SHANGHAIDouble Coin Holdings Ltd., one of China's largest tire manufacturers, is studying the feasibility of building a tire plant outside of China as a way of growing the company and combating the higher duties it is facing for exporting OTR tires and passenger and light truck tires to the U.S.
Possible sites include the U.S. and Thailand, said Liu Xunfeng, chairman of Huayi Shanghai (Group) Co., a state-owned, $10 billion company that holds a 66-percent ownership in Double Coin. The remaining shares are traded on the Chinese stock market.
Mr. Liu spoke about the possibility of the new plant in an interview Aug. 26 in Shanghai with the U.S. tire trade press.
The Huayi executive would not speculate on a timetable for deciding on the feasibility of a new plant, which would be Double Coin's first outside of China. He also declined to specify what type of tires the plant might build.
Mr. Liu did say, however, that the company has good cooperative relationships with companies in various industries in both Thailand and the U.S., making them good choices for a factory.
That's why we are considering a possibility for a tire plant in America, but it's only considering, thinking, Mr. Liu said. There's no decision.
The company, he said, still needs to do more due diligence for the lawyers, unions, policies, market competitiveness, etc. because for Chinese companies to sell the products to America is one thing. To set up a plant in America is another thing. It is totally different.
Along with the possibility of building a new tire plant, Mr. Liu said Double Coin and Huayi are open to possible joint ventures in the U.S. with other tire companies.
This might be in the form of acquiring capacity in another company's tire plant that has excess production, an off-take arrangement with a manufacturer in the U.S., joint cooperation on the business side and/or technical cooperation.
With any such agreement, Double Coin would like the arrangement to lead to synergies and positive results for the companies involved as well as their customers.
Mr. Liu singled out Goodyear and Cooper Tire & Rubber Co. as American companies with which Double Coin would like to develop some sort of cooperation.
The point is, it depends whether you want to make the tire company stronger and expanding by doing some kind of joint venture, he said.
Double Coin has been hard hit by the elevated import duties levied by the U.S. government against Chinese tire makers exporting OTR and passenger and light truck tires to the U.S.
In late 2014 the U.S. Department of Commerce assigned anti-dumping duties of 105.59 percent on Double Coin for OTR tires less than 39 inches in size imported into the U.S. As a result, the tire maker stopped importing OTR tires into the U.S. in April because it was no longer financially feasible to do so.
The company is supplying OTR customers with inventory out of its warehouses in Los Angeles and Memphis, Tenn., and will do so until that inventory is depleted, said Aaron Murphy, vice president of China Manufacturers Alliance (CMA), Double Coin's sales division in the U.S., based in Monrovia, Calif.
About one-fourth of Double Coin's OTR production has been impacted by the Commerce Department's decision, according to Mr. Liu.
Once its U.S. OTR inventory is depleted, CMA/Double Coin temporarily will be out of the OTR business in the U.S., Mr. Murphy said, stressing the word temporarily.
Double Coin also is facing elevated antidumping and countervailing duties on passenger and light truck tires exported to the U.S., following a ruling earlier this year by the U.S. Commerce Department's International Trade Commission (ITC) that the U.S. tire manufacturing industry had suffered material injury due to passenger and light truck tire imports from China.
Double Coin was not identified individually in the ITC's final ruling, meaning it was included in the PRC (Peoples Republic of China) -wide category. Those firms received an anitidumping duty of 87.99 percent and a countervailing duty of 30.91 percent for a total of 118.6 percent.
The reason the company was placed in this category, Mr. Murphy said, was not because Double Coin was dumping tires but because of a new DOC policy that if a Chinese tire company is more than 50-percent owned by a state-owned assets company (Chinese government), they are not eligible for a separate rate.
In addition, he said, they are not eligible to be placed in the blended rate. In essence, they are thrown out of the market based on who owns the factory, not whether or not they are dumping tires.
The ITC ruling has eliminated any possibility of Double Coin's selling and marketing the Warrior-brand passenger and light truck tire line in the U.S., Mr. Murphy said. Double Coin had introduced the brand at the 2013 Specialty Equipment Market Association (SEMA) show and had begun selling units in the U.S.
Further influencing Double Coin's consideration of a plant outside China is the possibility the U.S. government one day may look to impose higher duties on Chinese truck tires imported into the U.S., Mr. Liu said.
The American market is one of the most important markets among Double Coin total exportsmost important, he stressed. We have spent almost 20 years cultivating this market with all our American colleagues. We don't really want this to happen.
Double Coin operates five tire plants in China:
c Double Coin Heavy Duty Tire Co. in Shanghai, which produces about 2.5 million units of radial truck tires annually as well as large and giant OTR radials;
c Double Coin Holdings Jiangsu Tire Co. in Rugao, China, which manufactures 2.5 million units of TBR tires and 100,000 OTR and industrial radial tire units a year;
c Double Coin Holdings Chongqing Tire Co. in Chongqing, China, which makes 1.2 million units of TBR tires a year; and
c The recently acquired Double Coin Holdings Xingjiang Kunlun Tire Co. in Urumqi, China, which makes radial and bias TBR tires.
The company also operates Double Coin (Anhui) Warrior Tire Co. Ltd., located in Wuwei, Anhui Province, China, in a joint venture with Group Michelin. Double Coin owns 60 percent of the venture and Michelin 40 percent. The factory produces 2 million passenger and light truck tires annually.
Founded in 1929, Double Coin prides itself on a number of firsts. It produced the first Chinese automobile tire in 1934, introduced the Warrior brand in 1935, produced the first Chinese all-steel heavy-duty radial truck tire in 1964 and the first Chinese passenger car radial in 1982.
In 2002 the company manufactured the first Chinese all-steel radial OTR tire. A year later it produced the first all-steel radial industrial tire, and in 2010 it became the first Chinese tire maker to have a fuel-efficient tire certified by the U.S. Environmental Protection Agency.
The tire maker would record another first should it decide to build its next plant outside of China.
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