Toyo Dumped From US Truck Tyre Partnership, Sues Conti, Yokohama

Information obtained by Tire Review in the US indicates that Toyo Tire USA is “scrambling to fill truck tyre orders” following its dismissal earlier in the year from the GTY Tire Co. joint venture by partners Continental Tire the Americas and Yokohama Tire Corporation. The tyre maker has taken legal action as a result of this action and, in a lawsuit filed in January, Toyo claims that both Conti and Yokohama are attempting to prevent Toyo from selling any radial truck tyres in the US for five years, and that the partners have declared GTY Tire to be no more. All this, notes Tire Review, may be the indirect result of the “business and capital alliance” partnership struck between Toyo Tire & Rubber and Bridgestone Corporation in May 2008.

In January, Toyo filed for a federal court injunction in an attempt to restore production of its tyres pending the outcome of arbitration as called for in the GTY partnership agreement. The US Ninth Circuit Court of Appeals has yet to hold a hearing on Toyo’s injunction plea, and Toyo’s outside counsel told Tire Review that the International Chamber of Commerce has finally seated an arbitration panel to hear its case.

As it stands right now, Toyo has been shut out of receiving most of the 290,000 radial medium truck tyres it ordered from the GTY plant, and does not have available capacity at its other plants in Japan to make up the shortfall. Toyo would not say how many tyres it had received from the GTY plant before it was cut off, only that the 290,000 tyres it had ordered represented some 60 per cent of its projected needs for the US market – a total of approximately 440,000 tyres.

In its lawsuit, Toyo claims that “Continental and/or Yokohama” began telling Toyo customers and prospective customers that “Toyo was expelled from the partnership, that Toyo was no longer going to be able to provide GTY-manufactured truck and bus radial tyres” and “that Continental and/or Yokohama would sell such tyres to Toyo’s customers and potential customers.”

Toyo denies rumours that its tire moulds have been removed from the GTY plant and shipped back to Japan, and other rumours that it has cut off supplying wholesalers in favour of selling its limited supply direct to fleets.

“We continue to work closely with all of our valued customers to address their commercial truck tyre needs,” the company said in a statement. “Toyo is grateful for and remains committed to its loyal customers and to providing first tier service in every area.”

For its part, a CTA spokesperson told Tire Review “we can confirm that there is a lawsuit and arbitration that has been filed against CTA and Yokohama. However, it is our policy at Continental that we do not comment on pending litigation.” By press time, Yokohama had not responded to repeated requests by Tire Review for comment.

GTY Tire was formed by the then General Tire & Rubber Co., Yokohama and Toyo to pool their technical and production resources to produce medium truck tyres for the US market. Under a partnership agreement signed in November 1988, each partner would receive an allocation of tyres, which would be produced at General’s Mt. Vernon, Illinois tyre plant under the name GTY Tire Co.

According to Toyo’s lawsuit filing, there were a limited number of ways the partnership could be dissolved, and even then the remaining partners “were obligated to continue the partnership.” Further, if one of the partners were removed, the partnership agreement gave that partner the “’right and obligation’ to purchase its allocation of truck and bus radial tyres for the remainder of the current fiscal year and for the two fiscal years thereafter.” Toyo claims it is being denied that right under the agreement.

In its lawsuit, Toyo claims that CTA and YTC sent it a letter on December 22, 2009 “purporting to expel Toyo from the partnership and to dissolve the partnership agreement.

“The joint letter claimed that the partnership dissolved because ‘Toyo had entered into an agreement with Bridgestone Corp. pursuant to which (Toyo and Bridgestone) had been promoting closer collaboration on tyre technology,’” which was expressly forbidden under terms of the partnership agreement.

According to the Toyo lawsuit, the partnership agreement could be dissolved “If any partner should hereafter enter into a technology exchange or collaboration agreement regarding tyre technology with a major competitor of the other partners in the tyre business, upon joint written notice from two of the other partners. A major competitor shall be deemed to be any manufacturing company whose tyre sales are ranked among the top six in the world.”

Toyo refuted CTA and YTC’s claims regarding the Bridgestone partnership, stating that “neither the May 16, 2008 press release nor any business and capital alliance agreement between Toyo-Japan and Bridgestone-Japan amounts to a ‘technology exchange or collaboration agreement.” Similarly, Toyo claimed in its suit, both Continental AG and Yokohama Rubber Corporation had previously entered into “similar technology agreements with Bridgestone, and Continental AG also has entered into a technology agreement with Pirelli.”

The December 22 letter further stated, according to Toyo, that CTA and YTC would “automatically ‘confiscate’ Toyo’s partnership interest,” “acquired the right to purchase Toyo’s full allotment of truck and bus radials from GTY,” and “intended to dissolve the (GTY) partnership on December 31, 2009.”

In its suit, Toyo said the three partners met on January 8 at Toyo’s request to discuss the matter, but the result was that CTA and YTC only pushed the meeting back to January 13, 2010, the date they then said the pair would end production for Toyo and dissolve the partnership. While Toyo provided court documents and filings to Tire Review, it could not answer a number of questions due to the pending litigation.