Year in Review: Slowing auto sales define 2019 rubber industry

It's been a nice run for light vehicle sales worldwide since the 2008 recession.

Sales increased in the U.S. from 2009-16 before dipping slightly in 2017, but still holding above 17 million vehicles for four straight years through 2018. That streak could be in jeopardy, as the final U.S. light vehicle sales figure for 2019 could come just above, or below, the 17 million mark.

Flirting with 17 million in light vehicle sales is nothing to mope about. However, Roger Tutterow—a professor of economics at Kennesaw State University—said in his keynote address at the recent Hose Manufacturers Conference that if fleet sales are removed from the automotive numbers, the American consumer probably eased up on purchasing motor vehicles.

And it's not just a U.S. problem. Other global regions are seeing a similar slowdown, particularly in China. And the result has been several restructuring measures taken by suppliers to adjust, making it the No. 1 story of 2019 according to the Rubber & Plastics News editorial staff.

We put together the 10 biggest stories, and looked at major developments within our biggest industries—tire, automotive, medical, non-tire, small manufacturers, suppliers and general.

Join us as we look back at 2019.

1. Automotive adjustments

Two of the rubber industry's biggest automotive suppliers—Continental A.G. and Cooper Standard Automotive Inc.—announced widespread actions to respond to slower global automotive sales.

Conti unveiled its Strategy 2030 plan in September, which includes a plan to cut up to 20,000 jobs by 2029 to prepare itself for future challenges, according to CEO Elmar Degenhart. The move is in addition to its previously executed strategy to divide its operations into three business units—Rubber Technologies, Automotive Technologies and Powertrain, the latter to be called Vitesco and potentially either be put through an initial public offering or spun off.

The plan also includes ending production of truck tires at its Petaling Jaya, Malaysia, factory by the end of 2019, but also includes further investments in its tire division aimed at trying to become a top-three global producer. It currently is the fourth-largest tire maker behind Bridgestone, Michelin and Goodyear, respectively.

Five other closures throughout its businesses were disclosed, impacting upwards of 2,500 jobs throughout the scope of the plan.

Cooper Standard in November unveiled its intention to shut down 10 facilities and realign its global leadership team. Two executives will depart the firm by mid-2020, with five more also leaving during that span. Six of the impacted facilities are in Asia—five of those in China—three in the U.S. and one in Europe. The five in China will be mothballed to keep the firm in position for a Chinese automotive industry rebound, while the U.S. and Europe-based sites will be closed.

With two of the industry's leading suppliers bracing for changing automotive times, it's fair to say that 2020 looks a little more uncertain for the rubber industry's largest end-market.

2. Labor fights

It certainly didn't help that the automotive industry experienced a significant labor stoppage at one of the world's largest auto makers.

The United Auto Workers took up a strike against General Motors that lasted almost six weeks. And while the two sides ultimately came to a new labor agreement, suppliers throughout the industry felt damage. Cooper Standard reported a $26 million negative impact in the third quarter, part of which was caused by the UAW's strike. Other suppliers partially or fully shut down operations as the strike dragged on.

GM said the strike cost it nearly $3 billion, but the new labor pact allowed the firm to preserve the manufacturing flexibility needed as the automotive market transitions to electric vehicles.

Negotiations with Ford Motor Co. were smoother, reaching a similarly structured deal without a labor stoppage. The UAW and Fiat-Chrysler Automobiles reached a tentative agreement based on the pattern, but rank-and-file members hadn't finished voting as of press time.

While the GM strike was the biggest, it wasn't the only labor news within the rubber industry. The United Steelworkers union had a busy 2019 on the tire front. Agreements were ratified at two Cooper Tire facilities early in the year and at two Michelin/BFGoodrich sites in August. And the union could be on the verge of organizing its first U.S.-based tire manufacturing plant in decades if the recently-held vote at Kumho's Macon, Ga., plant is upheld.

Finally, the USW transitioned into new leadership as International Secretary Treasurer Stan Johnson—also chair of the Rubber & Plastics Industry Council—and International President Leo Gerard retired in the summer.

3. Trade War drags on

Our top story in 2018 still made an impact in 2019 as the U.S. and China continued their posturing over duties without much resolution.

The two countries traded jabs throughout the year, culminating in China adding a new round of tariffs ranging from 5-10 percent on some $75 billion worth of U.S. goods on Aug. 23. The U.S. responded by increasing its existing or pending tariffs on about $550 billion worth of goods imported from China by 5 percent. Existing 25 percent tariffs would rise to 30 percent effective Oct. 1 and the 10 percent tariffs would increase to 15 percent on Sept. 1.

Most trade associations have been against the tariffs, rather hoping that the two countries will come together and reach an agreement that will bring some certainty to the industry. Tutterow said in his keynote address that he believes the Trade War is weighing on the corporate sector, making companies hesitant to commit to long-term capital investments.

Mexico and Canada got some relief, though, as President Trump lifted the previously placed steel tariffs on the respective nations earlier in the year. The trio came to a new deal—the U.S.-Mexico-Canada trade pact designed to replace the North American Free Trade Agreement—in late 2018 that Congress is in the process of approving.

