During the OTR shortage (which now seems like millenia ago), there was a Chinese company that made a name for itself, GPX. Marketed under the names Triangle and Primex here in the US, their tires (along with CMA’s DoubleCoin) were the rare Chinese models that you could sell to a customer, without fear of premature failure.
They would last awhile, and the pricing on them was reasonable. As more than one veteran salesman we know of remarked, GPX made “…a good little tire.”(“Little” is an extremely relative term in the OTR industry.)
Now, their US branch finds itself in bankruptcy court, the victims of the first tire tariffs imposed as a remedy during the OTR shortage. They couldn’t be competitive with the 44% import tariff that was levied on their tires. GPX was lumped in with the rest of the dumpers from China at the time.
Okay, I have to say something at this point. There was a conversation that we had on a weekly basis after OTR tariffs were imposed, and it was this: “Why are they fining these people? It doesn’t matter if they have 4000R57’s at $10K apiece, people know which Chinese brands they can trust, and they aren’t buying ‘Super-Axe Sunshine Brand OTR‘. Most of these dumpers aren’t on the trusted list. The only place people will even consider buying Chinese tires in high volume is Mexico, and I wouldn’t give anything but a GPX/DoubleCoin to them, out of good conscience.”
Yet, the US took the word of the USW, Titan, and Bridgestone about these Chinese tires. For awhile there, I thought it might be the right idea. After looking at actual demand, my thoughts went the other direction. Were the Chinese subsidizing freight? Yes. Freight was outrageous at the time. Agents for the major shipping lines were extremely busy. Getting a freight rate on a container could take 2 weeks. Once the pricing came through, it was enough to make your eyes roll back in your head.
The Chinese Government made a smart business decision, not unlike what many other companies do when they introduce a new product: They took a loss to get consumers to try the product. It’s a very free market idea. The only way a customer would even try a Chinese OTR product, would be if the price was relatively cheap, compared to it’s US counterpart. They were. The quality just wasn’t up to snuff. In fact, to put it nicely, it was vastly inferior. So, to keep people trying the products, they kept making more, and reducing prices(or at least, keeping them vastly lower than open market rates for the tires.)
This is the way the new Chinese economy works. They are still a Communist country, they have just adopted most tenets of Capitalism. In effect, China behaves like the world’s largest mega-corporation. The brand, in this case, is China itself. They want to be the next Michelin, the next IBM, and the next Wal-Mart. Thus, they do everything in their power to promote the Chinese brand. They have the leverage, the labor, and the willpower to succeed. They just lack quality controls on many of their products. Chinese OTR was one sector where the attention to detail was painfully evident.
The market was taking care of the glut of cheap, low-quality Chinese OTR, and allowing the few quality brands that China was producing to succeed. The lack of discrimination and judgment that the USITC showed in those cases ended up killing GPX USA. In addition, the tariffs didn’t take effect until mid-late 2008. At this point, things had fallen off with regard to pricing. The sizes that GPX manufactured were mostly 25″, and below. The boom for these sizes ended by late 2007.
US Manufacturers were beginning to roll out their inventory reduction strategies. Mines and equipment manufacturers like CAT were reducing excess tire inventories as well. The market was literally awash in 25″ tires throughout 2008, and the deluge continues to this day.
While GPX might have survived tariffs levied in the boom years of 2005 to mid-2007, there was no way that they could compete with tariffs that put them near the same price point as a brand-name Firestone, or Bridgestone product in late 2008. Again, we are getting into tiers here. The buyer for a Primex or Triangle tire is not the same customer that is demanding a Michelin, or even a Goodyear. It just doesn’t make any sense.
The USW lawsuit was designed to permanently lock the Chinese out of the tire market. It didn’t matter that the buyers didn’t want most of the tires produced to begin with. The tariffs proposed were designed to kill off any remaining market share that China held. It has done just that.
Just yesterday, a customer called me up, and said the following: ” I need your best price on 4 skidder tires. No Chinese crap.” The Chinese hurt themselves by jumping en masse into OTR, valuing opportunity over quality. The tariffs killed them on the price end, punishing those who manufactured a quality Chinese tire, and still managed to survive the bad press.
The sad portion of this case is that GPX is a victim of time. You see, when the duties were levied, they lodged a complaint with the WTO, stating that the duties were exceptionally high. They don’t have time to wait for the tariffs to be rolled back, and keep their US business, so they must sell, even though they may have been truly wronged.
In the end, GPX USA is just one of the assets that are being sold off to interested bidders. In addition, they have a solid tire division, and a Canadian marketing arm that are on the block as well. Right now, the leading party for acquisition of their US assets is Alliance Tire, whose parent company has manufacturing facililities in Israel. Currently, there are questions as to whether or not they stay the high bidder.
If GPX accepts, Alliance hopes to complete the acquisition by year end.
Heavy Treaddin’ would like to acknowledge Modern Tire Dealer and Tire Review as sources for some of the information used in this article.
We’ll keep you posted on this, and other news affecting the tire and mining industry.
Until next time, we’ll be…
Signing off…
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