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Background Facts:

A London based arbitration process for breach of a contract to purchase tires brought by an International Earthmover Tire Manufacturer, plaintiff, against an International Mining Company, defendant.

The Mining Company contractually agreed to order a specified number of tires or to pay 40% of the agreed selling price for any tires not ordered. This is referred to as a "Take or Pay" arrangement.

The tire manufacturer contracted to produce tires that met the Tire and Rim Association OTR Handbook standards. The manufacturer did not guarantee tire performance, in terms of any performance measure.

The mining operations contracted to operate their vehicles within Tire & Rim Association OTR Handbook standards for tire load, inflation, speed, and not to exceed the manufactures published TMPH, Ton Mile per Hour, tire operational limits.

Breach of Contract Tire Performance Issues:

  1. The mining company cited lower hours/mileage performance of the contracted plaintiff's Tier 3, OTR tires compared to Michelin and Bridgestone brand, Tier 1, tires in their mining operations as the reason for refusing to continue the contractual "Take or Pay" agreement.
  2. The tire manufacturer stated that during the period of OTR tire supply shortages, the mining company was eager to contract, order and to use their Tier 3 tires to continue their mining operations and not until, once again, Michelin and Bridgestone Tier 1 brands became available in the market, ending the OTR mining tire shortage, did the mining company halt their contractual Tier 3 tire orders from the plaintiff. Further, the mining company evaluated the performance of the plaintiff's tires at several of their mining sites prior to entering into a contract and they were well aware of the Tier 3 tires performance compared to Michelin and Bridgestone.

Data Analysis:

Defendant's allegations of quality irregularities in the plaintiff's Tire Design, Manufacturing, Process Control, Rubber Compound & Component Design, Tire Curing, and Tire Operational Safety had no data support and these allegations were refuted case by case.

Expert Witnesses for both the plaintiff and defendant agreed that:

  1. The plaintiff's Tier 3 tire provided a Traction Tread design that was incorrectly applied for the service conditions of the defendant's hard rock mining operations.
  2. The plaintiff's traction tread design provides less tread depth, a tread pattern with more void area and less tread rubber that was therefore more vulnerable to hazards like lug damage, impacts, cutting, penetration, and tearing by the rocky road conditions compared to a Hard Rock tire design.
  3. The plaintiff's Tier 3 Traction design tires provided fewer hours/mileage of service than the Tier 1 Michelin and Bridgestone Hard Rock Lug designs. Tire performance hours varied from mine to mine depending on the severity of the mine's service conditions. Mines sites requiring improved traction preferred plaintiff's tires.

I analyzed the Defendants mining operations data and reports to further support that their tires were operated at mine conditions that:

  1. Exceeded the contractual Tire and Rim Association OTR Handbook standards for tire Loads and Inflations and the Manufacture's TMPH limits for Plaintiff's Tires that resulted in tire failures due to over-heating, impacts, and cutting in service.
    1. T&RA Tire Overloads, 368,207 Observations
      1. 5.0% Rear Over Load: 99% Front Over Load
    2. Over Manufacturer's TKPH, 368,207 Observations
      1. i) 15% Rear Over TKPH: 60% Front Over TKPH
    3. Tire Inflation for 22,452 Observations:
      1. 52% Under Inflated at Std 60 Ton Load: below the minimum105 Cold or 120 psi Hot
      2. 99% Under Inflated, at Max 64 Ton Load: below the minimum120 Cold or 137 psi Hot
    4. Road Hazards (rock impacts, cutting, bruising)
      1. 60% Tier 3 Hazard Removals, 440 Tires
      2. 42% Bridgestone Hazard Removals, 69 Tires
      3. 50% Michelin Hazard Removals, 251 Tires
      4. 54% Average Hazard Removals, 760 Tires
  2. Provided and environment of excessively rocky roads, loading, and dumping areas that produced and average of 54% tire removals due to impact, cutting, and tearing hazards for all tires, both Tier 1 and Tier 3.

Conclusion:

As of September 2017 the results of the arbitration have not been published.

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Leighton Spadone, President of DAAS Inc., has over 50 years of Tire Technology and Applied Statistics experience. He trains and consults tire companies on Tire Design, Tire Materials and Compound Formulations, Tire Curing, rubber processing, quality control, tire, compound, and materials testing. Mr. Spadone was employed by Goodyear Tire & Rubber Co in International Technical Service and Domestic Tire Development for over 43 years and by Eurotire Inc for 6 years as the Chief Technical Officer. he is an experienced Materials Product Developer for Radial Light Truck Tires, Radial Medium Truck Tires, Farm Tires, and Off-Road Radial Earthmover Tires.

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