GPX blames OTR duties for Ch. 11 filing

Tire Business staff report

Malden, Massachusetts - GPX International Tire Corp. is laying most of the blame for its Chapter 11 bankrutpcy protection filing on the “unreasonable” duties imposed in 2007 by the US government on certain OTR tyres imported from China.

“The US government's decision to impose extraordinarily punitive antidumping/countervailing duties on GPX's Starbright manufacturing facility in China has prompted the difficult decision to sell GPX's business to third parties,” said Craig Steinke, president and ceo of GPX, in a prepared statement.

The US Department of Commerce-in response to a petition from Titan Tire Inc. and the United Steelworkers (USW) union-determined in February 2008 that Chinese manufacturers and/or exporters of certain OTR tyres would have to pay duties of up to 210 percent above the wholesale value of each tyre.

Titan and the USW originally petitioned the Commerce Department in 2007 for relief, contending that Chinese OTR tyre imports were causing material injury to US OTR tyre makers. Bridgestone Americas Inc. later lent its support to the matter.

GPX's Hebei Starbright Co. Ltd. subsidiary in Hebei, China, was hit with 44-percent duties, causing GPX to move production of tyres to other Chinese tyre companies with lower duties, Mr. Steinke said it court filings.

GPX later sued Titan, Bridgestone and the USW in the US Court of International Trade (CIT), and ironically the CIT ruled Sept. 18 in favour of GPX and sent the matter back to the Department of Commerce for review.

The CIT ruled Commerce's calculations of both antidumping and countervailing duties amounted to “double counting” and termed them “arbitrary and capricious and unsupported by substantial evidence.”

GPX said Commerce's decision had a “devastating and irreversible financial impact” on Starbright and GPX, and accordingly GPX does not have the ability to wait for a final decision on the duties before completing the pending sales process.

Commerce noted at that time that imports of the targeted tyres from China were nearly 15 million units in 2006, up 21 percent from 2005. The value of those shipments was put at $339.6 million. The scope of the petition does not include tyres for aircraft, all-terrain vehicles, lawn-and-garden-type vehicles or tyres greater than 39 inches in rim diameter for mining and construction equipment.

Regarding the Chapter 11 filing itself, Mr. Steinke said: “The buyers we have identified are well established in the global tyre industry and are positioned to further invest in these brands, grow the business and provide exceptional service to our customer base.” He also noted GPX's tradition of innovation through research and development, high level of service and product quality will continue with the new owners.

“We feel very confident that this will be a positive and smooth transition for our employees, customers and suppliers,” he said.

Management expects these transactions to be finalised before year-end.

GPX suffered net losses of $19.5 million and $24.8 million in fiscal years 2007 and 2008, respectively, and was $21.6 million in the red through the first six months of 2009, according to court documents. Sales increased slightly last year to $503.5 million but were down more than 35 percent in the first of 2009 to $162.5 million.

At the time of the filing, GPX listed unsecured debts of approximately $36.2 million, including $5.2 million in trade debt.

The No. 1 unsecured creditor listed in the bankruptcy filing is the US Customs and Border Protection, at $5.66 million, followed by Tianjin United Tire & Rubber, $1.76 million and Airboss of America Corp., $1.41 million.

GPX is represented in U.S. Bankruptcy Court by attorneys Harry Murphy of Hanify & King P.C. and Peggy Farrell of Hinckley Allen & Snyder L.L.P. as corporate counsel. TM Capital Corp. serves as investment banker to GPX in connection with these transactions and Argus Management Corp. serves as restructuring advisor to GPX.

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GPX blames OTR duties for Ch. 11 filing from Tire Business (A Crain publication)