DETROIT-Michigan Tire Recycling Corp. has big plans for Detroit's scrap tires and is pursuing those plans its own way. Shying away from state funding and city government assistance, owner George Joseph invested nearly $4 million of his own money to open his tire collection and processing venture last September.
Mr. Joseph said he bypassed the system and set up his business privately because ``I did not want to go through hoops.''
Mr. Joseph said he spent three years researching processing equipment and systems before setting up operations in a 200,000-sq.-ft. facility on Detroit's east side.
The firm spent last year experimenting and engineering the start-up; this year it will bring the manufacturing up to full throttle and begin marketing its ground rubber product.
The company is settling into an area that has become a hot spot for tire recycling entrepreneurs.
As of last November, Michigan Tire was Detroit's only licensed tire recycling facility. Yet by that time, 11 other firms were seeking the city's help in setting up and/or funding tire recycling plants. The city, which generates about 4 million scrap tires annually, is in the process of cleaning up about 700,000 illegally dumped tires.
Other recyclers seeking city assistance have reportedly complained about the ``red tape'' involved with the process. Mr. Joseph, meanwhile, lamented the state's loose regulations of the tire recycling industry, saying it ``has bastardized the business.''
``It's easier to get a recycling permit than a driver's license,'' he said.
However, Mr. Joseph doesn't fear the pending competition, believing his company is getting well established.
Since its opening, Michigan Tire has acquired processing equipment from a defunct rubber reclaiming plant near St. Louis, giving Michigan Tire the ability to process all sizes of tires, including large off-the-road and solid tires. The added equipment also gives the firm the capacity to produce 100,000 pounds of ground rubber a year.
Currently, the factory is conducting small-scale processing of two-inch chips. But Mr. Joseph said he expects to have 40 cracker mills operating by the end of year, grinding tires collected through the company's developing hauling operation. By the end of 1995, it will be able to process more than 50,000 tires per day.
Mr. Joseph said a recycler has to process at least 50,000 tires daily and obtain reasonable tipping fees in order to survive. Recyclers cannot offset the cost of equipment and production when participating in price-cutting and collecting below-market tipping fees, he said.
Mr. Joseph is familiar with the hazards of price-cutting. Prior to his entry into the tire business, he ran a scrap wood grinding business that sold the byproduct as supplemental fuel. But growth in competition and subsequent aggressive pricing took much of the profit out of that business, he said.
As for himself, Mr. Joseph sold off his wood grinders and investigated the scrap tire business. ``With 5 billion tires dumped around the country, it looked like a good move,'' he said.
Michigan Tire is targeting eight different markets for the processed scrap rubber, and Mr. Joseph said he already has purchase orders from six buyers.
However, the firm is avoiding long contractual obligations with end-users. While beneficial, he said, there is always the danger that the end-user could go out of business, leaving him with no buyer. So his company is selling its product on the open market.
Mr. Joseph anticipates revenues of $5 million after the first year of operation.
All equipment and tires are stored indoors. To increase efficiency, the company wants to convert its machinery to hydraulic power, and it may double its current workforce of 30 employees.
Vertical manufacturing also may be on the horizon, according to Mr. Joseph, who eventually wants to manufacture rubber products, such as brake pedals, with the processed crumb rubber.
Michigan Recycling also will service waste-disposal companies, tire haulers and retailers willing to pay $1 for automobile tires and $3 for truck tires for disposal under Michigan Department of Natural Resources guidelines.
While the DNR requires haulers and collectors to register with the agency, it does not have a designation for recyclers. Instead, the DNR requires collection sites with more than 100,000 tires to maintain substantial bonds and account for the end-users of the tire rubber.
Michael Goodin of Crain's Detroit Business contributed to this story.