WASHINGTON-The U.S. Justice Department's Antitrust Division is investigating the tire industry, with a focus on possible price- fixing by tire manufacturers. Tire makers-who universally
insist they do not fix prices-are cooperating with the probe.
``We don't see anything we have done that's wrong,'' a Bridgestone/Firestone Inc. spokesman said. ``We feel sure that when the investigation is completed, it will be found that we comply with all antitrust regulations.''
The Justice Department's Cleveland office served all U.S. tire makers with subpoenas in April, but the investigation came to light only recently, when Goodyear mentioned it in a regular filing with the Securities and Exchange Commission.
A Justice Department spokeswoman in Washington confirmed that an investigation is under way, but would not provide any details. ``It's an ongoing investigation.*.*.*,'' she said. ``We're looking at anti-competitive practices in the tire industry.''
Goodyear, Michelin North America Inc., Continental General Tire Inc., Dunlop Tire Corp. and Cooper Tire & Rubber Co. confirmed they received and responded to the Justice Department subpoenas. Pirelli Armstrong Tire Corp. declined to comment.
``We provided a quantity of documents to the Justice Department at the end of June,'' said Dunlop legal counsel Jim Fox, adding that the company has heard nothing from the investigators since then.
``We're still in the process of gathering documents,'' a Goodyear spokesman said. ``We don't have a timetable on the investigation-there's no guidance in that respect.''
This isn't the first action against alleged price-fixing in the U.S. tire industry. The largest effort came from the Federal Trade Commission in the mid-1970s.
Tires long have been notoriously underpriced. Stiff market competition dampens any moves to raise prices, despite rapidly rising costs.
Nevertheless, Goodyear has raised prices twice so far this year, and as usual, when one tire maker raises prices, others follow suit. It is this seemingly unanimous price movement that draws government attention, according to industry observers.
The Justice Department is on a ``fishing expedition,'' said David Garrity, an analyst with Smith Barney Harris Upham & Co.
``If (tire makers) were indeed colluding on pricing, they're doing a very poor job of it,'' Mr. Garrity said.
The tire consumer price index is under performing compared with the overall index, he noted-something that wouldn't happen if tire makers fixed prices.
Mr. Garrity also said he didn't understand why the Justice Department is including original equipment tires in its investigation, since automakers would never stand for price-fixing.
Both Mr. Garrity and Joshua Harari, an analyst for Standard and Poor's Corp., said raw materials costs were behind the latest tire price hikes.
Mr. Harari suspects the investigation is nothing more than a routine review of tire makers. ``It seems they might not have much of a case at all,'' he said.
That's the opinion of Louis DiPasqua, a past-president of Goodyear's Kelly-Springfield Tire Co. subsidiary and currently president and CEO of Memphis, Tenn.-based TBC Corp., one of the nation's largest marketers of private brand tires.
He reacted with disbelief to the price-fixing probe, calling it ``very ironic-almost unbelievable.*.*.*I just can't see any kind of evidence this occurs within our industry.''
Despite ``very severe'' cost escalations on raw materials prices, the tire industry still is seeing a lot of pricing erosion due to discounting, he said. ``It just boils down to overcapacity. There's even less pricing discipline this year than last, simply because of a downdraft in the original equipment and replacement markets.''
He pointed to the fact that while most tire factories were gearing up for ``a 16-million light vehicle year'' in 1995, in actuality ``it looks like it's going to be about 14.9 million.'' And on the heels of shipments of 170 million auto tires last year, 1995 numbers will be closer to 167 million units.
The price-fixing probe ``is a waste of the taxpayers' money,'' said Harry Millis, an analyst with Fundamental Research Inc.
During his years covering the industry, the government has investigated tire makers two other times without success, Mr. Millis said. ``The tire industry's practices haven't really changed over the past 30 years.''
Some analysts have said it is ``standard practice'' for Goodyear to lead the industry in price increases. But a spokesman for Continental General disputed this.
``Our pricing is based on our particular costs,'' he said. ``There are instances where we've been well ahead of the industry.''
Even if Goodyear does lead the industry in pricing, that is scarcely improper, the Goodyear spokesman said. ``Historically, if you look at the leader in any market, it is more likely to take the initiative when market situations dictate a raise in prices.''
Reporter Sigmund J. Mikolajczyk contributed to this story.