Tires made in China recalled
By Sharon Silke Carty, USA TODAY
The government has ordered a small New Jersey tire importer to recall 450,000 Chinese-made light-truck tires because they might come apart and cause fatal crashes, even though the importer says the costs of a recall would bankrupt it.

The tires, in sizes typically used by full-size vans, SUVs and pickups, are blamed in a fatal accident outside Philadelphia that's generated a lawsuit against Foreign Tire Sales of Union, N.J. FTS has in turn sued Hangzhou Zhongce Rubber, one of China's biggest tiremakers, which sold it the potentially faulty tires.

The National Highway Traffic Safety Administration said it told Foreign Tire on Monday to recall the tires. It would be the second recall in a year and a half involving Hangzhou Zhongce tires. In February 2006, Cooper Tire & Rubber recalled 288,000 passenger-car tires from the Chinese maker because they contained "unauthorized material" in the sidewalls. Cooper said that could have caused air leaks and, eventually, tread separation. Cooper couldn't be reached Monday night for comment.

Foreign Tire says it sold Hangzhou Zhongce tires under brand names Westlake, Compass, Telluride and YKS since 2002.

Xu Youming, an administrative manager at Hangzhou, denied that the tires had safety issues.

"There is no problem with the quality of our tires," Xu said. "We have been exporting our tires … to the USA for over 10 years."

He said FTS placed a new order just two days ago. "We were getting visas to go to the U.S. to discuss the tire problem related to the incident last year, but now they have blamed us in public. … We do not plan to visit the U.S. now."

Tread separation is the problem that led to the recall of 14.7 million Firestone tires starting in 2000, most of them on Ford Explorer SUVs.

"We realize this company makes tires for a lot of folks. We don't know how far this problem could extend," says Sean Kane, president of consulting firm Safety Research & Strategies.

Kane says tread separation is particularly dangerous on trucks. "It creates pull on one side of the vehicle. If you have a light truck, the chance of a loss of control or a rollover is much more significant."

Foreign Tire was sued in Philadelphia on May 4 by the families of two men killed when their van crashed Aug. 12, 2006. The lawsuit claims the van had Hangzhou Zhongce tires.

The tires appear to lack a feature called a gum strip that helps hold the layers, or belts, together. Some tires have the strip, but it's narrower than Foreign Tire expected, the company told NHTSA.

Xu denied that lack of a rubber strip in the tires made them unsafe, saying there are "many other safety techniques" to ensure their safety.

Feds Order At Least 4 Tire Brands Recalled
Importer Says Radials Made In China Could Suffer Tread Separation

NEWARK, New Jersey, June 26, 2007
Tire Pressure (AP Photo/Robert F. Bukaty)

Fast Facts

The tires being recalled were sold under at least four brand names - Westlake, Compass, Telluride and YKS - in these sizes: LT235/75R-15; LT225/75R-16; LT235/85R-16; LT245/75R-16; LT265/75R-16; and LT3X10.5-15.

(AP) U.S. safety officials have ordered a New Jersey tire importer to recall as many as 450,000 tires that it bought from a Chinese manufacturer and sold to U.S. distributors.

Foreign Tire Sales Inc., of Union, New Jersey, said an unknown number of the light truck radials it imported since 2002 from Hangzhou Zhongce Rubber Co., of Hangzhou, China, could suffer tread separation, a problem that led to the largest tire recall in the U.S. in 2000.

FTS said an unknown number of the tires it sold were made without a safety feature, called a gum strip, which helps bind the belts of a tire to each other, the company said in a filing to the National Highway Traffic Safety Administration. Some of the tires had a gum strip about half the 0.6 millimeter width that FTS expected, it said.

Heather Hopkins, a spokeswoman for NHTSA, said its enforcement officials spoke to FTS on Monday to "let them know we want a full tire recall to take place."

"It is FTS' responsibility to do this," Hopkins said.

FTS failed to add a "remedy" in its June 11 filing, which is essentially a description of how a company will notify customers and provide proper consumer compensation, Hopkins said.

FTS attorney Lawrence N. Lavigne said the tires appear to meet federal standards but could still pose a risk to motorists.

"FTS, at great expense, investigated this," Lavigne said. The company, which has about a half-dozen employees, does not have the money to pay for a recall, he said.

FTS does not have a warehouse. It has tires shipped directly to distributors, who in turn send them to retail outlets, Lavigne said.

FTS said it believes other importers also sold such tires made by Hangzhou Zhongce. The Chinese company has failed to provide information that would allow FTS to determine exactly how many tires, and which batches, have the problem, Lavigne said.

According to the filing, the Hangzhou tires at issue were sold under at least four brand names - Westlake, Compass, Telluride and YKS - in these sizes: LT235/75R-15; LT225/75R-16; LT235/85R-16; LT245/75R-16; LT265/75R-16; and LT3X10.5-15.

FTS on May 31 sued Hangzhou in U.S. District Court in Newark, charging that its tests found that the tires may fail earlier than those originally provided by Hangzhou, and that a recall would put FTS out of business. The lawsuit seeks unspecified monetary damages and an injunction that would bar Hangzhou products from being imported.

