Checkoff Gets Legs - Tire Review Magazine

Checkoff Gets Legs

Taking a page from the dairy, beef and home heating oil industries, the tire industry may soon have its own multi-million dollar national consumer education campaign promoting the value of tires and importance of tire maintenance.

TIA Drafts Bill to Create National Promotion Program

Taking a page from the dairy, beef and home heating oil industries, the tire industry may soon have its own multi-million dollar national consumer education campaign promoting the value of tires and importance of tire maintenance.

Pressing forward on one of the key elements of its strategic plan, TIA has drafted proposed legislation for a tire industry "checkoff program," a mechanism to create the funding and structure for an extensive national consumer education and tire dealer training programs.

But it could be a slow crawl, and success is far from certain. First, TIA needs to get the RMA to buy in, and then the proposed bill needs to make it through Congress.

Based on the reaction of the RMA members, the National Tire Safety Research and Education Alliance Act of 2003 (NTSREA) could reach Capitol Hill for consideration next month.

If passed, the NTSREA checkoff program would place an assessment on each passenger and light truck/SUV tire – OE and replacement ®“ sold in the U.S. by domestic and overseas manufacturers and private branders, according to Littlefield. TIA is seeking a 50-cent-per-tire pass-through assessment, though no final amount has been determined.

Based on 2002 tire sales, such an assessment would raise some $160 million, funding that would be applied toward a massive consumer education effort, and the creation and support of extensive dealer and tire technician training programs.

"This would be a really big thing for this industry," said Roy Littlefield, TIA executive vice president, "but this is going to have to be a joint effort with the manufacturers."

According to Littlefield, a draft of the proposed legislation was formally presented to the RMA on June 6, and will be discussed with the seven tire manufacturer members later in the month. At press time, there was no word on the result of those meetings.

"If the (tiremaker) CEOs buy into it, we’re going to try and introduce it in Congress this July, and try to get it through this Congress by the time they adjourn for elections next year," Littlefield said. "If they (RMA) don’t buy into it, then we have to regroup and see what we need to do."

Getting the tire manufacturers to buy into the plan won’t be easy, Littlefield admitted. Despite several meetings with RMA officials and with its public affairs committee, Littlefield said it was difficult to gauge the level of reception for a checkoff plan. Of the seven tiremaker CEOs Littlefield has talked to, three have been quite receptive, he said. "But there are a couple of companies that are going to be a real hard sell on this."

RMA tiremaker members include Bridgestone Americas Holding, Continental Tire North America, Cooper Tire & Rubber Co., Goodyear Tire & Rubber Co., Michelin North America, Pirelli Tire North America, and Yokohama Tire Corp.

Some are concerned about financial state of the industry, Littlefield said, but any assessment should be passed on to consumers, at no cost to the dealers or tire companies.

And because the intent of NTSREA is to present a generic message to consumers, Littlefield said there was some concern that tiremakers would lose the promotional advantage of their own consumer education efforts.

While individual tiremaker programs and the RMA’s "Be Tire Smart" effort and National Tire Safety Week program have enjoyed some success, the NTSREA checkoff program would have a significantly larger budget than all those programs combined.

Manufacturer Views Mixed

"I think it’s an intriguing idea, but obviously we’d need to see the details," said Tom Dattilo, RMA’s chairman and Cooper’s chairman, president and CEO, who spoke with Tire Review weeks prior to the June 6 presentation. "We all know that the value proposition of tires has gotten lost in the shuffle of reduced prices. Philosophically, anything that helps people understand the value of tires is a good thing.

"I don’t know if the government is the right place to do it, of course," he said. "Sometimes you have to be careful what you wish for because the government will give you what you want along with 15 other things, and that turns something that makes sense into something stupid."

"At this point I’ve not seen anything in writing yet on a checkoff program," said Don Shea, RMA’s president and CEO, prior to TIA’s formal presentation. "I’ve heard some concepts, but frankly at this point I think its extraordinarily premature to say if it’s a good idea or not.

"Conceptually if it were a slam dunk to improve the image of the industry in the eyes of the consumer, who wouldn’t want to do it. I mean, you’d have to live under a rock to not think that would be a good idea," Shea said. "But how you get from this point to that point remains to be seen and carved out.

"How does a program advance tires generically without homogenizing them?" Shea asked. "That’s a detail our members would absolutely need to see to make any sort of rational evaluation."

Both Dattilo and Shea expressed concern about how RMA can even approach the assessment aspect of the proposed legislation.

"We cannot have that discussion jointly; that’s called antitrust," Shea said. "We cannot even have a discussion of a per tire assessment being passed through. Irrespective of any program, they (tire manufacturers and marketers) would continue to have to make individual pricing decisions."

Littlefield said the industry could enact its own voluntary checkoff program without government involvement, "but a congressional mandate puts it in place forever, you get around the antitrust issues of price fixing, and it’s all-inclusive. You can’t have some companies opt in and some opt out."

But that is clearly one concern of Dattilo’s. "What if a retailer says, ‘I don’t want to charge the consumer this 50 cents. I’ll just eat it. And, by the way, I want you, Mr. Distributor, to eat it for me, and if you don’t I’ll find somebody who will.’"

The RMA does not represent every company that brings product into the U.S., Dattilo said. "What if a company, particularly an importer, decides to subsidize someone in the U.S. and says, ‘Buy an extra million tires from us and we’ll eat the 50-cent surcharge,’" he said. "There is no way to stop them, and that’s a major concern out there.

"The devil is in the details, and I’m afraid the details are going to be difficult," said Dattilo.

Legislation Details

While the fine points of the proposed legislation still must be worked out, according to Littlefield, the NTSREA calls for the formation of an independent board, comprised of some 60 members, representing tire retailers, wholesale distributors and others affiliated with the industry. The board would oversee the program, including the development and execution of national consumer education programs, dealer and technician training, and any proposed certification programs for dealers and technicians.

Part of the checkoff program funding would be pushed down to the state level for use by state tire associations in their consumer education and dealer training efforts, he said.

None of the checkoff program funds could be used for lobbying efforts, Littlefield pointed out, and no individual brand or company could receive favorable treatment.

"Obviously the value proposition for tires is very important to us," said Dattilo, "but we have to see the details of the legislation and we’ll have to see what makes sense."


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