Pot, Kettle…You Get the Picture - Tire Review Magazine

Pot, Kettle…You Get the Picture

This is a long one, so saddle up.

On Monday, the well-read Huffington Post blogsite carried an opinion piece from Leo Gerard, president of the United Steelworkers, who waxed poetically about the importation of passenger tires from China.

As you know, the USW has filed a complaint with the U.S. government seeking sharp limitations on these imports, complaining…well, I’ll let Leo explain before I go on. Here is his blog offering from Huffington Post:

Chutzpah and Cheaters Partner to Keep American Tire Workers Unemployed

Leo W. Gerard
President of the United Steelworkers International

A group of tire importers that should be competitors banded together recently to ally themselves with China in a trade case.

Doesn’t sound like they’re working for the interests of the United States, does it? No, they’re not. They’re collaborating with China against American manufacturing in general and American tire workers, represented by the United Steelworkers, in particular.

They’re opposing the union’s petition seeking a limit on the flood of Chinese tires that has so overwhelmed the U.S. market in the past five years that six American tire plants closed and nearly 7,000 American workers lost their jobs.

China cheats in international trade. It does so by manipulating its currency and subsidizing its manufacturing, which results in lower prices for its exports. For the tire importers, calling themselves the American Coalition for Free Trade in Tires, China cheating means higher profits.

After taking up with China, these companies are not the American Coalition of anything. They’re the Chutzpah Coalition. Here’s the quote that explains why: "If you impose quotas, you harm American jobs because of the impact on all of the people that work for independent dealers." The Chutzpah Coalition lawyer, Jim Jochum of Jochum, Shore & Trossevim had the lack of insight to say that.

What we have here are tire import companies that grew and profited at the cost of American tire plants and American workers now asserting that if they are forbidden from importing limitless tires, then the result will be terribly wrong and unfair because some of their importing jobs might have to be cut.

If imports are limited, preserving thousands of American tire workers’ jobs, here’s what Del-Nat president Jim Mayfield asked at the Chutzpah Coalition press conference, "What’s supposed to happen to my company and my workers?" A call to Del-Nat asking for the total number of employees got this response: 68.

That’s chutzpah.

For those unfamiliar with Yiddish, chutzpah is not generally considered a positive attribute. The typical definition goes something like this: A boy kills his parents then seeks the court’s mercy because he’s an orphan.

In dealing with the Chinese and this coalition, there’s reason to believe chutzpah can be deadly. Chinese manufacturers are notorious for cutting corners in ways that proved lethal to consumers. Babies, cats and dogs have all died from melamine-laced milk and pet food from China. In another case, the Chinese manufacturer of Aqua Dots substituted a chemical, which when ingested reacted like the "date rape" drug, forcing a recall of the toy after it sickened American children who put the dots in their mouths, and caused at least one youngster to end up in a coma.

And then there’s the tire case. On Aug. 12, 2006, four Philadelphia carpenters were driving home after work when the treads on one of the Chinese-made tires on their van separated. The rollover crash that followed killed two of the men and permanently impaired a third. An investigation showed that the tires, imported by Foreign Tire Sales – one of the members of the Chutzpah Coalition – did not contain a gum strip between belts necessary to prevent tread separation.

Initially, when the National Highway Traffic Safety Administration ordered Foreign Tire Sales to recall the defective tires, the company said it couldn’t afford to do that. Foreign Tire said it could pay only 10% to 15% of the approximately $80 million cost of recovering nearly half a million tires. Sure, it could profit from importing defective products. But it wasn’t prepared to pay to clean up the mess.

Later, it decided that only 255,000 tires needed to be returned. Ultimately, Foreign Tire was spared when drivers turned in fewer than 20,000 of those tires – less than 8% of the total. Who knows what happened to the remainder of those questionable tires or the people driving the cars they were on.

Foreign Tire, the Chutzpah Coalition and China want to continue importing freely – free trade not fair trade. And Chinese officials have taken steps to ensure that happens. Early in May, according to a report in the People’s Daily, China’s Vice Minister of Commerce met with U.S. Embassy personnel in Beijing "to negotiate on two trade remedy investigations targeting Chinese-made products that U.S. industries recently filed with the U.S. government."

After that, the International Trade Commission released a memo revealing that Chinese officials attempted to discuss trade cases in a private meeting – a contact that was improper because other parties in these cases did not have an opportunity to argue their side. The ITC memo said China expressed particular concern about petitions filed under Section 421, the China-specific trade safeguard law that the USW used in the tire case.

Here’s what is at risk for China and their Chutzpah Coalition allies: in 2004 China sent 14 million tires to the U.S. valued at $453 million. By last year, that had increased to 46 million tires valued at $1.7 billion.

