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Chinese Tire Importer Heads to Bankruptcy

New Jersey Company Faces State, Federal Probes

By Joe Benton
ConsumerAffairs.com

June 29, 2007

Once FTS has replaced as many of the tires as it can, the company will have to declare bankruptcy, according to Lawrence Levigne, the attorney representing FTS. He said the tire importer estimated that it has enough funds to replace about 10 percent of the 450,000 tires that may be defective.

New Jersey authorities joined federal highway safety officials to demand information from the tire importing company about the tires it bought from a Chinese manufacturer and sold to U.S. distributors.

Levigne said the company would comply with the subpoena issued by the state Attorney General's Office.

The National Highway Traffic Safety Administration ordered the recall, which includes light truck radial tires imported between 2002 and December 2005. The brands involved are Westlake, Telluride, Compass and YKS.

The tires, made by China-based Hangzhou Zhongce Rubber Co., have an insufficient or missing gum strip, a rubber feature that helps prevent steel belts inside the tire from separating or from damaging the rubber.

FTS alerted NHTSA to the problem in an official document filed in June. NHTSA responded by ordering a recall. Failure to recall the tires could result in fines for the importer, NHTSA reminded in a letter faxed to the company yesterday.

"At the risk of putting ourselves out of business, this company did the right thing and we reported the problem," said Levigne, who faults NHTSA for not doing more to help the company correct the problem.

Heather Hopkins, a spokeswoman for NHTSA, responded that NHTSA does not have the resources to help companies carry out recalls even if it puts the company at an extreme financial hardship.

"We don't have the mechanism to pay for a business to continue being in business," she said.

Associate Administrator for Enforcement Daniel C. Smith wrote FTS President Richard Kuskin stating that, “The Safety Act does not provide for any exceptions to the notification and remedy requirements based on the financial impact on the manufacturer. A company that chooses to import motor vehicles or motor vehicle equipment into this country accepts the same responsibility for compliance with the Safety Act as any other manufacturer.”

Owners of tires carrying the Westlake, Compass Telluride and YKS (or a combination of these names) should check the sidewall of their tires for the DOT number. If the DOT number contains “FTS” as part of that number, the tire may be subject to this recall.

If the tire does not contain “FTS” in the DOT number it is not part of this recall.

The affected tires will also contain a tire size starting with LT. If the tire size does not show LT, it is not part of the recall. The affected tires have DOT numbers that start with 7D and end in either “02”, “03” “04” or “05”. No other tires are involved in the recall.

State Subpoena

The State of New Jersey issued a subpoena to FTS earlier. Assistant Attorney General Anne Milgram said New Jersey wants to coordinate with the offices of Attorneys General of other states and the National Highway Traffic Safety Administration.

“We need to know exactly how many tires were sold, the identity of the purchasers and how consumers are going to be notified that they are riding around on tires that might fall apart and cause serious injury, or, in at least one instance, cause death,’‘ Milgram said. “This is a critical public safety issue that affects consumers throughout New Jersey and the United States, and we will do everything we can to protect people from harm.’‘

The subpoena seeks information regarding the locations to which the tires were shipped, the identity of consumers who might be using them, FTS’ knowledge that the tires might be defective, and information about the recall.

FTS bought light truck radial tires from Hangzhou Zhongce Rubber Co. Ltd. of China from 2002 and 2006.

Chinese Denial

The Chinese manufacturer of the light truck tires has now denied it supplied faulty products and accused its FTS of making the claim to gain an advantage in an unrelated dispute.

"We have not found the faults cited by FTS," Hangzhou Zhongce said in a written statement. It said its tires met U.S. safety standards and FTS' specifications.

"We believe this is merely an effort by FTS to stir up a fuss due to this lawsuit," the tire manufacturer said.

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