4. Suspended tire investments

In 2018, tire makers continued to flood the U.S. market with investments for new tire plants. Several of those plans were put on hold in 2019.

Balkrishna Industries Ltd., citing "business uncertainties" and "volatile climate conditions," suspended its plans for a $100 million plant at an undisclosed U.S. site. The plant would have been the firm's fifth globally and the first outside of India.

BKT wasn't the only one to get cold feet. Qingdao Sentury Tire Co. Ltd. indefinitely put on hold plans to build a U.S. truck tire plant. The move, disclosed in September 2016, would have entailed a $530 million investment to build a plant in Troup County, Ga., with production capacity for 12 million car and light truck tires per year. It would have employed up to 1,000 at full capacity.

Overall, global capital spending on new capacities among tire makers decreased to roughly $3.5 billion. However, that figure still includes plans for seven greenfield facilities.

5. Silicone fire

Waukegan, Ill.-based AB Specialty Silicones went through a disaster in 2019 when a May 3 explosion killed four employees—Byron Biehn, 53; Allen Stevens, 29; Jeff Cummings, 57; and Daniel Nicklas, 24.

The cause of the fire has not been determined by the Waukegan Fire Department while private investigators and the U.S. Chemical Safety and Hazard Investigation Board continue their investigation.

In November, the Occupational Safety and Health Administration proposed a fine of nearly $1.6 million against AB Specialty Silicones, alleging willful safety violations connected with the explosion and subsequent fire.

AB also is facing a lawsuit from the Illinois Attorney General's Office seeking payment for cleanup of contaminants released into the soil, water and air from the fire, and efforts to extinguish it.

6. Parker buys Lord

Lord Corp. found itself a new home shortly after it hit the $1 billion sales mark.

The firm was sold to Parker-Hannifin in May for $3.68 billion in cash, giving the non-tire giant a boost in several core industries. The additional business is projected to drive Parker's overall sales up to $15.3 billion.

Lord brings Parker a strong presence in adhesives, coating science, thermal management, vibration isolation and passive/active damping solutions. Lord aims to benefit from Parker's cockpit controls, sealing technologies, EMI/RFI shielding and thermoplastics areas. Both are already strong in the elastomers arena.

Parker-Hannifin ranks ninth among the global Top 50 non-tire rubber product manufacturers with about $2.86 billion in sales to non-tire rubber-related activities. Lord ranked 50th on the same list with about $515 million in qualified sales.

7. The fourth revolution

Many companies are taking steps in developing and adapting Manufacturing 4.0 concepts, especially on the machinery side.

Smart manufacturing combines automation and robotics with the introduction of artificial intelligence, data technologies and cloud computing. In essence, the factory runs itself.

That's a big dream, but some companies are moving toward making it a reality.

HF Mixing Group disclosed a couple of strategic investments to prepare itself for a smart manufacturing future with the addition of Minnesota-based Mesabi Control Engineering Ltd. The firm provides automation systems and software, and HF intends to double its size from about $5 million to about $12.5 million in revenue through 2023.

Troester GmbH & Co. K.G. is taking some of the automation technology used in its plastics subsidiary X-Compound GmbH and applying it to the rubber side of its business, specifically in the tire arena.

And multiple firms—including Cooper Standard and Hankook—are using artificial intelligence to rapidly produce new compounds.

These are just a few of the Manufacturing 4.0 concepts being adapted throughout the industry. And as technology evolves, there certainly will be more developments.

8. Sustainability focus

Companies worldwide are feeling pressure from multiple fronts to become more sustainable, and now the rubber industry is reacting accordingly.

While natural rubber sustainability is still in its infancy, major OEMs like GM, Ford and Toyota; tire makers like Bridgestone, Michelin and Goodyear; and many other stakeholders have come together to form the Global Platform for Sustainable Natural Rubber.

The council just held its first general assembly in March and consists of representatives from nearly 40 organizations throughout the industry, which also includes NR producers, processors, traders, affiliate members and non-government organizations.

The forum has a tall task ahead of it, as the NR supply chain is highly complex, but the industry has the right people at the table to begin tackling these issues and develop a road map toward sustainability.

9. Hexpol, Preferred join forces

Hexpol A.B. has been quite busy on the acquisition front, and 2019 was no exception.

In fact, one could argue it made its biggest splash in July when it reached a deal to acquire Preferred Compounding, combining North America's two largest custom mixers in a deal worth $232 million.

The deal has added significance because Preferred itself had been active on the acquisition trail of late. Backed by private equity firm Audax Group, Preferred had acquired Trostel Ltd., another strong North American custom mixer, at the end of 2016, and Valley Rubber Mixing earlier in 2019.

10. A new era

Ed Miller's 19-year tenure as executive director will come to an end in mid-January.

The ACS Rubber Division named Lakisha Miller-Barclay his successor. She will become the association's second executive director in its history and currently is the director of finance and administration.

Miller and Miller-Barclay began the transition in the fall, using October's International Elastomer Conference in Cleveland as a platform to connect with members. She's been with the Rubber Division since 2007 and has held various roles.