The USW wants the U.S. International Trade Commission to limit the imports to the 2005 level, which was 21 million. That number then could rise by 5% the following year, and 5% more the year after that.

Congress added Section 421 to the U.S. Trade Act in 2000 to give U.S. industries and workers an opportunity to obtain product-specific relief from sharp increases in imports from China. Section 421 could provide resolution more quickly than a dumping or countervailing duty case.

Another good reason to call this group of tire importers the Chutzpah Coalition is that in its news release, announcing its formation, it suggested it represented "thousands of Americans working in the tire industry." Not likely. Two of the six members refused to say how many employees they have – Dunlap & Kyle Co., Inc. and Foreign Tire. But the total employed in the U.S. for the other four together: American Omni Trading Co.; Del-Nat Tire Corp.; Hercules Tire & Rubber Co. and Orteck Global Supply & Distribution Co., is 400.

That’s hardly "thousands of Americans."

But they’ve cost 7,000 Americans their jobs. And they’re fine with that. They’re working hard every day to add more to that number.

OK, now that Leo has had his say, I want to make a few points – once again.

Before I get started, I do want to say that retaining American manufacturing jobs is important. Producing your own goods helps any economy. But times have changed, while expectations have not. Retaining manufacturing jobs “just because that’s how it’s always been” makes no sense, especially when those jobs result in uncompetitively priced products. Those are not sustainable jobs. Those are jobs just because, and that is equally bad for the economy.

Now, to the teeth of Leo’s argument: The importation of China-produced passenger tires has directly resulted in the closure of six U.S. tire plants and the loss of 7,000 jobs. This is important because certain members of Congress drank the USW Koolaid and repeated these same figures to both their constituents and to the ITC.

As I stated in an April 22 blog item (scroll down to “Another Vague Argument”), those plant closures he mentions had little to do with the influx of China-made tires. Rather, they were the product of tiremakers wanting to retain production of so-called “high-value tires” (which translates into “higher tech, higher priced”) on these shores while pushing the production of so-called “broadline” tires to low-cost countries…like Mexico, China, Eastern Europe, etc.

In two of the USW’s cited plant closures, the plants were shuttered because the union would not come to terms with the fact that bloated wages and benefits were a drag on profits – it cost too much to make the tires here. In another case, the USW negotiated and accepted the closure as part of its master contract agreement. In yet another, the plant in question wasn’t even union represented.

And then there is today’s economy, one in which new tire sales are dramatically down, high-value tires are not delivering high-value profits, and those consumers who are buying tires are (despite what some tiremakers want to claim) looking for the lowest cost, not the best “value.” Fewer tires are being sold, and those that are tend toward the lower ticket end of the sales spectrum.

Even more troubling is that Leo and his followers take aim against a group of importers – the American Coalition for Free Trade in Tires – but fail to even glance into the mirror.

Again, as tiremakers shifted production of low-value tires to low-cost countries – including China – those same companies were among the largest importers and sellers of China-produced tires. But Leo doesn’t even mention that fact..because it doesn’t make for good press. Cooper, Bridgestone, Goodyear – they all produce tires in China that end up here. Conti just got going on its first Chinese plant, so they are off the list. Michelin claims that the Warrior brand tires it produces never make it to these shores, but…

Regardless, the union cannot have it both ways It cannot rail against Chinese tire imports while turning a blind eye to its role and its seeming benign acceptance that its employers are among the “offenders.” Now that’s chutzpah.

So the USW wants its cake – and the way they want it decorated – and they want to eat it too. They want high paying union jobs with companies like Goodyear, Michelin, Conti, Bridgestone and Cooper – now conveniently lumped together as “American tiremakers” – but they apparently don’t want those same companies to be competitive.

The USW demands a three-year quota system, rolling allowed imports back to 2005 levels with 5% annual increases over the following two years. Why three years? Why not five or 10 or forever? What will be different in 2012? Will the USW come begging at the table in 36 months?

Leo and his crew are betting on a Democrat administration and Congress to take his side. Note that growing Chinese tire imports has been an issue for more than the last six months, but the USW wasn’t going to raise the matter when the GOP was in charge.

At the end of the day, one cannot argue about the numbers. Yes, a lot more China-produced tires reach our shore today than in 2004; that is the state of the market. Has the influx of China-produced tires resulted in the loss of some union jobs? Probably, but not 7,000 or 5,100 (depending on which number Leo is using today). Not even close.

All anyone should want is for the Congress and the ITC to start asking the hard questions, the potentially unpopular questions, of the union and its supporters. The fact is, China and Chinese tires are not the blame or the problem. The real problems run much deeper, and the union needs to take a good look in the mirror and consider the role that it played in this issue.

If you have comments to share, send to me at [email protected].

– Jim Smith

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