According to automotive industry analysts, during 2006 China overtook Japan to become the world’s second largest market for cars. During 2006 7.2 million vehicles were sold in China, a 25.1 per cent increase on the previous year’s sales. Japan, now ranked number three, sold a mere 5.7 million vehicles in comparison.
The chairman of the House Armed Services Committee has asked the heads of Goodyear and the United Steelworkers union to come to a partial agreement to allow 200 workers at the tyremaker’s Topeka, Kansas plant to return to work. The request comes as the US Military has raised concerns about a potential shortage of tyres used on military vehicles, Deutsche Bank analysts report. Because of the 9-week-old strike, production of Goodyear tyres for Humvees has fallen to 10,500 per month from a US Army requirement of 20,000. The US military is reportedly considering invoking a law that forbids workers from abandoning jobs that are vital to US national security.
Continental AG has spoken of plans to increase passenger car, SUV and light truck tyre prices across Europe. A Continental spokesperson in Hanover declined to give further details of the price rise, but explained that the move had been forced upon the manufacturer by consistently high raw material prices. Continental’s raw material costs are expected to total 300 million euros this year.
Some financial analysts report they have become increasingly optimistic regarding Cooper Tire’s intermediate term performance. The Deutsche Bank report suggested the that poor US demand would soon get better with Cooper benefiting. The analysts also commented that Goodyear’s strategy is likely to have a positive effect on Cooper in the tight supply market. They were also “increasingly convinced” about Cooper’s ability to significantly reduce costs and improve profitability.
(Akron/Tire Review) The United Steelworkers union has attacked a report by Himansho Patel, an analyst with JP Morgan Securities, which suggests a key date in the union’s current strike against Goodyear could be 3 January – the date plant worker medical benefit coverage lapses. USW International Vice President Tom Conway sharply criticized the report. “The facts are that the real cut-off date is in mid-April,” Conway Stated in a press release issued 29 November “COBRA legislation gives you 60 days to make a decision to continue (your health care coverage) and another 45 days before you have to make a payment.” However, workers electing to continue medical coverage under COBRA are still liable for those premiums.
Five international synthetic rubber producers received fines totalling 519 million euros (£350 million, $682 million) from the European Commission after the group said they had fixed prices. The penalty is said to be the second largest fine of its kind in history. Royal Dutch Shell PLC, Eni SpA, Dow Chemical Co., Unipetrol AS and Trade-Stomil were fined by the EC. Bayer AG was found guilty but was not fined because it blew the whistle on the others, according to the EC. The EC said the group fixed pricing and shared customer information on buyers of butadiene rubber and emulsion styrene butadiene rubber – used widely in tyre production – between 1996 and 2002. Italy’s Eni got the largest fine at £185 million ($357.6 million), and Shell was hit for £108 million ($211 million).
Financial analysts questioned whether the news would lead to a significant drop in synthetic rubber prices following the recent collapse of natural rubber. If so this could add to a “significant raw materials bonanza coming up in 2007 for tyre manufacturers,” according to Deustche Bank analysts.
A study of the UK’s leading tyres, exhausts and batteries companies suggests few are fully in control of their overall business strategy. The survey – by business analysts Plimsoll – indicates a remarkable inconsistency in the companies’ commercial and financial behaviour. Very few of the tyres, exhausts & batteries firms planning to come out on top in 2007 in terms of profit and sales will actually achieve their goals.
David Pattison, senior analyst on the project, says: “In today’s highly competitive tyres, exhausts and batteries market you cannot sit still for a minute. If you have seen sales increase this year and good profits, there is a fair chance that next year you will not be able to maintain it. Likewise, if you did not increase sales this year you are going to have to set a priority of trying to grab some growth in the next trading period.”
Goodyear’s position as a leading global buyer of natural rubber means its ongoing strike dispute with the United Steelworkers is likely to affect natural rubber prices, according to analysts at Deutsche Bank. “Since Goodyear buys approximately 10 per cent of the world production of natural rubber, the strike at the company’s North American plants has consequences on raw material prices,” the analysts wrote, adding: “They are currently producing at 40 per cent of their pre-strike capacity (10 per cent at union plants and 100 per cent at non union plants).”
Korean tyre manufacturers have an uphill struggle on their hands if they want to improve their products’ brand recognition on a global scale, according to a recent Deutsche Bank report. Instead the analysts expect that any improvement should come through higher gross margins for their distribution subsidiaries. “In our view, the industry’s competitive landscape is not favourable for Korean tyre makers and it will be very difficult for them to improve their brand recognition in the highly competitive global tyre market,” the analysts commented.
Passenger car tyre replacement markets were “very strong in October,” according to Michelin. The research shows that the European replacement market sales grew 9 per cent (+2.9% year-to-date); and 4 per cent in North America (-3.2% year-to-date). Truck tyre sales also grew in the period, according to report, although not as much as the passenger car market.
Natural rubber prices have fallen to levels last reached 18 months ago ($1.55/kg). This represents a 45 per cent drop from the peak reached last June and 27 per cent on the average tyre companies were paying in 2006 (approximately $2.15/kg), according to a Deutsche Bank report. As the analysts’ predictions are based on 2007 natural rubber prices of $1.9/kg this could result in improved earnings for tyre companies that spend highly on natural rubber.
The United Steelworkers has walked away from contract talks with Goodyear. The USW informed its members that its negotiating team has left Cincinnati – site of the Goodyear/USW master contract talks – and that no new negotiations had been scheduled. “We will go back when the company has something new to show us,” USW spokesman Wayne Ranick said in a Reuters report. Goodyear, for its part, said that its negotiating team would remain in Cincinnati and stood ready to continue bargaining for a new master contract.
So where do the two sides go from here? Deutsche Bank analysts reported that the USW sees Goodyear’s unilateral announcement of a plant closure as “setting an unacceptable precedent, and the bottom line is they aren’t going to budge on this issue.”
Hankook Tire Co. has reported that its third-quarter profit fell 16 per cent on higher raw material costs and a stronger currency. Net income was 44.4 billion won ($47 million) in the quarter that ended 30 September compared with 52.9 billion won ($56 million) a year earlier, the company said in a regulatory filing. Sales rose 7.9 per cent to 526.4 billion won ($558 million). Operating profit fell 27 per cent to 40 billion won ($42 million).
Goodyear and the United Steelworkers will return to the negotiating table in Cincinnati today, both sides confirmed over the weekend. It will mark the first formal talks between the two sides since USW workers hit the picket line on 5 October at 16 Goodyear plants in North America. Last week, Goodyear published information on its most current offer to the Steelworkers, and indicated that it was ready to get back to negotiating. While acknowledging the tyremaker’s move back to formal talks, the USW, however, did not immediately commit to returning to the bargaining table until Saturday.
(Akron/Tire Review) Will they or won’t they? That’s the big question heading into the sixth week of the United Steelworkers strike against 16 Goodyear plants in North America. Goodyear stated 9 November that it was sending its negotiating team back to Cincinnati, and that the company was “willing and prepared to resume formal bargaining with the United Steelworkers at any time.” While the USW applauded Goodyear’s return to the Queen City, it did not commit to resuming contract negotiations. “We are pleased that the company has apparently come to its senses and will return to the table,” said Tom Conway, USW International vice president. “We stand ready to bargain a fair labour agreement, as we always have, and assume by this announcement that the company has abandoned its destructive position on closing plants and slashing health care.”
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