Cooper monitoring U.S. truck tire tariff situation

FINDLAY, Ohio (Aug. 5, 2016) — Cooper Tire & Rubber Co. expects its pending deal to buy control of a Chinese truck tire maker to be finalized before year-end, but the company also continues to evaluate other options for truck tire supply, especially in light of elevated tariffs on Chinese truck tires being studied by the U.S.

Cooper disclosed in January its plan to buy a 65-percent share in China's Qingdao Ge Rui Da Rubber Co. Ltd., a Pingdu, Qingdao-based company focused on truck tires.

Cooper has budgeted approximately $92 million for the acquisition and initial investments in the company, previously known as Qingdao Guang Ming Tire Co. Ltd.

Thus far Cooper has made a down-payment of $5.93 million, according to its second-quarter 10-Q form filed with the Securities and Exchange Commission.

The down-payment is fully refundable in the event that the transaction does not close, Cooper said, and does not provide it with any power to direct the activities of GRT prior to the transaction's closing.

Cooper said it expects GRT — to be renamed Cooper Qingdao Tire Co. Ltd. after the closing — to serve as a global source of truck and bus radial tires for Cooper, which uses the Roadmaster brand name for truck tires.

Radial passenger tire capacity may be added, Cooper said.

In its filing, Cooper reminded shareholders that the GRT route is just a first step in its truck/bus tire sourcing strategy.

“We believe this investment remains prudent, and we are committed to continuing to deliver high-quality tires and superior value to our TBR customers,” Cooper said.

“As part of that commitment, we are continuing to evaluate other option for additional TBR supply to serve global markets, including alternatives outside of China.”

In line with this strategy, Cooper noted it is “assessing the impact of the preliminary countervailing duty tariff announced on July 28, with the goal of keeping Cooper and our customers competitive.”

Since the preliminary anti-dumping tariff has not yet been announced, Cooper said it's “not yet clear how the market and pricing will be impacted.”

In the company's second-quarter conference call with analysts, Bradley Hughes, chief operating officer and senior vice president, said Cooper believes there is insufficient domestic supply to meet demand for TBR tires in the U.S. and that the majority of the excess suppliers are in China.

Mr. Hughes added that the company's estimated 2016 operating margin guidance includes an estimate of the impact of the tariffs.

“I want to underscore that we are committed to the TBR business,” Mr. Hughes said, “and we'll continue to provide high-quality tires at a great value to our customers.”

He also said Cooper is monitoring the market reaction related to the “Brexit” vote in Europe, including assessing what impacts, if any, the United Kingdom's decision to leave the European Union will have on its business.

Cooper's European headquarters and primary manufacturing is in Melksham, England, with additional manufacturing capacity in Krusevac, Serbia.

This footprint, Mr. Hughes said, “positions us well to meet customer demand and respond to any changes.”