Imports
Chinese government departments plan to curb the rising price of rubber on the domestic market in an effort to ease the pressure on manufacturing enterprises. The measures include proposed include; directly selling large quantities of the country’s natural rubber reserve to tyre producers, seeking possible increase of the import quota of natural rubber and avoiding the possibility of an increased import quota entering the futures market for speculation.
In the United States, analysts UBS Warburg have downgraded Goodyear stocks from “Hold” to “Reduce” and the price target per share from $8 to $5.50. The analysts accept that the company’s sales performance overseas is improving, but Goodyear is struggling in the US and the analysts cite five reasons why it might be difficult to make further progress in this market.
Zimbabwe’s only tyre manufacturer, Dunlop Zimbabwe, is at the centre of a political row. A member of the ruling Zanu PF party visited the company after reports on the state-owned Zimbabwe Broadcasting Corporation alleged that Dunlop was closing down as part of a plan by white-owned businesses to stir up unrest against the government. This has been refuted by a source close to Dunlop, which says that the company is suffering because of Zimbabwe’s shortage of foreign currency and government controls over tyre prices, but there are no plans to close down. The company, which employs around 800 staff, imports 90 per cent of raw materials needed to make tyres and wants to raise tyre prices. It has already suspended credit sales to customers in order to minimise losses.
Goodyear has announced the closure of its factory at Marikina in the Philippines on February 1st. Overcapacity and weakening demand were cited as the reasons. The plant employed 175 people and produced 1,200 tyres a day. Goodyear Asia Region tyre manufacturing director Harold Smith said that the Philippines tyre market was highly competitive “with a flood of low-cost imports from China and South East Asia.” The company has another factory in the Philippines, at Las Pinas, and some associates from Marikina may transfer there.
According to the monthly investors’ update, the group is still under pressure. In the US the replacement business was quite good, not so in the OE business. In Europe, the group is suffering because of the warm weather, which is having a negative effect on sales of winter tyres, and in Asia, the company has been forced to lower prices due to the fact that cheap imports from China are putting pressure on prices. In a cost cutting move, Goodyear is offering an early retirement package for around 700 white collar workers, half of them working in the Akron HQ.
The Indian tyre manufacturing industry may be under threat from cheap imports from China. The lifting of trade restrictions with China has already created trading problems for many of India’s smaller industries. Presently imports from China form only 2.87% of India’s imports, but the arrival of cheap, mass produced products from China has indicated the lack of preparedness of Indian industry to meet the new competition. Tyre manufacturing has been highlighted as a potential victim as businesses move from manufacturing to importing.
KIK Technology Inc, of Oceanside, California has been taken over in a share exchange by Russian Imports Inc. KIK Technology Inc, is a profitable operator in the growing off the road tyre market and offers an extensive range of patented, flatproof, micro-cellular polyurethane products. The company is currently concentrating on healthcare, industrial and recreational markets, but expects to see expansion of its market through a three-year strategic development plan.
The European Commission, and BIPAVER are in negotiation with Brazilian and Argentinean authorities to try and raise the prohibition of the ban on retread imports which the EC considers protectionist and a restriction on Free trade. The EC is preparing to take the case to the World Trade Organisation, which will allow compensation claims to be made and possible commercial retaliatory barriers to be imposed.
Ford Chief Executive Jacques Nasser has described the news that the recall of Firestone tyres in the USA might take until next spring as “unacceptable”. Originally, the recall was scheduled to take until summer, but Bridgestone/Firestone announced the revised spring time scale this week. Production of Firestone tyres has doubled and imports have been increased to meet demand. Ford is said to be considering a number of ideas to quicken the recall, including providing rental vehicles for those who are anxious about the delay.
An article in the newspaper Handelsblatt suggested that Continental is about to open a tyre factory in Moscow and that negotiations were close to final agreement. An investment in the region of 30 million Euros was reported. In September last year, Neue Reifenzeitung reported on negotiations between Continental and Moskauer Reifenwerke, which was very close to bankruptcy, although the financial situation may have improved as the main shareholder Yukos has sold its stake in the company. NEUE REIFENZEITUNG asked Continental for more details, but the company said it was not in a position to comment and could not confirm the figures quoted. Continental is only one of the tyre companies involved in negotiations in this area, with Michelin being another.
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