EPA-230/1-74-04G
AUGUST 1974
ECONOMIC ANALYSIS
OF
i
PROPOSED EFFLUENT GUIDELINES
THE RUBBER PROCESSING INDUSTRY
(PHASE II)
QUANTITY
U.S. ENVIRONMENTAL PROTECTION AGENCY
Office of Planning and Evaluation
Washington, D.C. 20460
u)
O
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This document is available in limited quantities through the
U. S. Environmental Protection Agency, Information Center,
Room W-327 Waterside Mall, Washington, D. C. 20460.
The document will subsequently be available through the
National Technical Information Service, Springfield, Virginia
22151.
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ECONOMIC ANALYSIS
OF
PROPOSED EFFLUENT GUIDELINES
THE RUBBER PROCESSING INDUSTRY
(PHASE II)
U.S. ENVIRONMENTAL PROTECTION AGENCY
Office of Planning and Evaluation
Washington, D.C. 20460
EPA-230/1 -74-046
August 1974
U.S. Environmental Protection Agency
Region V, Library
230 South Dearborn Street
Chicago, Illinois 60604
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This report has been reviewed by the Office
of Planning and Evaluation, EPA, and
approved for publication. Approval does not
signify that the contents necessarily reflect
the views and policies of the Environmental
Protection Agency, nor does mention of trade
names or commercial products constitute
endorsement or recommendation for use.
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PREFACE
The attached document is a contractors' study prepared for the Office of Planning and
Evaluation of the Environmental Protection Agency ("EPA"). The purpose of the study is
to analyze the economic impact which could result from the application of alternative
effluent limitation guidelines and standards of performance to be established under Sections
304(b) and 306 of the Federal Water Pollution Control Act, as amended.
The study supplements the technical study ("EPA Development Document") support-
ing the issuance of proposed regulations under Sections 304(b) and 306. The Development
Document surveys existing and potential waste treatment control methods and technology
within particular industrial source categories and supports proposal of certain effluent
limitation guidelines and standards of performance based upon an analysis of the feasibility
of these guidelines and standards in accordance with the requirements of Sections 304(b)
and 306 of the Act. Presented in the Development Document are the investment and
operating costs associated with various alternative control and treatment technologies. The
attached document supplements this analysis by estimating the broader economic effects
which might result from the required application of various control methods and tech-
nologies. This study investigates the effect of alternative approaches in terms of product
price increases, effects upon employment and the continued viability of affected plants,
effects upon foreign trade and other competitive effects.
The study has been prepared with the supervision and review of the Office of Planning
and Evaluation of EPA. This report was submitted in fulfillment of Task Order No. 16,
Contract 68-01-1541 by Arthur D. Little, Inc. Work was completed as of August 1974.
This report is being released and circulated at approximately the same time as
publication in the Federal Register of a notice of proposed rule making under Sec-
tions 304(b) and 306 of the Act for the subject point source category. The study is not an
official EPA publication. It will be considered along with the information contained in the
Development Document and any comments received by EPA on either document before or
during proposed rule making proceedings necessary to establish final regulations. Prior to
final promulgation of regulations, the accompanying study shall have standing in any EPA
proceeding or court proceeding only to the extent that it represents the views of the
contractor who studied the subject industry. It cannot be cited, referenced, or represented
in any respect in any such proceeding as a statement of EPA's views regarding the subject
industry.
