Evening star., 1928-04-05
TIRE MAKERSLOSE
ON INVENTORIES
Removal of British Export
Curb Not Unmixed Blessing
for U. S. Trade.
BY '. c. RoYLE.
cial nispatch TO The Star.

Special Dispatch TO The Star.
NEW YORK. April 5.-Removal Of
the British government restriction on
shipment of crude rubber from the Far
East, just announced. will not prove an
unmixed blessing for American tire and
rubber manufacturers. Active options
in crude rubber have dropped over 6
cents a pound here and in London as a
result of Prime Minister Baldwin's
statement. This meant an immediate
fall in the value OF the huge inventories
of the rubber companies.
Rubber today is selling for about half
what 1t was quoted at the first of the
wear. Tire and rubber manufacturers
naturally favor low-priced rubber and
in the long run this decision may bring
them decided benefit. but the immediate
effects of the British government move
were harmful.
The price of tires and other mechani-
cal rubber goods naturally IS governed
eventually by the prices Of raw mate
rials. The two main raw materials i'll
tires are rubber and cotton, both OF
which are subject to extreme fiuctua-
ton. Rubber is far the more violent and
consequently the more dangerous conf
modify.
Tires From Dearer Rubber.
Normally tire companies can and do
make more money when rubber prices
are low, since costs are lower. But
today the racks of the manufacturers
are fun of tires made from rubber cost
ing twice. or nearly twice, what the
price of rubber is today. The ware
houses of the companies are fun OF
rubber which cost more than the pres
ent quotations. Either this must be
sold at a loss or made into tires which
are subject to the price influences OF
lower-priced raw materials,
Many consumers OF rubber both here
and abroad have contracts under which
they must take certain tonnage OF
rubber for long terms. yet at prices TAR
above the present level. When the
present inventories are worked OF the
situation may simplify itself. but in the
meantime tire manufacturers declare
their products will be subject to the
pressure for lower prices, because of
cheap rubber. from both the public and
the automobile manufacturers.
In the meantime the restriction win
not be removed until November /. and
at present consumption is heavier than
shipmentS This leaves dangerous
situation. for II manufacturers do not
fill their requirements they may have
to paw higher rubber prices and again
sell finished products on the basis OF
low material costs after November j.
Cheap Rubber Not Assured.
There is no absolute assurance. more
over. that the removal OF the British
restrictions will continue TO assure cheap
rubber II Is considered entirely pos
sible that the British and Dutch pro-
ducers may work out some sort of regu-
lation of their own to keep up prices.
II many plantation owners are driven
out of business the laws of supply and
demand viii bring prices up. and while
a plantation can deteriorate TO jungle
in a brief time, ii takes at least seven
years to develop new tract to pro-
ducing stage.
At least three great tire manufac-
turers have plantations OF their own.
They will not benefit materially from
cheap rubber since the margin OF ad-
vantage which they might hold over
competitors who buy instead OF growing
their rubber viii be leSsened. The COM
petition in the tire industry Is terrific.
The automobile makers are already
pressing for lower original equipment
prices, and the trade fears that some OF
the smaller tire manufacturers, with
small inventories and raw supplies, may
take advantage Of the situation and
slash prices
The announcement OF the British
government has caused renewal OF rl-
inors regarding mergers and consolida-
ton among the tire companies to elini-
nate competition and cut overhead.