FINDLAY, Ohio—Cooper Tire & Rubber Co. executives feel the company will not be as impacted by the likely implementation of U.S. duties starting next year on imports of consumer tires from China as it was in 2009-12 because the company's product mix is more high-end now.
“We're 25- to 30-percent less exposed today than where we were before,” Cooper Chairman, CEO and President Roy Armes told financial analysts in an Aug. 7 conference call.
Ultimately, although the company is moving farther away from the lower end, these tariffs do cause a disruption, so Cooper will have to adjust as needed. Mr. Armes noted that the last time the tariffs were in place, imports were still coming in from other nations.
“At the same time, we saw other countries enter into the market and pick up a lot of slack on these imports, because during that period of time of the tariffs, imports continued to increase,” he added.
The International Trade Commission (ITC) has made a decision on the antidumping and countervailing duty investigation against certain pass-enger and light truck imports, and the Department of Commerce is conducting further investigation and determination.
Although the outcome of the duties determination is still unknown, Mr. Armes said, “based on our past experience, we know that tariffs have been disruptive to a normal market and if they are imposed again they're likely to be disruptive again.
“Tariffs are felt in the marketplace where they are being applied, but they also often affect other markets. We continue to support free and fair trade in a globally competitive market.”
Concerning another matter in China—that of determining the value of the tire maker's Cooper Chengshan (Shandong) Tire Co. Ltd. (CCT) joint venture—Cooper said it is still waiting for completion of an independent “fair market” valuation of that entity. The company expected to report that value Aug. 11 but disclosed that day that it had extended the deadline for a “brief period.” As of Aug. 14 Cooper had yet to release the information.
“The process to arrive at the long-term ownership of CCT is ongoing,” Mr. Armes said. “Cooper has briefly extended that deadline to allow for some additional work to take place related to the process. We will continue to communicate with investors and others at key points in this process as appropriate.”
During Cooper's recent second quarter conference call with analysts, Mr. Armes noted: “We continue to work through that process and, regardless of the ownership outcome, China will continue to be an important part of Cooper's long-term growth strategy.”
Although the valuation has yet to be created, Cooper did reach an agreement with its joint venture partner at the end of January regarding the process of determining the long-term owner of CCT, which ceased making Cooper-brand products last July at its plant in Chengshan, China, in protest of Cooper's then-pending alliance with India's Apollo Tyres Ltd..
Once a valuation is established, Cooper said Chengshan will have 45 days to either purchase Cooper's 65-percent stake in the company or sell its own 35-percent interest to Cooper. Should Chengshan decide not to exercise either option, Cooper has the right under the agreement to purchase Chengshan's share.
Although CCT halted production in the last half of 2013 and the beginning of 2014, the company has now returned “to normal production levels, which helps support the volume growth in the quarter,” Cooper said.
This includes CCT's resuming production of Roadmaster medium truck radials earlier this year while production of all brands is ongoing, with the plant now nearly at full production levels. Mr. Armes said customers have been responding well to the Roadmaster tires and Cooper is working to continue this business segment.
“We are regaining our position with 90 percent of our top 30 customers and expect to continue to make progress in the second half,” said Brad Hughes, senior vice president, international operations, and CFO.
Mr. Armes added that although Cooper does not yet know the resolution of the CCT ownership, it does have the “financial wherewithal to meet all of our obligations, support our growth strategy including investment in our growth in China through CCT or otherwise along with the accelerated share repurchase to ensure a bright future for Cooper.”
To reach this reporter: [email protected]; 330-865-6143; Twitter—@jenniferkarpus.