Check the Pressure in Your Tires.. and Your Supply Chain

Monday, June 25, 2007 20:59
Posted in category From the Factory Floor

This morning, the headlines read Importer Issues Warning on Chinese Tires, Chinese Tires Are Ordered Recalled, Importer Told to Recall Chinese Tires .. and I think with that, we have our next Chinese product to added to the Deadly dangers made in China

At the heart of this recall (some stories say it is official.. others don’t) is that Foreign Trade Sales of Union N.J. has been importing tires from Hangzhou Zhongce Rubber, and that some of these tires are missing a thin piece of gum rubber that Foreign Trade Sales asked to have added as an added safety element to the tire (anyone who remembers the massive recall of Bridgestone tires a few years ago should understand why).

Well… apparently Zongce Rubber failed to add that extra strip, and we have what looks like a federal recall either in place or on the way. So, with that… here are some interesting bits that I have pull from the articles (I have added bold and underline to highlight some areas):

From AZ Central:

The tires, used as replacements on pickup trucks and sport utility vehicles, lack a critical component, which could cause the tires to fall apart on the road, FTS told the agency. The Chinese company, Hangzhou Zhongce Rubber Co., built the tires for FTS with a gum strip that was inadequate or with no gum strip at all, FTS said. The strip is used to prevent tread separation.

From WSJ:

Adding a layer of complexity is the fact that the tires meet minimal U.S. safety requirements, according to FTS. The distributor notes that it often demands additional features to make tires more durable than the requirements.

From the NYT article:

The company first suspected problems in October 2005. Almost a year later, in September 2006, the Chinese manufacturer, Hangzhou Zhongce Rubber, a former state-owned company based in eastern China, acknowledged that a gum strip that prevents the tread from separating was left out of the manufacturing process.

Lawrence N. Lavigne, a lawyer for Foreign Tire Sales, said the company did not alert the National Highway Traffic Safety Administration about the problems until June 11 because officials had no definitive proof of a manufacturing flaw until it was revealed by further testing in May. He said it made no sense to initiate a recall based on suspicions.

Again from AZ Central

The tire distributor contacted NHTSA after a lawsuit was filed in May over a rollover accident that left two dead and one man with a severe brain injury. Carlos Souza, 19, who was injured, and the families of construction workers Rafael Melo, 20, and Claudeir Figueiredo, 25, sued FTS and Hangzhou Zhongce Rubber, alleging defects in their tires caused the rollover.

And finally from WSJ

There has been at least one other accident involving an ambulance, which didn’t result in injuries, and a host of claims for compensation from consumers who had problems with the tires.

Some thoughts. After reading this story, I am once again appalled by the story.. not because a Chinese tire manufacturer went off the reservation and made a product not to spec, but that NOTHING was done.

If I were FTS, and I suspected that the Hongce Tire manufacturer was not producing to spec (especially since they specifically mention that this layer prevents separation), I would have done the following:

  1. Immediately ceased all purchasing until the issue was resolve
  2. Tested the tired through 3rd party inspector
  3. Implemented an ongoing China and U.S. QC system whereby factory visits, 3rd party verifications, and safety testing were all performed
  4. Arranged for recalls as necessary

Moral consideration aside, if FTS suspected that Hongce was not adding the layer… WHY DID THEY KEEP BUYING THE PRODUCTS?

After all, they were paying extra for that piece… yet, rather than spend the money to do the proper testing, or end the agreement, they contained importing the products… up to a half million of them (about 5% of their production according to a study we did a few years back)….

If this gum layer was critical to the stability of the tire, and if FTS thought that Hongce was not adding that layer, FTS should have ceased buying the product immediately. Their spokesman said that they cannot pay for the full recall, and that reminds me of an old say that starts “an ounce of prevention…”. A basic risk analysis should have told these guys to get on a plane and watch their tires be produced, to put a QC team in China, and to do spot testing in the States. Didn’t anyone at FTS think.. “uh.. these tires might fail.. and we might get sued”?

In the end, they are getting sued… and thus why I think this is becoming an issue. In the U.S., fear of things made in China is a hot topic in the popular press, and while it was the ultimate responsibility of FTS to ensure the quality of their goods (keep in mind, they have suspected for 2 years that these products were bacd, but did not do tests until THIS MAY), they are choosing to blame their supplier… who by their own admission are producing to the minimum spec as required by the U.S. Government bodies.

One thing to note.. assuming the 2 accidents above are the only ones that can be attributed at this time to these tires, that would mean there is a .000444% failure rate of these tires. Feel free to leave a comment about if a recall is even necessary (given the 2005 and 2006tires should already be off the road)

More to come… I am sure of it

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4 Responses to “Check the Pressure in Your Tires.. and Your Supply Chain”

  1. Andrew Busch says:

    June 27th, 2007 at 1:43 pm

    Here’s what I wrote for the Globe and Mail on Tainted Chinese Imports….

