Evening star., 1928-03-01
TIRE PRICE SLASH
NOW SEEMS LIKELY
Retailers Awaiting Cut-Sit.
uation Lies in Status of
Crude Rubber Market.

Special Dispatch to The Star.
NEW YORK. March 1.--Automobilc
tire manufacturers are running their
plants at a rate but little below ca
pacity. but their cash registers are not
clicking with the regularity they hoped
and expected Retail distributors have
chopped of their purchases with re-
markable unanimity.
This production of motor cars Is
speeding up steadily and consequently
demand for original equipment of tires
Is high but the motor car makers are
understood to be demanding more fa-
vorable terms on their contracts.
Retail dealers are confidently antic-
ipating cut in tire prices. and the
tire manufacturers are afraid they may
have to make such cut. Competition
is severe. The margin of profit on
tires is slim at best and in consequence
the outlook for the moment is not
particularly bright. despite the volume
of automobiles now in use and in proc
eSS of manufacture.
Misjudged the Market.
The reason for this situation lies
largely in the crude rubber situation.
according to manufacturers. Rubber.
which stuck around 40 cents pound
for over a year. has been subject to a
drastic drop and now is selling around
% cents. To the layman it woulti
seem that the tire manufacturers stood
to benefit from the lower price Of raw
materials.
The manufacturers. however. rs they
have done SO often i'll the past. mis-
judged the crude rubber market. When
the break came. it found them all load
ed up with high-priced rubber or at
least rubber which cost them around 40
cents pound, and with tires made
from this high-priced rubber. With
the drop they had to write off an ir-
ventory loss on their crude and finished
materials amounting to over 10 cents
a pound for every pound Of rubber in
cluded.
Possible Restriction Abandonment.
The uncertainty in crude rubber Is
due to the possible abandonment of
restriction by the British colonial gov
ernment. For nearly four years the
British government has fixed the
amount of crude rubber which should
be shipped in any quarter from the
Straits Settlements. on sliding scale
fluctuatiug with the price in the world
markets. If the average price was over
a certain figure more could be shipped
in the next quarter. If the price fell.
shipments were cut down. Now 1t Is
uncertain whether this policy. known
as the Stevenson plan, Will be adhered
TO in future.
The Dutch East Indian planters will
not agree to abide By 1t. and the stocks
of crude in the hands OF dealers and
fr flSn Inv fnr
years A committee Of the British
Parliament now is investigating the
situation. If It reports that the entire
plan should be abandoned, no one could
tell where the price of rubber would 60.
Mergers More Likely.
Whatever is done, It is likely that
the British producers and dealers Will
get together in some sort of agree
ment 10 aid In holding up the price OF
crude rubber. The American cOnSum-
ers are agitating for permission TO form
n body SO that they can buy as unit.
Even If such body were allowed. many
in close touch with the situation think
it would have rocky road TO travel.
since the units in the industry have
seldom been able TO get together on
any kind of proposition whatsoever.
For the iong-tcrln output. OF course,
rubber would be Of benefit
to the tire producers. but for the pres
ent the uncertainty and loss on in
ventories is disturbing factor. The
drop In cotton prices recently also has
been disturbing factor. although for
the long pull this also would be of
advantage to the manufacturers. The
wholesale situation is likely TO speed
some of the mergers and consolida-
tions which have been talked of in the
industry for some months.