The US Made Tyre – An Endangered Species?

Every day the news seems to get worse – production cuts, decreased demand, shutdowns, plant closures – the US tyre industry is not, to put it lightly, in a happy place at present. The problems it and the automotive sector as a whole now face are of course only a fragment of a wider tapestry of economic woe, and the range of remedies tyre makers have at their disposal are limited.

In early August Goodyear gave notice of plans to ‘adjust inventory’ at a number of its US consumer tyre factories through temporary shutdowns. The communications manager at the company’s Gadsden plant, Jackie Brehm Edmondson, reassured those affected that the two week closure was only intended to “align (production) with industry demand and responsible inventory targets.” No cause for concern, then. Such shutdowns, after all, do occur from time to time.

When the factory shut down a second time, a week-long hiatus that began on September 27, fingers were pointed at Hurricane Ike. The disruption caused by the hurricane at the company’s petrochemical plants in Houston, Bayport and Beaumont was said to have created raw material supply disruptions to Gadsden and other Goodyear tyre manufacturing facilities. “When you don’t have raw material to make tyres, you can’t make tyres,” commented Ms Brehm Edmondson. Next time round, when the factory suspended production on a third occasion, this time for the week between October 25 and November 2, talk of strong winds and raw material shortages were absent. Goodyear had another type of storm to worry about.

Along with Gadsden, the company has recently suspended production in its Fayetteville, Union City and Lawton plants, with partial shutdowns at Topeka and Danville. And Goodyear is not alone: Michelin shut down its Tuscaloosa, Alabama BFGoodrich factory for two weeks on September 21. A month later, more comprehensive lay offs were announced. Up to half of the company’s employees at three production sites are to be laid off for eight weeks, starting November 1.

Production cuts are needed to counter the growing inventory of unsold tyres. Not only are OE sales down – before the latest economic crisis US manufacturers were already feeling the heat for producing exactly the wrong kind of vehicles for a world with rising fuel costs – aftermarket sales, traditionally more insulated from economic fluctuations, have also experienced a downturn as consumers tighten their belts.

If customers aren’t buying tyres, especially higher priced American made products, there’s hardly any point in manufacturing them. There’s no arguing this fact, supply and demand is one of the fundamental aspects of capitalism, a game the US has long since committed itself to playing. But where does that leave US based manufacturing facilities, and those employed there?

On October 20 the president of the Macon, Georgia Chamber of Commerce, Chip Cherry, stated that, due to economic factors and a downturn in the US automotive industry, a decision had been taken to delay production work on the new Kumho tyre factory in the region. The revised completion date for the plant, originally intended to open late 2009, has not been disclosed. The next day, Cooper Tire & Rubber announced its plan to conduct a capacity study of its United States manufacturing facilities over the following ninety days. The company says restructuring will most likely result from the study, including “capacity consolidation or geographical shifts to production.” North American media, along with the United Steelworkers union, are reporting the impending closure of one of the company’s US based plants following this announcement.

For company management and shareholders, a reluctance to produce in the US, where wages and costs are relatively high, is perhaps good business sense. However such decisions cannot be viewed without also considering the impact upon the communities serving production plants put out to pasture, or upon the national economy as a whole. But what can be done? Aside from petitioning for government subsidies or the introduction of duties such as those implemented to counter the dumping of certain Chinese made OTR tyres, there appears to be little the US tyre industry can do to remain both competitive and American.