The lawsuit was reported Monday by The Wall Street Journal.

A Hangzhou Zhongce spokesman contacted by The Associated Press in China said he could not immediately comment. A Hangzhou official reached by the Journal said: "We are aware of this matter, and we are now in the process of responding to the lawsuit. Production and sales at our company remain normal."

FTS said it became concerned about Hangzhou tires in October 2005 amid an increase in warranty claims and began talks with the Chinese company, and then commissioned its own tests.

FTS was sued in Philadelphia on May 4 by the families of two men killed when a van they were riding in crashed last year. Also suing are the driver and passenger in the van, which the lawsuits claim had Hangzhou tires.

The largest tire recall in the U.S. involved 14.7 million Firestone tires in 2000, said Sean Kane, president of Safety Research & Strategies, a consumer group. "I wouldn't expect this to rise to that number," he said.

FTS, in its filing, said it sold Hangzhou tires to these distributors: Tireco, Compton, California; Strategic Import Supply, Wayzata, Minnesota; Omni United USA Inc., Jacksonville, Florida; Orteck International Inc. of Gaithersburg, Maryland; K&D Tire Wholesalers LLC, Carlsbad, California; and Robinson Tire in Laurel, Mississippi.

By Jeffrey Gold and Matthew Verrinder © MMVII The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.

Made in China: Faulty Tires
How a Chinese supplier's bad decision turned into one importer's worst nightmare, and may mean the end of his business

by David Welch
BW Exclusives

Richard Kuskin was sitting in the dingy basement office of his Union (N.J.) import firm one day in May, 2006, when the phone rang. One of his distributors in New Mexico was on the line. There had been an accident involving an ambulance riding on Chinese-made tires sold by Kuskin's firm, Foreign Tires Sales Inc. The tires had blown out, causing the driver to lose control. No one was hurt. Still, the incident scared Kuskin. For several months he'd had a nagging feeling that his Chinese partner, Hangzhou Zhongce Rubber Co., had cut out a key safety technology. For Kuskin, the ambulance incident was like a flashing red warning light.

After hanging up, Kuskin called his engineer, Gary Eiber, and dispatched him to New Mexico with instructions to inspect the shredded tires. Then Kuskin called a product liability attorney. Kuskin knew the costs of a recall could crush his company, which has 13 employees and last year sold just 700,000 tires. He also knew that getting Hangzhou Zhongce to pay for some of the recall would be hard. Chinese companies aren't legally obligated to execute U.S.-ordered recalls, and, says Kuskin, his supplier was denying there was a problem. "I didn't sleep too good that night," he recalls.

There were more sleepless nights to come. Over the next few months, consumer complaints about faulty tires made by Hangzhou Zhongce and sold by Foreign Tire and several other companies trickled in. There were more accidents, including a fatal one that has sparked a lawsuit and prompted the Feds to recall 450,000 tires. The National Highway Traffic Safety Administration (NHTSA) is now weighing an investigation into whether FTS moved quickly enough when the first tire defects were reported. NHTSA is also looking into whether other tire distributors have also sold potentially faulty tires manufactured by Hangzhou Zhongce.
Hidden Costs

With the very real prospect that his company could go under, Kuskin has sued his Chinese partner in federal court for fraud, breach of contract, and recall costs. Hangzhou Zhongce, which declined to comment, has retained legal counsel and hired a Washington public relations firm. The Chinese company recently posted a statement on its Web site. It reads in part: "Until now we have not found the claimed defect as described by FTS. We believe our tires' quality is good."

The Foreign Tire saga reverberates well beyond the world of cheap replacement tires. Companies selling everything from toothpaste to toys to all-terrain vehicles rely on mom-and-pop outfits much like FTS to import products from China. In most cases, the federal government expects these firms to monitor and test goods for possibly dangerous defects. But the reality is that many small importers have limited resources and testing capabilities, and face only minimal requirements to perform tests. Kuskin, for his part, acknowledges that though his company tested tires, until the recent crisis the process was random. "It's so important for U.S. manufacturers and importers to test and inspect anything they buy overseas," says Sally Greenberg, a senior counsel with Consumers Union. "It's not so cheap to source to China when you have these quality issues."

Kuskin began buying tires from Hangzhou Zhongce in 1990, and has been riding the Chinese import wave ever since. The number of Chinese tires imported to the U.S. has grown quickly in recent years, growing fivefold to 32 million a year, or about 10% of the market, since 2000. Most are cheap replacement tires that sell for $100 or less. A company like FTS typically approves the manufacturer's design and mandates certain specifications. FTS sells to wholesalers, which in turn supply retailers. A consumer can find tires made by Hangzhou Zhongce under brand names like Vesta, Goodride, and Chaoyang at outlets large and small.
Tire Testing

Kuskin seems shell-shocked, and gets defensive when telling his story. The 59-year-old entrepreneur is quick to say he's had only one other minor recall in 19 years. And though it didn't help, he expresses pride in the testing his company does, which he says involves driving tires for 40,000 miles for 40 days on hot Texas pavement. After that, the tires are sent to a lab, where they're analyzed for wear and breakdown. The test costs about $40,000, he says, and is not required by the Transportation Dept. "When these tires are made right," says Kuskin, "they're as good as any tire in the world."

