To hear Carlisle Companies tell it, the company’s eminent departure from the tire business is all China’s fault.
Chinese competitors, claimed David Roberts, Carlisle CEO, in an interview with the Charlotte Observer, are “price aggressive.”
As if this was some kind of new revelation, that Carlisle had previously been impervious to that factor.
As if the company didn’t get positive notice for CLOSING one of its plants in China last year, moving all production stateside.
As if the company didn’t tell investors just a year ago that its ‘transportation products” unit (which includes tires) was seen as “a solid and consistent contributor going forward.” The unit, according to its 2012 annual report, said the newspaper, showed the tire unit’s “earnings grew by 476% amid lower costs after it closed tire factories in China and Pennsylvania.”
Carlisle started its business in 1917 as a tire company. Over the years it diversified into all manner of other things, like brake friction and airplane wiring and construction materials and restaurant plates. Yes, plates. Charles Mooney is turning over in his grave, I’m sure.
Today, Carlisle is a leader in lawn/garden. ATV, retailer, small ag and industrial tires. We’re not talking about an also-ran here.
With the recent release of its second quarter report, Carlisle went 180-degrees and made the stark announcement that its transportation products unit – which also produces automotive belts and wheels – was “no longer a strategic asset,” and that it was looking at all of its options, including possibly selling the business. Tires were still turning a profit, apparently, just not a big enough one – compared to wiring and plates.
“It was a very difficult decision because it’s the foundation of our company,” the CEO told the Observer. “If we are going to achieve our overall strategic financial objectives, it would have been very difficult to do that still owning the tire business.”
For the record, Carlisle posted 2012 profits of $270 million, up 50% from $180 million the year before. The stock is up 14% since the start of 2013.
Carlisle makes/made a good product, well-respected and well-liked by dealers and users. A buyer will be found, and that buyer will walk into the same conditions Carlisle faced. Except, I’m sure, they are the exact same conditions they are well-accustomed to. Cause they existed a year ago. And two…or three years ago.
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By and large, retreading is not a significant part of the Chinese tire market. According to the recently released ‘China Tire Retreading Industry – Overview and Forecast’ research publication, China’s estimated 500 retread plants turned out some 18 million retreads (type undefined) in 2012.
That was against a backdrop of an estimated 460 million new tires produced there last year.
Still, retreading grew by more than 10% YoY, according to the report.
Not quite enough, though, Scrap tires are taking over the country-side in China. The report said that the volume of scrap tires generated grows by over 10% annually, “and scrap tires have become a major source of solid waste pollution.”
While the report producers acknowledge how retreading helps reduce scrap piles, it notes that, “the overall development of China tire retreading industry lags behind that of new tire industry due to many special reasons.
“Firstly, Chinese consumers usually have misconceptions about the tire retreading industry,” the report notes. “Retreaded tires are often considered to be unsafe and produced by small workshops. Besides, some Chinese media constantly vilify tire retreading industry as ‘illegal business’ and highly polluting. As a result, many vehicle owners refuse to use retreaded tires.
“Secondly, China still lacks corresponding regulations or policies in charge of the pollution and recycling of scrap tires. On one hand, scrap tires are burned and discarded in large amounts, which not only severely pollutes the environment, but is also a waste of resources; on the other hand, it causes a serious shortage of raw materials for enterprises processing and recycling scrap tires in China.
“Finally, because of misconceptions, many drivers in China tend to keep using the tires till the tires are scrapped instead of retreading or recycling the tires according to wear limit signs, which not only leads to unsafe driving, but also leaves tires little utilization value for retreading due to excessive wear.”
Looks like there is a lot of work to be done there.