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TABLE OF CONTENTS
Page
List of Tables v
I. EXECUTIVE SUMMARY 1
II. DESCRIPTION OF RUBBER PROCESSING INDUSTRY 9
III. DESCRIPTION OF RUBBER PROCESSING INDUSTRY
SEGMENTS SIC 3021 - RUBBER FOOTWEAR 11
IV. SIC 3031 - RECLAIMED RUBBER 21
V. SIC 3041 - RUBBER HOSE AND BELTING 27
VI. SIC 3069-FABRICATED RUBBER PRODUCTS 33
VII. SIC 3293 - GASKETS PACKING SEALING DEVICES -
COMPOSITIONS ONLY 39
VIII. SIC 7534 - RETREAD TIRES 43
IX. ECONOMIC IMPACT ANALYSIS 47
APPENDIX A-1
111
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LIST OF TABLES
Table No. Page
1-1 The Rubber Processing Industry SIC Code 3021 4
I-2 The Rubber Processing Industry SIC Code 3031 5
I-3 The Rubber Processing Industry SIC Code 3041 6
I-4 The Rubber Processing Industry SIC Code 3069 7
I-5 The Rubber Processing Industry SIC Code 3293 8
11-1 Tire Products Vs. Non-Tire Products 10
11-2 Rubber Usage 10
II-3 Value of Shipments of SIC Categories, 1972 10
111-1 Rubber Footwear Companies and Plants 12
III-2 Plant and Company Size 18
III-3 Company Diversification 19
111 -4 Footwear Sales 19
111-5 Rubber Footwear Value of Shipments 20
IV-1 Financial Trends 22
IV-2 Average Production by Company 23
IV-3 Consumption of Reclaim Rubber 24
IV-4 Reclaim Consumption by Product 24
V-1 Hose and Belting Plants 28
V-2 Sales by Company 30
V-3 Industrial Products 31
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LIST OF TABLES (Continued)
Table No.
VI-1 Sales by Company
Single- and Multi-Plant Companies Ranked within SIC 3069 34
VI-2 Sales Classification 35
Vi-3 Product Types 36
VI1-1 Single- and Multi-Plant Companies Ranked within SIC 3293 40
VI11-1 Annual Passenger Output of Retreaders by Volume 44
VIII-2 Annual Truck Output of Retreaders by Volume Brackets 44
VIII-3 Shipments of Tread Rubber (Camelback) 45
VIII-4 Rubber Usage by Tire Type 45
VIII-5 Number of Tires Retreaded in 1972 46
VI11-6 Retread Tire Prices 46
IX-1 Pollution Control Costs - Category A Plants 48
IX-2 Minimum-Sized Plants with Required Capital 49
IX-3 B.P.T. Costs 50
IX-4 B.P.T. Costs 51
IX-5 Total Number of Plants used in Calculations 53
IX-6 Price Effects 54
IX-7 Analysis of Selected Companies 55
VI
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SECTION I
EXECUTIVE SUMMARY
This final report is submitted in compliance with Part III of Contract No. 68-01-1541
with the Environmental Protection Agency on the Economic Impact of Water Pollution
Control of the Rubber Processing Industry. Using the effluent guidelines development
document as prepared by Roy F. Weston, Incorporated, and supplied to us by EPA, we
evaluated the economic impact of pollution control costs on the Rubber Footwear (SIC
3021), Rubber Reclaim (SIC 3031), Hose and Belting (SIC 3041), Rubber Products Not
Elsewhere Classified (SIC 3069), Gaskets Packing and Sealing Devices (SIC 3293), and
Retread Tires (SIC 7534) industries.
Methodology
In determining the effects of pollution control on the industry, the costs that would
likely be incurred were estimated from the effluent guidelines document and information
received from industry. Conclusions were drawn from an analysis of the way these costs
would affect prices, production, employment, profits, and other economic variables. The
analysis was based on coverage of facilities of various sizes that represent about one third of
the industry.
The Contractor assumed that companies in extremely competitive segments of the
industry (Footwear and Reclaimed Rubber) would find it necessary to absorb the increase
in cost, whereas the other segments would pass along the cost in the form of higher prices to
maintain their current profit margins. However, so large a percentage of the industry is on
municipal systems that there is little potential for price increases. Small companies that are
not on municipal systems, that have limited capital, and that cannot increase prices were
considered as candidates for closing if the annual costs for pollution control exceeded 50%
of their Before Tax Earnings.
Segmentation
The non-tire section of the rubber processing industry, which is the subject of this
document, has been segmented by product. Each SIC code is considered a separate segment.
