A flood of imported tires entering the United States is swamping the nation's huge replacement tire market, eroding the profits of domestic producers, tire industry officials warned Wednesday.
Goodyear Tire & Rubber, the nation's largest tire producer, said its second-quarter earnings are likely to be down 25% from last year, mainly because its "private brand" tire sales are suffering from increased competition from imports. In last year's second quarter, Goodyear earned $108.6 million, and the company reported a profit of $411 million for all of 1984.
Private brand tires are made by major producers such as Goodyear specifically for retail chains, which then add their own brand names. Goodyear, which also sells its own brand-name tires in the replacement market, sells private brand tires through its Kelly-Springfield and Lee Tire subsidiaries, a company spokesman said. Such private brand tires are often sold at lower prices than the major brand-name products and thus compete more directly with inexpensive imports from countries such as Japan and South Korea.
Although U.S. auto producers, including the new American operations of Japanese auto makers, equip almost all their new cars with domestically produced tires, imports now account for about 20% of the much larger replacement tire market, according to the Rubber Manufacturers Assn., a tire industry trade group based in Washington.
Imports of radial and non-radial tires for passenger cars, excluding those brought in on imported cars, surged to 30.1 million in 1984, up nearly 31% over the 23 million posted in 1983.
Imports Up 14% This Year
In the first four months of 1985, meanwhile, imports rose to 11.3 million, up more than 14% from the 9.9-million level posted in the same period last year. At the same time, sales of U.S.-built tires in the replacement market have been falling, industry officials say.
Canada, home to a number of tire plants owned by U.S. producers, is still the largest exporter of tires to the United States, according to the Rubber Manufacturers Assn. But Japan is a close second, and South Korea is now the third-largest exporter, the trade group says.
Goodyear said Wednesday that, with imports likely to remain a problem throughout the rest of the year, the company doesn't expect to make up for its reduced second-quarter profits in the second half. "It doesn't appear there will be any improvement in (the private brand market) for the balance of the year," the company said in a statement.
California tire retailers agreed that imports are cutting into domestic sales in the replacement market.
"I think (the import problem) is at its worst on the West Coast," said Jerry Rogers, president of Long Beach-based Mark C. Bloome Inc., one of the largest tire retailers in Southern California. He said California and other Western states have experienced a big rise in imports because of the large number of small cars in the region.
"Most of the imported tires from Japan and Korea are designed for small cars," Rogers said. "So the increase in tire imports has been pretty dramatic over the last several years out here."