Truck and Bus Tires from China - USITC | United States ...Truck and Bus Tires from China Inv. No....

Truck and Bus Tires from China Inv. No. 701-TA-556 and 731-TA-1311 (Final)

January 24, 2017 Presentation at the

United States International Trade Commission

Andrew Szamosszegi

aszamosszegi@captrade.com

202-955-6817

Themes

Key Themes of Injury Analysis

• The domestic industry is at f u l l capacity.

• Subject imports compete largely with each other, third country providers of lower priced tires, and retreaders.

• There is very limited substitutability between the vast majority of domestic TBT and the vast majority of subject imports.

• The domestic industry sells differentiated products and bundled services that are fundamentally different f rom the subject tires.

• The domestic industry is in a strong financial position and expanding.

• There are significant differences between the TBT market and the PVLT tire market.

2

Conditions

Imports Are Necessary to Meet Demand

80 i Thousands of Tires

70

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

—Domestic Capacity —Total U.S.Market Shipments

Source: Modern Tire Dealer Fact Sections (various issues).

Conditions

TBT Capacity is Increasing while PVLT Capacity is Flat

140

120

100

80

60 \

40

20

0

Daily Capacity 2001 = 100

•Passenger and Light Truck Tire Capacity

•TBT Tire Capacty

~i r i r t 1 1 r

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Source: Modern Tire Dealer Fact Issues 2001-2017.

Conditions

Imports Were Required to Meet Rising Demand over the POI

0 Thousands of Tires

2013 2014 2015 2016

• Domestic Capacity • Total U.S. Market Shipments Source: Modern Tire Dealer Fact Section. Data on 2016 shipments are not yet available. Note: M T D calculates nameplate capacity on a daily basis, while the Commission collects average production capacity on an annual basis. A comparison between the two is therefore inappropriate.

Conditions

80

Imports Are Necessary to Meet Demand Thousands of Tires

(Daily) Imports

(Millions of Tires)

16

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

• Imports —Domestic Capacity —Total U.S.Market Shipments

Source: Daily capacity and shipments from Modern Tire Dealer Fact Issues. Import data, on an annual basis, from USITC DataWeb for commodity codes 4011.20.1015 and 4011.20.5020.

Conditions

Subject Share of Imports Was Flat over the POI

\Share of Import Quantity

2013

62% 58%

2014 2015

• Subject • Nonsubject

2015 2016 Jan - Sep

Source: Prehearing Report Table C - l . 7

Conditions

Declining Rubber Prices Drove TBT Price Declines

Rubber Price (Cents per Pound)

300

250

200

150

100

50

0 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14

Source: Singapore Commodity Exchange via Index Mundi. Rubber, No. 3 Smoked Sheet (RSS3), Singapore Commodity Exchange, 1 s t contract.

Jan-15 Jan-16

Conditions

Producers Pass Through Increases in Raw Material Costs

Margins: Our Confidence

Price vs Raw Materials *"< Trailing 4 Quarters

Note: This is

price only;

excludes the

benefits of mix

Q2 2016

GOODfYEAR

History has shown that we are able to protect absolute margin dollars during periods of rising & falling raw material costs

(a) Raw Materials are changes w n u i prior year and ecrJudea raw material coit iavlrwj; i l l data excludes Venetuela. 67

Source: Goodyear 2016 Investor Day Final Presentation, September 15 2016, at 67.

Conditions

Trucking Tonnage Increased over the POI 2000=100 Index of Trucking For-Hire Tonnage

142.4

125.9 133.5

1 1 5 7 113.6 i n . 9 113.3

Source:: ATA American Trucking Trends 2016 (Figure 3-3) and ATA Press Release, "ATA Truck Tonnage Index Jumped 8.2% in November" (Dec. 20, 2016).

Conditions

Heavy Truck Sales Increased over the POI

0 n I 1 1 1 1 1 f 1

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: Federal Reserve Bank of St. Louis. Motor Vehicle Retail Sales: Heavy Weight Trucks, Monthly, Seasonally Adjusted Annual Rate. September 2016 is a preliminary estimate.

Impact

The Overall Tire Industry is Healthier Now than during the PVLT Investigation

Thousands

59.7 59.1

Employees in the Tire Industry

59.3 P V L T Investigation

(Full Years)

53.9 ^ n 53.6

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: Bureau of Labor Statistics. Employment in Nondurable goods: Tires (NAICS 32621), seasonally adjusted. Values shown are the annual averages of the monthly data.

2016

12

Impact

Stock Prices of TBT Firms Have Risen

\j n i 1 1 i r

1/1/2012 1/1/2013 1/1/2014 1/1/2015 1/1/2016 1/1/20

Bridgestone Michelin Continental Goodyear Titan's Index Source: NASDAQ, daily close/last price. Labels at right are the percent change from 1/2/2013 to 1/12/2017. (Bridgestone and Continental adjusted for stock splits on 10/17/2013 and 12/24/2013, respectively.) Dow Jones Automobiles & Parts Titans 30 Index (via Google Finance). This index includes at least Bridgestone and likely other tire producers.

