2039 the U.S. economy will lose $10 trillion in growth, and exports will decline by $2.4 trillion."

Should the plan take shape, especially in the broad context it has been proposed, the Biden administration believes there could be job growth.

There also should be opportunities for companies throughout the rubber industry.

Moving quickly

If Ann Wilson had to guess, she'd say those opportunities will come sooner rather than later.

With Democrats controlling both chambers of Congress and showing a willingness to use a procedure to pass measures with a simple majority, Wilson, senior vice president of government affairs for the Motor & Equipment Manufacturers Association, expects House Majority Leader Nancy Pelosi to get something passed by July 4.

And from where she stands, moving quickly on infrastructure isn't a problem.

"First and foremost, infrastructure bills help all of us who are in transportation," Wilson said. "To have a solid infrastructure system in this country is a necessity for everybody who is involved in the vehicle industry. That's first and foremost."

Anne Forristall Luke, CEO of the U.S. Tire Manufacturers Association, said the tire industry also welcomes an ambitious approach to improving infrastructure. After all, hundreds of millions of tires roll along the nation's roads every day. Each touchpoint proves the importance of upgrading and maintaining America's infrastructure.

"It's beyond question that the U.S. transportation infrastructure system … is woefully in need of upgrade and modernization," Luke said. "We are very excited that the Biden administration is taking a bold approach and is passionately committed to infrastructure investment as a driver of economic growth."

The USTMA also is hopeful of the role that used tires could play as the plan takes shape and pointed to rubberized asphalt as one opportunity. This mixture of asphalt and used tires not only helps to recycle tires, it extends the life of roadways compared with the use of traditional asphalt, according to the USTMA.

The infrastructure proposal also resonated with the United Steelworkers union, which represents thousands of workers at nine consumer tire factories operated by Cooper Tire & Rubber Co., Goodyear, Kumho Tire USA Inc., Michelin North America Inc., Sumitomo Rubber North America and Yokohama Tire Corp.

"A large-scale investment is certainly long overdue, but more importantly President Biden has made it clear that he, like our union, takes an expansive view of infrastructure," a statement from the USW said. "… Aggressive investment coupled with strong Buy American provisions will create long-term economic resiliency, strengthening our domestic supply chains and providing a secure economic base for generations to come."

While Luke is optimistic about the plan that has been presented, unlike Wilson, she's not convinced that it will get passed quickly.

She's also not sure which parts of the proposal will survive the rigorous debates.

"There's obviously a lot of road to travel—pardon the pun—in moving from the Biden administration's proposal to the various Congressional proposals that will come out," Luke said. "There's a long way to go here."

In the plan presented in late March, Biden proposed a $621 billion investment in transportation infrastructure and resilience. That includes $115 billion to modernize bridges, highways and roadways.

But it's not just roads and bridges that are targeted for upgrades. Biden is proposing investments of $85 billion, $80 billion and $25 billion for transit systems, railways and airports, respectively.

He's also suggesting $20 billion be set aside to address road safety and is pushing for a $50 billion investment to address the infrastructure vulnerabilities that have arisen with climate change.

Wilson, in particular, was encouraged by the focus on investments that address technological and safety vulnerabilities.

"I think the other thing we have to keep in mind when it deals with either safety or climate: Our members—component manufacturers—operate in a global climate," Wilson said. "For us to have a clear path forward on technology as well as climate technology allows our members to know where they need to invest, what they need to invest in and what the expectations of regulators are in this country.

"But having said that, I think it's really important to realize this industry is in a transformational state."

Beyond transportation

The auto industry isn't alone in its excitement for a potential—and significant—infrastructure investment. Molly Mullins, NAHAD executive vice president, said the hose industry is optimistic as well.

"I think anytime you hear a new administration prioritize infrastructure it creates optimism and excitement that manufacturing and related businesses will see a boost," Mullins said. "The domestic hose industry is no different, and we see ourselves playing a critical role in the Build Back Better Plan."

NAHAD businesses, she said, are ready to step up when called. They proved their ability to rise to the greatest challenges during the COVID-19 pandemic, and they are poised to do the same with infrastructure projects.

"Our membership has continued to work throughout the entire pandemic, providing critical support to drive industry and infrastructure forward," Mullins added. "Our manufacturers and distributors will keep doing what they do best and are a critical piece of multiple components of this infrastructure plan."

The Biden plan proposes a $650 billion investment in infrastructure that improves the quality of life at home. This portion of the bill focuses on goals such as retrofitting homes and businesses for energy efficiency ($213 billion), expanding broadband internet access ($100 billion), rebuilding and upgrading infrastructure for drinking water and wastewater ($111 billion) and upgrading the electric grid ($100 billion).

Luke believes used tires can play a role in helping with infrastructure projects like these. They aren't, after all, just for asphalt.

Recycled tires can be used in retaining walls, slope stabilization and fill. The USTMA and its members are particularly interested in the use of tires to create this type of sustainable infrastructure that also can include stormwater infiltration galleries and bioswales.

"Those are things that we see as tremendous both from a sustainability and environmental stewardship perspective," she said. "Those are areas where we both have the opportunity to grow sustainable markets for scrap tires and also have a very positive impact on the environment and on the development of the highway of the future."

Investing in jobs

Investments in job training, education, research and development, and manufacturing are built into Biden's plan as well. The proposal, for instance, calls for $180 billion in strategic R&D investments that help firm up the U.S.' leadership in key technological areas such as artificial intelligence, biotechnology and computing.

"President Biden is calling on Congress to make smart investments in research and development, manufacturing and regional economic development and in work force development to give our workers and companies the tools and training they need to compete on the global stage," a White House statement read.

While Mullins is encouraged by parts of these investments, she remains skeptical about others.

Job training certainly is needed, she said, but the key will be understanding where that funding is best utilized. NAHAD intends to play a critical role in ensuring that the work force is ready to meet the industry's changing needs.

"Hiring and retaining a competent work force is the number one challenge most of our members face, regardless of which sector of the industry they serve. Recent reports state job openings hit a two-year high in February, and competition is fierce," Mullins said. "The plan's focus on training is a good one, but I also believe it is up to companies individually to provide training services for their own work force."

Then, she said, there's the part of the proposal that involves paying for it.

The infrastructure proposal includes changes to the tax plan, moves the administration said could raise $2 trillion in the next 15 years, enough to nearly cover the entire infrastructure proposal.

"The challenges are always in the details," Mullins said, "and one of the primary concerns that we've seen is the potential for a tax increase on our members."

According to a statement issued by the White House, Biden's plan would set the corporate tax rate at 28 percent, raising it from where it is today, but keeping it below where it was in the 1980s. The plan also would change the tax code to discourage offshoring by U.S. companies and close some loopholes that help to lower corporate taxes.

Mullins contends that now is not the time to raise taxes, especially as companies are rebuilding in the wake of a difficult year.

"The global pandemic has created real hurdles and has been a threat to many of our member businesses," Mullins said. "I think throwing a tax increase on the heels of the economic cost of the pandemic is troubling."

NAM agrees.

"Raising taxes on manufacturers would fundamentally undermine our ability to lead this recovery," the association said.

NAM contends that other revenue sources would be better suited to support the infrastructure projects proposed.

In its "Building to Win" plan, the association proposed gas taxes, vehicle miles traveled fees, registration fees, passenger facilities charges and harbor maintenance taxes as potential revenue sources for infrastructure investments.

"Let's keep moving forward and not turn back the clock to the archaic tax policies that gave other countries an advantage over America," NAM said.