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Titan Chief Ready to Pull Trigger on OTR Tariff Play

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A friend of mine who is close to the government agencies involved in setting anti-dumping and countervailing duties on imported goods called me the other day. He had a few questions about imported OTR and ag tires, specifically he wanted to clarify a few things about pneumatic versus non-pneumatic units and where certain manufacturing was being done.

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His questions about imported units – primarily from India and China – got my attention. While nothing has been filed as yet, it appears the Commerce Department is gearing up for a petition from Titan International chief Morry Taylor with, perhaps, the United Steelworkers in tow.

Taylor, who has been reporting little good news on the financial front for quite a few quarters, mentioned that he might file a trade petition during Titan’s third quarter conference call with financial analysts. The USW has said nothing about the matter, but….

The last time Morry tore off after OTR importers, a lot of damage was done, and one major distributor was basically put out of business. In recent financial reports, Taylor has bemoaned market conditions, whether it’s a downturn in mining or slowing at the Canadian oil sands or a fall off in farm production and agricultural equipment sales.

This year alone, Caterpillar has made massive job cuts. In September it announced plans for a 10,000-person cut, adding to the 31,000 jobs eliminated since 2012. At its third quarter results announcement, Cat officials said 2015 will be the “third consecutive down year for sales and revenues, and 2016 would mark the first time in Caterpillar’s 90-year history that sales and revenues have decreased four years in a row.”

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Michelin North America puts its newest OTR plant in South Carolina on mothballs, and Bridgestone’s OTR and ag tire plants in Bloomington, Ill., Des Moines, Iowa, and Aiken, S.C., are likely also trimming back.

Imported tires from China and India, Morry’s apparent target, did not cause those cutbacks. Those makers had nothing to do with a global downturn in mining and construction – has anyone paid attention to China’s domestic economy?

I’m going to lay a few things on the table, without comment, and you can digest them as you please.

  • Titan reported a double-digit sales decline for the third quarter of 2015, a fall of 31% year-over-year. Sales for the first nine months were also down, in this case by 28%.
  • Operating profit for the third quarter was a loss of $14.5 million; the loss for the same period last year was $2.5 million. Operating profit for the first nine months was a loss of $6.1 million, better than the -$31.7 million posted for the same period in 2014.
  • “The third quarter for our end markets was worse than anyone forecasted,” said Taylor in the financial report. “This was consistent with our large customers and competitors. We continue to be focused on what we can control.  This can be seen in our third quarter results.”
  • Yesterday morning, Titan stock was trading at $4.43 a share, down from Nov. 9’s price of $5.02.
  • The 52-week high for Titan stock was $12.50. It traded at $19.44 on March 5, 2014, and at $30.89 on April 24, 2011.
  • On Nov. 19, Goldman Sachs lowered shares of Titan International from a neutral rating to a sell rating in a research report sent to investors.

Separately, don’t be surprised if the Department of Commerce starts poking around the medium truck tire market next year. No specific petitions have been filed, but the marketshare domination of Chinese manufacturing has been a topic of conversation in the DOC.

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As with the consumer tire market the DOC trampled over this past year, the tariff tsunami can wreak serious havoc on the medium and heavy truck tire segments. The USW has already proven willing to mess in their own cage (dog owners will get the reference), so going after imported truck tires won’t surprise.

Wonder if anyone has the Teamsters on speed dial?

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