FRANKFURT-The recent plunge in the value of the U.S. dollar vs. other major currencies has ignited a spurt in tire buying and trading among the world's large international wholesalers, focusing attention on a billion-dollar industry that operates parallel to the ``official'' channels of trade. When the value of the dollar fell below 1.40 German marks in March, traders who were able to move fast were in a position to pad their profit margins almost overnight by as much as 10 to 15 percent over normal business conditions.
When currency values swing significantly and rapidly, the so-called ``gray'' market for tires booms as marginal players get active hoping for a windfall profit.
As one international trader remarked, ``The fax machine allows almost any tire dealer to get involved in container trading.''
Loosely defined, gray market trading involves the selling of tires or other products in geographic markets other than those intended by the manufacturer.
The importing or exporting of tires or other products without the sanction of their manufacturer usually involves obscure or ``gray'' areas of the law-which is how the practice differs from ``black-marketing,'' which is clearly illegal.
Trade in the major brands is usually the most lucrative, since a dealer who can obtain a globally advertised brand for less than his competitor, can sell it at the market price, or slightly discounted, and still make a larger profit than would have been possible under normal conditions.
Tire manufacturers argue that the gray marketing of tires plays havoc with their pricing policies, leading to complaints from dealers who have not bought from traders.
Manufacturers also point to the fact that there are technical differences built into tires for various geographical regions.
For their part, the traders feel the major, globally active tire makers are able to play both sides of the net in pitching their products. On the one hand, they argue that tires made in a company plant in one corner of the world are of the same quality as those made elsewhere, while at the same time exercising a ``technical escape clause'' that maintains tires designed for conditions in one part of the world are not intended or appropriate for use in another.
In years past, selected European manufacturers have sought to stymie gray market trading by warning dealers they would not honor guarantees on certain tire types imported from outside of Europe by independent, ``unauthorized'' traders.
Because of the potential for bad publicity resulting from poor performing tires, tire companies are particularly sensitive to these ``displaced'' products, and by disclaiming warranty coverage for such tires they put the onus on the seller and/or importer.
In nearly every case, the reason given for not honoring the warranties is technical. For example, tires built for use in North America, where a premium is put on treadlife and comfort, often will not perform to the satisfaction of European consumers, who emphasize wet grip and handling, tire company officials maintain.
A case in point might be Goodyear's Aquatred. Promoted in North America as a water-clearing wonder, the product was redesigned with extra circumferential drainage channels before it was put on sale in Europe in order to increase its water evacuation characteristics.
A common weapon tire makers use to control unauthorized international trade is sidewall marking. Tires to be sold in the U.S., for example, must have the U.S. Department of Transportation (DOT) codes-manufacturing plant identification and Uniform Tire Quality Grading information among them.
A dealer in the U.S. selling a tire without a DOT code can be fined $10,000 per tire, according to a Goodyear spokesman.
In Europe, tires to be sold after Jan. 1, 1996, must carry an ``E'' mark-signifying a minimum quality standard.
Additionally, the 15-nation European Union requires tires sold within its jurisdiction to carry an ``e'' marking, indicating they have passed a series of performance tests designed to demonstrate roadworthiness.
For tire makers, sidewall marking offers a relatively easy way to keep tires in the desired geographic region and throttle trade through independent channels.
Groupe Michelin is the company most active in trying to control international trade, according to large wholesalers.
Its European budget-oriented ``Classic'' line tires, for example, do not carry all the DOT information required for sale in the U.S., making them ``unattractive'' for traders, a spokesman said.
Alternatively, Michelin notified European dealers in a recent letter that it will not honor guarantees in Europe on its MXTE, an ``export-only'' product intended for tropical/equatorial climates that is being re-imported and offered for sale in Europe.
Michelin said the MXTE was designed for enhanced resistance to heat and road hazards, changes that yield a trade-off in aquaplaning characteristics expected by European consumers.
Further, Michelin noted, the S-and T-rated MXTE does not bear either of the European-type approval markings.
In another case, Bridgestone Corp. a few years ago marked Bridgestone RE88 performance tires manufactured in Japan but intended for sale in the U.S. with a load rating slightly different from that on products homologated for fitment on cars in Europe.
The result was tires that essentially could not be sold in Germany-arguably the most lucrative European market-because that country requires cars be fitted with tires that have been approved technically for fitment by the car maker.
The two versions of the tire were identical, however, according to the results of tests conducted by a German laboratory at the behest of a Dutch wholesaler interested in selling the U.S.-bound version.
In the current global currency environment, the trade winds are blowing primarily west to east, i.e., from the U.S. to Europe or elsewhere.
Additionally, the devaluation of the Spanish peseta and Italian lira vs. other European currencies last year created opportunities within Europe for ambitious traders. And trading under such conditions is nearly impossible for the manufacturers to control, although some are trying to monitor the situation by marking tires with ink that can be detected only by use of an ultraviolet lamp.
In years past, the problem was considered more critical, as major manufacturer brand tires produced in Africa, Asia or South America with locally available raw materials and designed for local conditions appeared for sale in Europe or North America.
While widespread failures were not reported, all it takes is one failure to cause migraines for manufacturers, tire company representatives said.