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Posted at 11:49 a.m., Monday, June 25, 2007

Importer asks for U.S. help in Chinese tire recall

By Margaret Cronin Fisk and Gopal Ratnam
Bloomberg News Service

Foreign Tire Sales Inc., a New Jersey tire importer, asked for U.S. government help in recalling 450,000 Chinese-made tires it said are defective. A federal safety official said a recall is the company's job.

National Highway Traffic Safety Administration officials are "really outraged that they think NHTSA can deal with this," Ron Medford, an agency administrator, said today in an interview. The Union, N.J., company, says it can't afford a recall.

"There is no provision in the law to assist companies in cases of safety defect recalls," Medford said. Foreign Tire Sales has a "real obligation to conduct a recall," he said.

Hangzhou Zhongce Rubber Co., based in Hangzhou, China, built the tires for Foreign Tire Sales with an inadequate gum strips, used to prevent treat separation, or none at all, the U.S. company said. The tires, used as replacements on pickup trucks and sport utility vehicles, lack a critical component and could fall apart, the U.S. company said. Both tire companies have been sued in at least one fatal accident.

FTS's is one of a growing number of product-defect claims against Chinese imports, such as tainted pet food and lead-coated toys, said Sean Kane, president of Safety Research & Strategies of Rehoboth, Massachusetts.

"The situation exposes just how vulnerable we are" to defective goods from China, said Kane, whose group asked the U.S. government to issue an advisory on the tires and disclosed the situation today in a statement. "It's only going to get worse."

BRAND NAMES AFFECTED

Tires produced by the Chinese company are sold under the brand names Westlake, Telluride, Compass and YKS, Safety Research & Strategies said in a statement.

Hangzhou Zhongce didn't immediately respond to an e-mail message seeking comment.

The Chinese company "unilaterally changed the construction" after its product passed federal tests without telling Foreign Tire Sales about the change, the U.S. company told the government agency.

The gum-strip flaw is present in about 450,000 tires sold to the New Jersey company by Hangzhou Zhongce and an unknown number sent to other distributors, Foreign Tire Sales said.

"FTS recognizes that a complete product recall might be in order," the company said in a June 11 letter to the safety agency. "Such a recall would force FTS to file for bankruptcy," the closely held company said, asking the agency's help in collecting, replacing and disposing of the defective tires.

COMPANY 'ON IT'S OWN'

The Traffic Safety Administration offered no help in response to the letter, its lawyer Lawrence Levigne said.

"NHTSA has basically said FTS is on its own," he said. "Under the regulations, the importer is treated like the manufacturer."

Foreign Tire Sales sued Hangzhou Zhongce May 31 in federal court in New Jersey, asking that the Chinese company be ordered to conduct the recall and supply replacements built to the original specifications. FTS is also seeking unspecified damages in the breach-of-contract suit.

Hangzhou Zhongce saved an estimated 30 to 40 cents per tire by eliminating or reducing the gum strip, Levigne said.

The U.S. distributor contacted the safety agency after being sued in May over a rollover accident that left two people dead and one with a severe brain injury.

Carlos Souza, 19, who was injured, and the families of deceased construction workers Rafael Melo, 20, and Claudeir Figueiredo, 25, sued FTS and Hangzhou Zhongce Rubber, claiming defects in their tires caused the rollover.

TROUBLE FOR CARMAKERS

FTS said it was investigating possible defects in its tires before the suit.

Tire failures will embroil carmakers including Ford Motor Co. and General Motors Corp. in additional lawsuits, said attorney Jeffrey Killino, who sued on behalf of the Melo and Figueiredo families.

"A lot of these light-truck vehicles are more likely to roll over," Killino said. The families sued General Motors, maker of the Chevrolet cargo van in the accident.

Foreign Tire Sales was aware of problems with the tires before the Aug. 12, 2006, accident involving his clients, Killino said in an interview.

"There was a sharp increase in warranty claims in 2005," he said. "That was a signal. FTS didn't report the problem until after we filed the lawsuit in May."

Foreign Tire Sales sought answers from the Chinese company in 2005 and 2006 after an increase in warranty claims, Levigne said.