Tires leave the curing presses and find their way to an associate in Goodyear's Union City, Tennessee plant.
U.S. tire shipments are projected to drop by approximately 16% in 2009, mostly as a result of a nearly 45% decline in Original Equipment Manufacturer (OEM) passenger tires and almost 43% drop in OEM Commercial truck tires, according to the latest numbers from the Rubber Manufacturers Association.
Total 2009 tire shipments are projected to decline approximately 45 million units to 237 million units. This level is approximately 84 million units less than the peak of 321 million units in 2000. The decrease in tire shipments reflects the recent struggles of automotive manufacturers, low consumer confidence, high unemployment, and depressed home values, the trade group says.
The latest blow to the struggling industry comes as the U.S. Trade Representative is considering imposing tariffs on the imports of Chinese tires after the International Trade Commission (ITC) found that tariff relief was necessary to reduce tire imports.
The USTR remedy recommendation will be delivered to President Obama by Sept. 2, 2009. The President’s decision on how to respond to surging tire imports from China, which has resulted in massive job losses and factory closures, is due on September 17th.
Like so many candidates, Senator Obama talked tough about protecting U.S. jobs and trade during the campaign, but there’s been slight evidence that President Obama differs in any significant way from the Bush Administration’s disastrous economic policies on trade. The Steelworkers, of course, were one off candidate Obama’s strongest supporters.
ITC commissioners last month found a market disruption and recommended that tariffs be placed on passenger and light truck tires from China – 55% in year one, 45% in year two and 35% in year three.
The United Steel Workers Union, which brought the legal action, claims it is urging a higher tariff in the first year so domestic tire workers get the full relief prescribed to prevent the frontloading of inventories by Chinese exporters or U.S. importers who are dumping higher volumes prior to the President’s decision.
The USW petition claimed that imports of tires from China increased from 2004 to 2008 by 215% in volume and 295% by value. In 2008, China exported to the U.S. nearly 46 million tires with a value of more than $1.7 billion, making it the largest source of consumer tire imports. While imports nearly tripled by value during the surge period, domestic production of consumer tires declined by more than 25%. Access to the Chinese market is tightly restricted under an industrial policy imposed by the one-party communist government in China.
During the last five years, about 5,100 U.S. tire workers lost their jobs as a result cutbacks in domestic production that coincided with the skyrocketing increases in imports of tires from China. About 3,000 more jobs are slated to be lost by year’s end, since three plants are threatened with elimination, according to the USW.
The tire industry is expected to realize a about an 8% growth in 2010, or 260 million units, according to RMA.
At the moment, all areas of the tire market are suffering big declines. Here’s some RMA data:
- Original Equipment Passenger Tires: Large decreases in domestic vehicle production as a result of automaker production shutdowns and bankruptcy reorganizations will result in a nearly 46% decline in 2009 shipments to approximately 21 million units.
- Original Equipment Light Truck (LT) Tires: This category will experience an approximate 12% decrease, or -400,000 units, in 2009 to about 2.6 million units.
- Original Equipment Medium/Wide-Base/Heavy On-Highway Commercial Truck Tires: Given economic conditions in the commercial sector, a nearly 44% decline to approximately 2.2 million units is anticipated for 2009, a decrease of more than 1.6 million.
- Replacement Passenger Tires: The market will have another decrease of nearly 9%, or approximately -18 million units, reaching a level of 176 million units.
- Replacement Light Truck Tires: Although the number of vehicles for this market remains steady and largely represented by small commercial vehicles, further declines in economic conditions is forecasted to contribute to a nearly 18% percent decline in replacement LT tire shipments in 2009 to the 24 million unit level.