Word: rubberizing
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Early in January, Chrysler, the U.S.'s ailing No. 3 carmaker, closed its aging, inefficient Dodge assembly plant in Hamtramck, Mich. Two weeks later, Uniroyal, the No. 4 rubber company, announced plans to shutter one of its oldest tiremaking factories, a 74-year-old mausoleum just south of Hamtramck on Detroit's Jefferson Avenue. The timing of the closings was coincidental, but it did serve as a stark reminder of how quickly a slump in the car industry can affect its many suppliers...
Especially the tire producers. The same worries about long gas lines and soaring fuel prices that have clobbered auto sales have also pummeled the rubber companies. Tire sales are declining, adding to already bulging inventories built up last summer in anticipation of an industry-wide United Rubber Workers walkout. Shipments were off 8.5% in 1979 from 1978's 205.6 million, and the industry finished the year operating at only 65% of capacity. The slowdown in new car sales is only part of the problem. Because people are driving less and are switching to smaller cars that do not wear...
...inflation. It costs 18% to 20% more to make a tire this year than last: the prices of synthetic rubber and other petroleum-based products helped boost the bill for raw materials by 20% to 25%, and the new union contract signed last July could push labor costs up by as much as 40% over the next three years. But even before the cost crunch hit, the industry was suffering from its slowness in the early 1970s to make radial tires...
...smaller companies have suffered most from all these developments. Last July, IRI of Louisville, Ky., the littlest tire manufacturer, filed for bankruptcy; it was followed soon by Ohio's Mansfield Tire & Rubber (1978 sales: $112 million). Before the year was over, Indiana's McCreary Tire & Rubber ($50 million) had stopped making passenger-car tires...
...past behavior of RKO's parent, General Tire & Rubber Co., determined the decision. Ten years ago, General Tire signed a consent decree with the Justice Department, which charged it with forcing buyers of its tires to advertise them on RKO stations. Four years ago, General Tire disclosed that it made illegal political campaign contributions and foreign payoffs and agreed to pay fines of $200,000 after signing a consent decree with the Securities and Exchange Commission. The FCC complaint emphasized that "RKO was effectively controlled by General Tire and hence General Tire's wrongdoing had a direct bearing...