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Dealers react to tariff decision

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Dealers react to tariff decision

One dealer called it “bad for the United States.” Another dealer called it “anti-consumer.” Yet another said it was “politically motivated.”

Independent tire retailers and wholesalers have been blunt in their assessment of President Barack Obama’s decision to slap punitive tariffs on Chinese-made passenger and light truck tires.

“It’s really unfortunate what the president has done,” says John Quirk, CEO and president of Lewiston, Maine-based VIP Parts, Tires and Service, one of the country’s largest independent tire store chains with 57 stores throughout New England.

Tariffs will lead to higher prices, which will stretch the budgets of entry-level tire buyers even further, he believes.

“It’s certainly going to raise prices dramatically; I think that’s a foregone conclusion. Not only are (prices of) Chinese products going to go way up, I think every tire manufacturer is going to follow suit. We’re going to see multiple price increases throughout the year.”

Quirk says supply will be impacted, as well. VIP sells a significant amount of Chinese-made private brand tires supplied by TBC Corp. “We’ve had to make some adjustments. To protect ourselves, we already have put in larger orders to ensure we don’t fall short on supply. But it’s going to put some pressure on our inventories.”

[PAGEBREAK]A to Z Tire & Battery Inc., an 18-outlet dealership based in Amarillo, Texas, also is struggling with supply, says President Phil Nussbaum. (The company operates four wholesale centers, as well.)

“Our inventory on hand has been affected pretty negatively.”

Nussbaum says some of his suppliers with factories in China pulled back on shipping in anticipation of the ruling. “We also had some manufacturers who have moved molds out of China to other countries. From a supply standpoint, those product lines have dried up quickly.”

A to Z Tire may be forced to drop some Chinese-made lines. “Many of the manufacturers are still sending in their price changes, so we have to review where we’re at with each manufacturer. We have to make decisions on each product line. We’re like everybody; we’re looking for the best deal for our customers. We thought we had the best deal figured out.

“I think short-term, sales will still be good. I don’t see a change in that other than scrambling to figure out where to get tires from. Then it becomes a (situation in which) he who scrambles the best gets the most sales.”

The decision to levy the tariffs “makes no sense to me,” says Ben Kravitz, president of Summit Tire of Mass. Inc., a Brockton, Mass.-based wholesaler with three distribution centers. “I think it’s an anti-consumer measure. We’re already starting to see some price bumps, and some of the deals out there are drying up.”

Kravitz says his company is fortunate because it’s more major brand-oriented than some of its competitors. However, it does carry some Chinese-made lines. “We saw this thing coming, so we have some extra inventory. We stocked up on Chinese merchandise. We have a month or two to sort it out. It hasn’t affected us yet.” Despite this, he believes the tariff decision will prove to be a mistake that ultimately will hurt the end user.

[PAGEBREAK]

That sentiment is shared by Chris Roberg, owner of Pacific Tire Distributors Inc. in Portland, Ore.

The company wholesales to retail tire shops.

Roberg says tariffs will lead to price hikes that will be passed down the customer chain. “We work on high volume and slim margins. We’re not in a position to absorb anything. And that gets right down to the consumer — the end person in the chain is going to feel the impact.”

Chinese tires make up about 25% of Pacific Tire Distributors’ total product screen. That percentage includes tires from domestic tire manufacturers who have set up factories in China. “In the short-term, there are going to be bumps in the road, primarily with supply. We always have containers on order or on the water. Right now, nobody is accepting orders.”

“I think (the tariff decision) is going to have the opposite result from its intended result: to spur more jobs in America, sell more American-made tires, that kind of thing. In effect, it’s going to put more people out of business. There are a lot of distributors who do nothing but import Chinese tires.”

Not all tire dealers believe the tariff ruling will hurt them. Bob Kellogg, president of Warren Tire Service Inc., a 14-store chain based in Queensbury, N.Y., says the ruling may impact 1% of the tires his company sells. Warren Tire sources most of its products from American plants.

According to Kellogg, very few of the tires it gets from Goodyear Tire & Rubber Co., “only two small segments of certain lines of tires,” are made in China. The ruling “levels the playing field a little bit more.”

“We don’t sell a lot of what I would call the ‘Pep Boys-type’ of Chinese tires — the real low-end, no-name tires,” says Barry Steinberg, owner of Watertown, Mass.-based Direct Tire & Service Inc. “We’ll sell some Wanli’s, Federal’s and Maxxis tires, but they’re not a big part of our business. But I’m sure TBC, Del-Nat and the other big private brand guys... are going to be in a funk because their sources have just dried up at that level. The $25 tire doesn’t exist anymore.”    ■

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