    My book, “World Event Trading” comes out July 8th. It’s on Amazon now.


    Over the last ten years, the number of imported food lines into the United States has tripled. At the same time, the budget of the US Food and Drug agency budget has remained the same. This means that roughly 1% of all imported food items coming into the United States are physically inspected. Actually, there is no single food agency charge with inspecting domestic and foreign foodstuffs. In the United States, there are twelve different groups applying 35 different laws.

    The U.S. Consumer Product Safety Commission (CPSC) is charged with protecting the public from unreasonable risks of serious injury or death from more than 15,000 types of consumer products under the agency’s jurisdiction. Deaths, injuries and property damage from consumer product incidents cost the nation more than $700 billion annually. However, the CPSC has only about 100 field investigators and compliance personnel nationwide to conduct inspections at ports, warehouse, and stores.

    It becomes clear that the U.S. essentially has a self-policing environment when it comes to food and consumer products. Until recently, this system has actually worked very well. However with imports growing from China and India, there is concern that this will break down very soon. Recently tainted imports of pet food, toothpaste, and toys have all enter the system triggering recalls, bans, and pet deaths. Why is this occurring?

    The United States operates under a clearly defined legal system that protects consumers and businesses. When it comes to consumer and food products, the U.S. enacts laws and regulations to protect those that are purchasing these products. The companies that produce these products have a heavy incentive to ensure the quality of the product. If they don’t, they can be sued in civil court and also taken to criminal court. It isn’t perfect, but this system has been beneficial over the years.

    However, this system of self-policing/legal incentives doesn’t work when you have a company that is beyond the reach of the U.S. legal system. Recently, the US has been unable to locate the Chinese company that generated the protein additive to the pet food that caused the deaths of animals. Recently, the US has been unable to track down exactly who operates the factories making recalls child toys that contained lead paint. Recently, the US has been unable to locate the Chinese company that produced the poisonous chemical (diethylene glycol) that was found in toothpaste at discount stores.

    In 1997, this was the same chemical that caused dozens of children deaths in Haiti when it was put into a fever medicine. Requests to find the manufacturer were ignored, business records were withheld, and records were destroyed. This all comes from an internal F.D.A. memorandum that was recently released. Overall, the exclamation point on this was the recent death sentence of the former head of the Chinese drug and safety agency for taking bribes from the companies he regulated. In 2007, the same ingredient was mixed into medicine and killed over 100 people in Panama.

    The fact is that these companies operate outside of US law and therefore operate outside of US regulations. This means that as imports of these goods continue to pour into this country, the risk will rise that more tainted food and consumer products will come is as well. The tragedy of the situation is that the consumers that are most likely to be impacted are low income families trying to stretch their incomes by shopping at discount stores.

    Wisely, the FDA is in the process of changing their system to shift how it inspects and regulates imported food. The FDA wants to focus on countries that pose the biggest potential hazards. This hope is to be more proactive as inspectors target nations and companies under a risk-management approach and converts to up-to-date screening and testing technologies. The problem is that they are still 2 months away from coming out with the new plan. The sad thing is that this isn’t a new plan. The FDA actually had this plan in 2002, but couldn’t get the funding to implement it.

    Until that happens, large risks remain for additional tainted products entering into the US food chain. At a time when Congress is keenly focused on the large and growing trade imbalance with China, this situation could be the kindling for trade protectionist legislation that is circulating in D.C. If what happened in Haiti and Panama occurs in the United States, it will be impossible to stop it.

  2. Trade War Looming? Or… Nothing Else to Write About? | All Roads Lead To China says:

    July 1st, 2007 at 8:07 pm

    […] I think that the recent FTS case is a perfect example of that (read more on my thoughts about FTS here) […]

  3. Rich says:

    July 6th, 2007 at 3:06 am

    Hi Andrew,

    thanks for your post, and good luck with your book.

    your comments on the self-regulating nature of the U.S. market are very interesting, and I recently met the COO of a global 10 firm who was wondering why China didn’t have anything in place.. essentially, they were trying to draw down their QC teams in China

    As time goes on, I think that line of thinking will prove dangerous as supply chain integrity issues will become the focus of many firms.

  4. Trans Union WebLog » Blog Archive » Tuck Faculty and Research - Articles says:

    July 25th, 2007 at 10:52 pm

    […] Check the Pressure in Your Tires.. and Your Supply Chain | All Roads … All Roads Lead to China provides news, analysis, and insights … to “Check the Pressure in Your Tires.. and Your Supply Chain … as inspectors target nations and companies under a risk-management …… […]