Will Manufacturers Kill the Used Tires Biz?

Tiremakers have long held the re-sale market at arms length, out of a healthy respect for the boundaries of anti-trust regulations.  But a number of factors are aligning that may shift the market away from the re-sale of used tires for vehicles. The cost of selling used tires is going up – the scrap market is growing in tandem with the demand for used tires to be recycled into fuel to meet the energy requirements of rising economies, such as China’s. At the same time, tire litigation is getting more sophisticated and manufacturers have a keener understanding of their liability.

In 2007, Safety Research & Strategies kick-started this shift by publishing Used Tires: A Booming Business with Hidden Dangers. The report made the link between crashes, tire age and used tires, using data to show that nearly one-third of aged tire crashes investigated involve used tires. It also noted that inspections by used tire wholesalers are cursory and lead to dangerous tires entering the market and recommended used tire sellers adopt higher standards that included visual reviews and internal examinations, such as shearography or X-rays.

The story gained traction in the mainstream press, garnering stories in major daily newspapers, such as The New York Times, and the Wall Street Journal, and television news stations covering large markets, like KHOU of Houston, Texas. In response, Continental issued a Technical Bulletin listing dozens of concerns to look for before a used tire can be considered. Bridgestone-Firestone announced that its corporate stores would no longer sell used tires. The Tire Industry Association (TIA) announced that it would examine a used tire safety program and service certification program.

And in May 2007, the Rubber Manufacturers Association issued a Tire Information Service bulletin warning consumers about the dangers of used tires. After a disclaimer that it’s okay to install a used tire if a consumer knows the tire’s history and has it properly repaired, the association enumerated 14 conditions that posed a used tire risk, including: innerliner or bead damage; indication of internal separation, run flat under-inflated or overloaded damage, a defaced Tire Identification Number, inadequate tread depth and evidence of improper storage. It’s unclear how the average consumer would be able to discern any or all of these conditions without training or a shearography machine, but the RMA took a step away from the secondary sale market.

Subsequent to the RMA bulletin a Goodyear manager wrote a letter to the company’s National Account Sales Lead stating Goodyear’s desire to migrate 100 percent of their used tires to the scrap market.

“Goodyear would like to be the first tire manufacturer to completely destroy the tires removed from customer vehicles in their retail stores.  This shift in focus for tire disposal is in response to a growing concern that “used” tires are becoming an unsafe alternative for consumers to cut costs.  Currently 8-20% of Goodyear scrap tires that are disposed of at Goodyear locations find their way to a tire re-seller and this is a way for waste management companies to generate revenue to offset rising operating costs.  Although re-sellers can provide a warranty for these used tires, Goodyear takes responsibility to properly dispose of these scrap tires to insure the public’s safety.”

More recently, economics are coming into play. A July Tire Business report, noted that exports of California scrap tires were being exported to Asia in such quantities that scrap tire dealers in that state were hard pressed to find enough inventory “to stay in business.” One tire recycler in Livermore, CA said that he had lost up to 40 percent of his business to Asia, where they would be used as tire-derived fuel.

And certainly, litigation will be a force in the break-up between manufacturers and the used tire business. In the past, plaintiff’s attorneys, which have successfully sued tire dealers for mounting defective used tires. But as tire litigation is becoming more mature, and attorneys are going after manufacturers as well.

While the RMA’s 2008 Used Tire Bulletin may not have been a smoking gun in a products liability case, arguably because manufacturers have an interest in selling more new tires, the Goodyear letter, written in plain-as-day English certainly has potential.

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