“Rinse and repeat.” Handy instructions on the back of a shampoo bottle. Also short-hand for witnessing the same sad thing over and over. A seemingly infinite loop. Like the movie “Groundhog Day,” only not nearly as funny.
Titan International opened 2016 by filing petitions claiming “material injury” from imported OTR tires being “dumped” on the U.S. by makers in China, India and Sri Lanka. The USW, Titan’s convenient friend in these matters, signed on for the ride; at press time nary a word was heard from Bridgestone or Goodyear, which have unionized OTR tire plants in the U.S.
“In 2007 Titan won antidumping and countervailing duties on OTR tires from China, but over the past few years there have been a number of companies putting wheels into the tires to get around the duties,” according to Morry Taylor, Titan CEO and chairman. “This has become a large problem because some overseas operators have actually advertised on their websites how to beat duties. So our petitions address tires from China, which enter mounted on a wheel or rim. We have also added India and Sri Lanka to this new action.”
Unlike Titan’s previous effort, this one covers both OTR and agricultural tires, whether they come here mounted on a wheel or not. Unmounted OTR tire imports from China already face antidumping and countervailing duties imposed in 2008 by the Commerce Department. Those duties were reaffirmed in 2014, so those tires are already being taxed.
Remember that unlike its competition, Titan produces wheels for ag and OTR applications.
Targeting producers in India and Sri Lanka and packaged tire/wheel units is a new twist. “In 2014, OTR tires from China, India and Sri Lanka accounted for an estimated 41% of all OTR tires imported into the U.S.,” both Titan and the USW stated in their respective news releases. “The actual number would likely be higher if mounted tires were included in the import data. Imports from the three countries have grown significantly since 2012, even as demand in several important markets has fallen due to declining farm income and low commodity prices.”
The union and tiremaker are playing a bit loose with the facts. Since 2012, we have reported:
- On the OTR side, a decline in coal mining that started in the second half of 2012 continued into 2013, and certainly impacted U.S. demand for all tire producers. Depressed oil prices, though good news for consumers, has waylaid the Alberta oil sands, a foreign market Titan was quite active in. Falling commodity prices – copper, gold, silver, etc. – pushed OTR tire sales down all over the world.
- Meanwhile, the domestic construction market has taken off. New large scale commercial construction projects will drive 13%-15% growth in 2016, say experts, and U.S. housing starts are expected to see a 27% rise this year. And let’s not forget the expected rise in infrastructure projects thanks to the recently signed federal highway bill.
- The Drought of 2012 was a disaster for the entire North American ag tire market. But the following year saw a 12% increase in net farm income, and 2014 was up as well. For 2015, net farm income increased 33% YoY. As agriculture is a highly cyclical market, things were expected to be tighter in 2016 and into 2017, the same experts say.
And over the past two years, the cyclical nature of its markets has forced Titan to lay off dozens upon dozens of workers at its plants in Freeport and Quincy, Ill., and Bryan, Ohio. According to Titan, here’s why:
September 2015: Quincy layoffs – “All major agriculture equipment manufacturers have been reducing employment levels over the past year. Just last week one of our major customers announced it had to lay off over 100 workers due to a slow-down in the farm economy. It is always a tough decision to eliminate jobs, but with the dramatic decrease in orders, reductions are necessary at this time.”
December 2015: Bryan layoffs – “The layoffs are ‘due to weak market conditions that are not expected to improve during 2016.’”
July 2014: Freeport layoffs – “The market has continued its downward spiral. Our ticket orders for tires in the ag and industrial market are down. They’re just not in demand.”
Yes, the OTR and ag markets have been in a downward spiral for the past couple of years, just as Titan’s share price has been during the same period (high of $19.52 in March 2014, low of $3 as the market opened on Jan. 11). But none of the events were driven by tire supply-and-demand issues, and certainly not by price competition.
These are cyclical segments. They go up, they go down. It has been that way forever. Michelin (not unionized) felt the downward cycle coming and mothballed its shiny new OTR plant in South Carolina until market conditions improve. Bridgestone Americas adjusted production at its unionized plants in Bloomington, Ill., and Des Moines, and at its new giant OTR tire plant in South Carolina.
Leveraging government intervention to pull up your own bootstraps is akin to using protectionism to gain a monopoly. Seeking financial shackles on tiremakers like Apollo, BKT, Alliance Tire Group, Mitas, Trelleborg and JK among others – all well-respected producers – is no answer.
“I feel bad that Titan cannot identify what its advantages are and how it can sell in the marketplace,” Jeff Kreitzman, CEO of API, told us back in 2008 when the tiremaker and union were pushing for additional duties on China-made OTR imports. “We don’t see where Titan has been injured. Its stock is trading at an all-time high. The company is profitable.”
And as I wrote in that same column, “The concept of a ‘free-market economy’ means market forces – not unequally applied ‘equalizers’ – should weed out the weak and unworthy. If we claim to have a fair, free market in a global marketplace, then fair means every player – not just the ones we like – should be allowed to succeed or fail on their merits, their products, their service.”
Rinse and repeat.