But clearly some of them weren't being made to FTS's specifications. The first sign of trouble came in October, 2005, when FTS spotted a "sharp increase" in consumer claims. Kuskin says he didn't hear about a single accident and argues that there were claims on only 0.5% of the tires. That may seem small, but one major tiremaker says it considers warranty claims on more than 0.5% of one model to be "on the high side," and even when the number exceeds 0.1% "it starts drawing attention." Kuskin says he submitted the data to NHTSA and that it didn't see an issue either. "I wasn't in tune to the fact that this could be a big problem," he says.
But his engineer, an industry veteran, was suspicious that the tires weren't being made properly. And after the May, 2006, accident in New Mexico, Foreign Tire started asking pointed questions of its Chinese supplier. Eiber wanted to know if Hangzhou Zhongce was using a 0.6-millimeter gum strip—it prevents a tire's steel belts from separating from the rubber—in every unit. Kuskin says the company told Foreign Tire that the tires were fine. But when Eiber took apart the tires from the New Mexico ambulance company, he found no gum strips. Foreign Tire pressed Hangzhou Zhongce about the missing strips, but says its executives responded that the tires were not a problem.
Ignored Concerns

It was time for a face-to-face meeting. Kuskin, Eiber, and the FTS's attorney flew to Hangzhou in September, 2006. Over three days of meetings, Kuskin says, they talked about problems with the tires, the possibility of a recall, and asked for documented test results that would prove the tires were safe. Then Kuskin says he pressed the Chinese to take responsibility for the recall and replace the defective tires. They listened, he says, but were noncommital.

The trip did unearth one revelation, Kuskin says. Hangzhou Zhongce told him that its chief engineer had decided to stop using the gum strips, which the company has since confirmed. Apparently the man didn't understand the significance of the technology, Kuskin says. "There is one engineer responsible for this whole mess," he adds. "That's the guy I am absolutely furious with."

Over the next few months, Foreign Tire says it sent six e-mails to Hangzhou Zhongce asking for information on the tires and help with a recall. On May 30, Kuskin wrote: "Problems do not go away because they are ignored. We notified you of two quite severe problems. I have heard nothing or very little on these subjects." Hangzhou Zhongce, says Kuskin, never directly responded to his questions. Nor, he says, would it say which tires lacked gum strips so FTS could recall them.

FTS decided to do more testing. It asked a tire distributor in Maine in early January of this year to find a few Hangzhou Zhongce-produced tires that were made in 2005. It took the Maine firm six weeks to find the tires and ship them. Kuskin sent the tires to Texas for another endurance test. After 20,000 miles, the tires failed. Kuskin got the test results on May 10.
"Not Acceptable"

A few days earlier, Foreign Tire was sued over a fatal wreck that had occurred in August, 2006. A van using FTS tires crashed on the Pennsylvania Turnpike. Two people were killed and another has serious brain damage. "It wasn't a good day for me," says Kuskin. On June 11, Foreign Tire alerted NHTSA about all of its findings and the government ordered a recall. NHTSA sent the importer a letter on June 26 saying the company's inability to afford the recall, which Kuskin estimates will cost $90 million, is "not acceptable." For its part, Hangzhou Zhongce says the tires aren't defective and questions whether a recall is even necessary. Attorneys for the Chinese firm met with NHTSA on July 11 and asked for a chance to prove that its tires are safe, says a person familiar with the meeting. The company also says incorrectly sized tires may have played a role in the fatal accident.

Meanwhile, the attorney representing the victims of the Pennsylvania crash is gearing up for a major legal battle. Jeffrey B. Killino, who works for the law firm Woloshin & Killino in Philadelphia, plans to make the case that Foreign Tire waited too long to issue a recall. "I'm going to build a case that they should be criminally indicted," he says. "It was my case that prompted the recall." Kuskin denies he waited too long to alert NHTSA and says his tires not only meet government standards but also that his firm volunteered that the tires failed its own more stringent tests.

As he ponders his future, Kuskin says he is trying to apply the lessons he has learned from his experience. "We didn't have a formal schedule" to test tires, he says, but now the company tests one a month. Kuskin also plans to write new contracts that would obligate Chinese manufacturers to help pay for future recalls and ensure that disputes are settled in Hong Kong, where the legal system is more sophisticated than China's.

As he takes out ads in newspapers urging consumers to turn in their recalled tires, Kuskin harbors hopes of making his Chinese partner pay. He says he has had "reasonable conversations" with the U.S. law firm recently retained by Hangzhou Zhongce. "We intend to be made whole by Hangzhou," he says.

Welch is BusinessWeek's Detroit bureau chief. With Lorraine Woellert and John Carey.


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