Tire company CEO races to the bottom

Titan Tire CEO Maurice Taylor in a March 16, 2009, file photo.
File,AP Photo/Charlie Neibergall

(MoneyWatch) When French industry minister Arnaud Montebourg contacted the chief executive of U.S. tire company Titan International (TWI) about its acquiring a struggling Goodyear factory in northern France, it's unlikely the official expected the following response. 

"Do you think we're stupid?," said Titan CEO Maurice Taylor in a February 8 letter replying to Montebourg's overtures. "The French workers are paid high wages but only work three hours. They have one hour for their lunch, they talk for three hours and they work for three hours."

Taylor went on to boast about his preferred strategy: "Titan is going to buy Chinese or Indian tires, pay less than 1 euro an hour to workers and export all the tires France needs."

That Taylor comes across as culturally prejudiced and somewhat ill-informed is not so surprising; I've heard similar statements from many American executives. And Taylor, a 1996 Republican presidential candidate, is apparently famous for his lack of diplomacy.

But what is more remarkable is the pride with which Taylor explains the company policy: underpay Chinese and Indians workers in order to kill European competition.

This race to the bottom strategy doesn't seem to have anything in it for U. S. workers, nor does it have much of a future. As Indian and Chinese workers increasingly demand higher pay, Taylor will find them loathe to cooperate with his plans. In the meantime, U.S. and European factories will have closed, lost their workforce and their skills, and Titan will be left -- where, exactly?

Most business leaders today recognize that the race to the bottom is (as it always has been) a fool's game in which the last man left standing is the loser. And most business leaders have already seen that, as far as exploiting Chinese and Indian labor forces, that game is nearing its end. This is why many companies are starting to repatriate their manufacturing. It's not just that foreign wages are going up -- there's a dawning awareness that losing all your manufacturing expertise is bad for innovation and bad for customer loyalty.

But if you tried to tell Taylor that, I guess he'd just call you stupid.

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    Margaret Heffernan has been CEO of five businesses in the United States and United Kingdom. A speaker and writer, her most recent book Willful Blindness was shortlisted for the Financial Times Best Business Book 2011. Visit her on www.MHeffernan.com.