HILTON HEAD ISLAND, S.C.—Asia is the only real growth area for the world tire industry in the near future, according to Dennis Byrne, professor emeritus of economics at the University of Akron.
Mr. Byrne, who spoke at the 29th annual Clemson University Tire Industry Conference at Hilton Head Island, said “the only real game in town at the moment is in China and perhaps India.”
While domestic tire production has rebounded somewhat since the recession of 2008, shipments in 2012 were stagnant, according to Mr. Byrne.
“The industry is continuing to contract from production levels of five to 10 years ago, and I don't see that stopping.”
International trade in both tires and vehicles is the major reason for this, he said, noting that about one-fourth of the vehicles and tires sold in the U.S. are imported. Some of the stagnancy in production figures can be traced to other factors, such as the radialization of the tire industry.
“This was the first real paradigm shift in the industry,” Mr. Byrne told the Clemson audience. “When I was young, a car might need 24 to 28 tires during its lifetime. Now it needs maybe eight to 10.
“A good radial tire will last almost as long as the vehicle it's mounted on.”
Away from North America, the situation isn't much brighter, according to Mr. Byrne.
“Western Europe is hurting economically, and that probably won't change,” he said. “Eastern Europe shows a lot of promise, but it's too closely tied to Western Europe at present. South America continues to muddle along. It doesn't have much going on yet.”
Alone among South American countries, Brazil has a good outlook in the intermediate term, though it too has economic problems, he said.
In Asia, Japan and South Korea have slow growth, though the aftereffects of the March 2011 earthquake/tsunami in Japan may still explain some of the stagnancy there, according to Mr. Byrne.
“China is now the largest producer in the world,” he said. “But China decided it was growing too quickly, and clamped down on growth.
“India seems finally to be on the path where they want to be. It's not yet a major producer, but it will be.”
Every area of the world faces at least some obstacles to growth, Mr. Byrne said. Even China faces problems, including environmental issues, rising wages which make Chinese products less competitive against products made elsewhere, and a lack of skilled labor.
As for Europe, he said, it is enough to know that the crisis in Cyprus, which represents about 0.5 percent of the European Union's economy, was nearly enough to create a continentwide meltdown.
“If one country drops the euro, the euro will fall apart,” he predicted.
The U.S. runs a deficit with every one of its major trading partners, and one of the reasons is that American firms are multinational, according to Mr. Byrne, who said “the headquarters is just where the board of directors meets.”
For that and other reasons, the U.S. tariffs against Chinese tires didn't work, he said. It took tire plants in Indonesia, Korea and Thailand exactly six months to ramp up to replace Chinese shipments.
U.S. tire production seems to be stabilizing in the 13- to 15-percent range of world production, Mr. Byrne said.
The U.S. tire industry is declining both absolutely and relatively, he added, but it remains a major market—and the same is true of all the developed world.
There is little pros-pect for the U.S. experiencing significant growth in tire production, according to Mr. Byrne.
“Replacement tires have sailed, and they're not coming back,” he said.
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