In a mailing sent to about 1,700 tire dealers nationwide, the United Steelworkers (USW) has criticized Continental Tire North America Inc.'s business plan and questioned if the company truly is committed to selling tires in North America.
The union claims Conti's supply problems only will get worse and is not a temporary situation resulting from restructuring, according to a letter dated Oct. 4 and written by Joseph Drexler, the USW's manager of strategic research.
Mr. Drexler is claiming Conti will produce 24.3 million tires for North America this year, down from 32 million tires in 2004. Most of those tires, the letter stated, will go to original equipment fitments. It further asserts that daily capacity at Conti's new plant in Camacari, Brazil, is 4,500 tires instead of the 9,000 that Conti had set as the year-end goal when it opened the plant in April.
Mr. Drexler said the capacity estimates are based on a meeting he and union representatives held with workers from the Camacari plant during a September visit to Brazil. Workers there told the USW that work stoppages due to problems with two mixers and glitches in supply of synthetic rubber have caused a production shortfall of more than 90,000 tires, according to the letter.
``Given these numbers, no one should be surprised that dealers are experiencing short supplies of Continental tires,'' Mr. Drexler wrote. ``We expect the problem will become far worse before things improve, and it will be difficult for Continental Tire to make up for lost production with added production at sufficient quality from low-cost countries or from the planned expansion of its Mount Vernon, Ill., facility.''
He acknowledged to Tire Business that he wasn't allowed inside the Camacari factory, but his estimates are based on eyewitness accounts. ``We tried to verify (capacity) several times through different sources, and that's what we believe is the case,'' he said, declining to divulge the names of his sources.
Rick Holcomb, Conti's legal counsel, called the USW correspondence to dealers ``normal campaign tactics.''
``We've discussed these with our dealers and they understand what's going on, they understand this is just a campaign tactic commonly used by the union leadership, and we've satisfied them and given them confidence that we'll continue to provide them tires,'' he said.
Conti's North American tire production has decreased by 7 million tires since 2004, Mr. Holcomb acknowledged, but he said demand is being covered by increased sourcing of tires from Europe, South Africa and Brazil. The company looks at total capacity globally, he said, and that hasn't changed much.
The closure of the Mayfield, Ky., plant and indefinite suspension of tire production in Charlotte, N.C., have caused the 7 million tire gap, he added.
The Camacari plant currently is manufacturing 5,000 tires per day, Mr. Holcomb said. The plant did experience ``initial delays'' due to port delays and power availability. ``However, those issues are behind us now, and we're trying to get back on track to hit target volumes.''
A USW spokesman told Tire Business the reason the union has been contacting Conti's dealers with these charges is to hold the company ``accountable for actions it has taken against its workers, the communities where they live, their tire dealer customers and their own shareholders.''
His comments refer to the ongoing dispute between the USW and the tire maker over the Charlotte layoffs and the ceasing of tire production at that plant. In July, the National Labor Relations Board filed complaints against the company regarding its bargaining practices. A hearing is scheduled for Nov. 28.
The meeting in Brazil was part of a global outreach the USW does to establish relationships with international unions, according to Mr. Drexler. He said he doesn't have estimates for capacities at Mount Vernon or other Conti plants outside of the U.S., but he noted the union hopes to acquire more production information as it meets with workers in other countries, particularly from Mexico, which he had planned to visit on Oct. 17.
``We made the best estimates we can based upon the information that we have, and we challenge anyone to contribute to the discussion about this,'' Mr. Drexler said.
Tire Business in its Aug. 28 issue reported that many Conti dealers were experiencing poor fill rates, and some felt reluctant to use Continental or General signage or promote the brands if they couldn't be guaranteed adequate supply.
The letter to dealers further questioned Conti's marketing strategy for its brands, citing an advertising campaign targeted to Southern California that has been ``missing in action'' and a sponsorship deal with the University of North Carolina's (UNC) athletic department that has drawn the union's ire.
Mr. Drexler said he has been unable to locate any evidence of any major ad campaigns, including the one in Southern California, which he said the tire maker had touted for this fall. Instead, he noted Conti announced in September personnel realignments in its passenger/light truck replacement sales and marketing group.
``I will say we've done our best to track (ad campaigns) and we haven't seen it,'' he said. ``One of the things we ask in the letter is for the dealers to tell us if in fact they've seen a big increase in marketing.''
Conti's Mr. Holcomb refuted the Steelworkers' claims, saying the tire maker had launched a marketing campaign for all California marked by consumer rebates backed by TV and radio spots.
``Right now we consider it a successful program, and we're doing more in the California area than we've ever done in any other region,'' he said.
In September Conti announced a three-year sponsorship of UNC's athletics program. The USW has appealed to the UNC administration to cancel the marketing contract because of Conti's layoffs of about 1,000 workers in Charlotte in favor of lower cost production overseas and its slashing of retiree health benefits.
The union said it has met with student body leaders and UNC President Erskine Bowles to inform them of these issues.
``We want them to drop Continental Tire,'' Mr. Drexler added. ``We don't think that a prestigious university like the University of North Carolina should be associated with a company that's done so much harm to the citizens of North Carolina.''
Mr. Holcomb called the union's criticism of Conti's marketing strategy ``an interesting accusation because on one hand the union is saying we're not doing enough and then they are critical when we engage in some marketing activities with the University of North Carolina.''
He noted that he and other Conti officials had called the UNC athletic department a few weeks ago and spent an hour on the phone telling them their version of the story. ``As far as we knew when we left the phone call, they were very satisfied, not only with our version of the events, but very happy to have Continental as a sponsor,'' Mr. Holcomb added.