TIA, USTMA see infrastructure, environment on Washington agenda

WASHINGTON—With the potential of the country coming out of the COVID-19 crisis sometime in 2021 thanks to vaccines, the business of Washington could start to look more like normal in the coming year.

And that business could impact the tire industry in a variety of ways.

For most of 2020, Democrats and Republicans were locked in a debate over the need for additional COVID-19 relief that eventually came in late December.

President Joe Biden, who took office Jan. 20, has signaled that infrastructure spending will be on the new administration's agenda.

What historically has been a bipartisan effort to pass infrastructure spending ended up stalling under President Donald Trump, said Roy Littlefield, executive director of the Tire Industry Association.

"Biden wants to come in and pass an infrastructure funding bill, and we certainly support infrastructure spending and the work and jobs it brings to the industry," Littlefield said. "But we have to be careful.

"What's happening with the Highway Trust Fund is that more and more percentage of that money is going to mass transit and less and less to roads and bridges."

It's not uncommon for governments to raid dedicated funds to pay for something completely unrelated. Think Social Security on the national level or recycling accounts on the local level, for example.

With 28 percent of the Highway Trust Fund now being diverted to mass transit, Littlefield is worried the tire and automotive repair segments could be seen as easy marks to raise more money needed to pay for the infrastructure work.

Such funding comes from a variety of sources, including fuel and truck tire excise taxes. Passenger tire excise taxes were once in place but done away with in 1982.

Littlefield said he sees the potential for renewed interest in a passenger tire excise tax as a way to raise money, and that's something his group opposes. There also is a concern about the potential to raise taxes even higher on truck tires and truck parts to help cover infrastructure costs.

"It's one of those things that it's really important to the country and it's really important to the industry to have an infrastructure bill, so we want that," he said about the overall idea of a renewed infrastructure program.

But not at TIA members' added expense.

A key concern among TIA members, Littlefield said, is the possibility that the federal government will do away with the last-in, first-out accounting method for inventory. Known as LIFO, this method results in lower tax liabilities for companies compared with the first-in, first-out inventory approach.

A recent survey of larger members of TIA indicates ending LIFO easily could cost each business millions of dollars in one-time federal tax liabilities as a result of the accounting change, Littlefield said.

"The problem is you have been using LIFO and doing it legitimately through the years, why should you get penalized now because that one-time tax would be really big," he said.

USTMA expectations

While TIA represents many across the tire industry and includes thousands of members, the U.S. Tire Manufacturers Association is a much more narrow group. With 13 members operating manufacturing plants in 17 states, the USTMA represents companies making tires on U.S. soil.

As CEO of USTMA, Anne Forristall Luke knows the first half of 2021 still brings lots of questions as the county is expected to roll out a vaccine program for COVID-19. But the industry, she said, is heading into the year with momentum.

"As you know, in '20 we had unprecedented economic challenges in our industry," Luke said. "Our tire production dropped in the first quarter by 90 percent in the wake of factory shutdowns and the global manufacturing shutdown. Those are figures that were never before seen and I hope never seen again.

"There's been a great comeback starting in the second quarter and over this summer. We're looking to continued recovery in 2021."

Despite the expectation of a rebound, Luke said 2021 still brings uncertainty as the country awaits the impending vaccine rollout. The first two quarters of next year will remain challenging, and beyond that there is difficulty making firm forecasts.

"In conversations with leaders of my member companies, I think we all recognize there's still going to be a lot of uncertainty in the first two quarters of next year," Luke said.

"I think a lot rides on vaccine distribution. I also think a lot rides on the ability of the Biden administration to work with Congress to get a comprehensive economic stimulus over the finish line after inauguration," she said.

USTMA sees both challenges and opportunities in some key areas heading into 2021, Luke said.

"One is economic recovery and growth. The next would probably be modernizing the regulatory framework around tire performance and safety, given all the technology changes that are coming in the transportation sector," she said.

Both electric vehicles and autonomous vehicles have different tire needs when compared with traditional vehicles.

Environmental stewardship and sustainability are other important matters in the coming years, she said.

"We need to take a really long-game approach and reflect upon the place our industry has in society and the positive impact we can have on society through the prism of those major transformational forces. We're taking a very big picture view," Luke said.

Living through 2020 actually will provide some tangible benefits for companies that have adapted and responded to the crisis.

"In my career, I have rarely if ever seen a confluence of people coming together to build a better future under these kinds of circumstances. Looking back on 2020, I see a lot of silver linings in terms of business response, adaptability, worker protection, changing business models in response to rapidly changing economic conditions," she said. "Coming in to 2021, all of that positions us to be successful while navigating these transformational forces."

The country's approach to climate policy also is expected to shift under Biden's leadership.

In addition to rejoining the Paris Climate Agreement, Biden appointed former Secretary of State John Kerry to a newly created Cabinet-level position as special presidential envoy for climate. The move indicates that climate policy will be a top priority for the Biden administration.

Kerry, as secretary of state, signed the Paris Climate Agreement on behalf of the U.S. in 2015.

"The Biden administration is going to be more focused on climate policy than a second Trump administration would have been," Luke said.

These efforts, she added, present opportunities for tire makers.

"The tire industry and innovations in tires are critical to achieving a lot of effective climate change solutions," Luke said. "Even something like tire rolling resistance can have a measurable impact on fuel economy, fuel consumption.

"There's already been a lot of work that's happened in our industry to promote C02 emission reduction, and I think we can see a lot more of that in the next few years in partnership with the incoming administration."

Along with climate change, the USTMA also expects the focus on tire and rubber particles in the environment—created as people drive their vehicles—to continue to gain more attention.

"We, as USTMA, have intensely accelerated our engagement with the regulators, policy makers and research to help support the research that's being done, including looking at generating tire and rubber particles under sound scientific conditions that researchers can study," Luke said.

The pandemic has brought about some opposing forces when it comes to tire usage in the U.S. that could continue to play out during the next year.

With more people staying at home, or closer to home, during the pandemic, the number of vehicle miles traveled has decreased. But counter to that has been a trend away from public transportation causing people who normally would not drive themselves to purchase vehicles, Luke said.

While COVID-19 brought the tire industry to its knees during the spring, the pandemic also provided an opportunity for manufacturers to show their mettle.

"We all know character is revealed in a crisis. I am very proud of how our industry responded this year," Luke said. "Our member companies put their workers' health first. They repurposed manufacturing lines to make PPE (personal protective equipment) and contributed supplies to local hospitals and community organizations all while developing business strategies to keep their companies safe and healthy during the crisis."