Impact

The TBT Industry is Even Healthier than the PVLT Industry was

25%

20%

15%

10%

5%

0%

Operating Income /Net Sales

12.9%

9.2% 10.1%

2012 2013 2014 2015 PVLT

Source: USITC Inv. No. 701-TA-522 and 731-TA-1258: Certain Passenger Vehicle and Light Truck Tires from China

(Final), Publication, Table C - l . 14

Impact

TBT Profits Exceeded Those in Other Industries

20%

15%

10%

5%

0%

Operating Income /Net Sales

2013 Truck & Bus Tires — Computers & Electronics — Furniture — • Motor Vehicles Wood Products

Source: Bureau of the Census, Quarterly Financial Reports.

2014 •All Manufacturing •Electrical Equipment Machinery

-Nonmetallic Minerals

2015 Aerospace Fabricated Metals

•Miscellaneous •Primary Metals

15

Volume Effects

Imports Are Necessary to Meet Demand 80 Thousands of Tires

(Daily ) Imports

(Millions of Tires)

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Imports -Domestic Capacity -Total U.S.Market Shipments

Source: Daily capacity and shipments from Modern Tire Dealer Fact Issues. Import data, on an annual basis, from USITC DataWeb for commodity codes 4011.20.1015 and 4011.20.5020.

16

16

Volume Effects

Subject Share of Imports Was Flat over the POI

100% ~\Share of Import Quantity

90%

2013

Source: Prehearing Report Table C - l .

62% 58%

2014 2015

• Subject • Nonsubject

2015 2016 Jan - Sep

17

Volume Effects

PVLT Imports since the Orders

16

14

12

10

8

6

2

Millions of Tires

U.S. Monthly PVLT Imports Preliminary & Final Determinations

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

—China — R O W

Source: USITC DataWeb, monthly 2006 through November 2016, using codes identified in USITC Publication 4545, "Certain Passenger Vehicle and Light Truck Tires from China," at 1-14. 18

Price Effects

Rubber Prices Decreased More than Tire Prices over the POI

120 i index, Jan 2013 = 100

100

80

60

40

20

0 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16

—Tires (includes OTH) —Rubber Source: Tire price: Bureau of Labor Statistics Producer Price Index: Tire manufacturing, except retreading, Truck and bus (including off-the-highway). This price series is representative of domestic producers' quarterly shipments AUVs found in the confidential pricing data. Rubber price: Singapore Commodity Exchange via Index Mundi. Rubber, No. 3 Smoked Sheet (RSS3), Singapore Commodity Exchange, 1 s t contract.

Price Effects

Rubber Prices Decreased More than Tire Prices over the POI

Domestic Tires Subject tires Nonsubject tires Rubber Oil

Source: Tire price: Bureau of Labor Statistics Producer Price Index: Tire manufacturing, except retreading, Truck and bus (including off-the-highway). Import AUVs: USITC DataWeb for commodity codes 4011.20.1015 and 4011.20.5020. Rubber price: Singapore Commodity Exchange via Index Mundi. Rubber, No. 3 Smoked Sheet (RSS3), Singapore Commodity Exchange, 1 s t contract. Oil price (daily): Brent crude, Intercontinental Exchange (using prices from 1/4/2013 and 9/30/2016).

Attribution

Declining Raw Material Prices Cause Tire Prices To Decrease

Margins: Our Confidence GOOD/YEAR

History has shown that we are able to protect absolute margin dollars during periods of rising & falling raw material costs

(a) Raw Materials are changes versus prior year and excludes raw material COR swtnfs; all data excludes Venetuela. 67

Source: Goodyear 2016 Investor Day Final Presentation, September 15 2016, at 67.

Attribution

Heavy Truck Sales Declined in 2016

Thousands, SAAR

500

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: Federal Reserve Bank of St. Louis. Motor Vehicle Retail Sales: Heavy Weight Trucks, Monthly, Seasonally

Adjusted Annual Rate. September 2016 is a preliminary estimate.

Threat

No Vulnerability: TBT Industry is Even Healthier than the PVLT Industry was

25%

20%

15%

10%

5%

0%

Operating Income /Net Sales

12.9%

9.2%

2012 2013 2014 2015 PVLT

Source: USITC Inv. No. 701-TA-522 and 73 l-TA-1258: Certain Passenger Vehicle and Light Truck Tires from China (Final), Publication, Table C - l .

Threat

250 Index 1/2/2013 = 100

200 ]

150

100

50

No Vulnerability: Stock Prices of TBT Firms Are High

POI

0 1/1/2012

+ 118%

+73%

1/1/2013 1/1/2014 1/1/2015 1/1/2016 1/1/20

•Bridgestone Michelin Continental Goodyear Titan's Index Source: NASDAQ, daily close/last price. Labels at right are the percent change from 1/2/2013 to 1/12/2017. (Bridgestone and Continental adjusted for stock splits on 10/17/2013 and 12/24/2013, respectively.) Dow Jones Automobiles & Parts Titans 30 Index (via Google Finance). This index includes at least Bridgestone and likely other tire producers. 2 4

Threat

120%

100%

80%

60%

40%

20%

-20%

-40%

-60%

TBT Demand in China: Truck Production in China is Growing

Medium and Heavy Truck Production in China

Year on year change (of 3-month moving average)

li I,I

'"I I •

i i .i

II 1

II

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Source: China Association of Automobile Manufacturers, via Haver Analytics.