Because of the market and price considerations, this characterization has been more useful
and reasonable in considering economic impact. These segments are:
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Guidelines
Document
SIC Code Category Product
3021 A Rubber Footwear
3031 B and C Rubber Reclaim
3041 A Hose and Belting
3069 A and D Rubber Products Not Elsewhere Classified
3293 A Gaskets, Packing and Sealing Devices
7534 None Retread Tires
Financial Considerations
The rubber industry has always had a lower return on its invested capital than the rest
of industry. The latest information on the 1973 figures shows that all industries enjoyed a
9% return on invested capital, while the rubber industry's amounted to only 7.8%. Profit as
a percent of sales after taxes for all industries was 4.8%. The figure for the rubber industry
was 4.1%.
Present indications are that the consumption relationship between the segments will
remain roughly the same, and there will be no marked changes in rubber usage. In general,
no substantial ups and downs are anticipated. Financial problems are currently being
encountered by the retread and reclaim rubber businesses. The retread business will not be
affected by pollution control, but it still has problems.
Although the reclaim business suffers from low margins and competition from virgin
rubber, it will need to spend money on pollution control. Pollution control costs could
cause many plants to close. We estimate that three out of a total of eight plants currently in
operation will seriously consider closing because of the added cost of pollution control.
Since costs of scrap collection keep increasing, the profit squeeze on reclaim rubber
becomes increasingly tighter. Many companies have already gone out of business; during the
1970's the additional cost of the pollution controls could well cause others to go out of
business.
The rubber footwear segment of the industry has been seriously affected by foreign
competitors. Small companies (less than $2 million sales) that do not discharge into
municipal sewers would need to increase their sales prices as much as 4%. They state that
this will place them in a poor competitive position.
This analysis indicates no adverse effects on the growth of the industry because of
B.P.T., B.A.T., and N.S.P.S. In addition, the costs should not affect supply.
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The Contractor does not expect these additional costs to exert a significant impact on
the market for and prices of the respective products. The plants that will close are chiefly
small plants that already operate at a low profit margin because of a difficult competitive
situation. Many plants, however, discharge into municipal systems that will not be affected.
The Contractor estimates that 22 plants will close, or about 1.5 percent of the total in
the rubber processing industry. The impact on each segment is summarized below. More
detailed information is presented in Tables 1-1 through 1-5.
SIC Code Want Closings Number of People Effect on Supply
3021 Footwear 3 220 None
3031 Reclaim 3 250 High
3041 Hose and
Belting 0 0 None
3069 Fabricated
Products 12 600 Small
3293 Gaskets and
Sealing _4 200 None
Totals 22_ 1.270
Limitations
When interpreting the findings of this study, one must be cognizant of the limitations
of the cost data used for calculating investment and annual operating costs. First, the
Contractor has defined these as direct incremental investment and annual operating costs
required to achieve environmental standards. Since these costs were provided to the
Contractor by the effluent guidelines development document, the Contractor cannot verify
their accuracy. Second, comments from industry indicate some of these costs require
further review, but such a review is not within the scope of this phase of the study. Third,
tentative data on B.A.T. guideline costs for hose plants made by the lead process is included
but not finalized. The tentative guidelines are given in Appendix A. Finally, the calculated
price increases for pollution guidelines (B.A.T. and B.P.T.) are probably maximum expected
increases. Certain companies and certain plants meet B.A.T. guidelines (or are on municipal
systems) and may not increase their prices at all. Other companies may be constrained to
follow suit.
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TABLE 1-1
THE RUBBER PROCESSING INDUSTRY
SIC CODE 3021
Footwear
Impacts B.P.T. B.A.T.
Costs
Investment
Total for Segment ($) 1.41 x 106 NA
Per plant (average) ($} 156,000 NA
Percent of average annual NA
investment in segment
Annual
Total for segment ($) 0.585 x 106
Per plant average ($) 65,000 NA
Percent of sales 0-7.14 NA
Price increase— Percent None NA
(Varies from product to product)
Plant closings 3 NA
Percent of total in segment 4.3 NA
Displaced workers 220
Percent of total in segment 0.7 NA
Number of community impacts None NA
Impact on industry growth None NA
Direct balance of payment effects None NA
Total plants in Segment 70 NA
Total plants not on municipal 9 NA
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TABLE 1-2
THE RUBBER PROCESSING INDUSTRY
SIC CODE 3031
Reclaimed Rubber
B.P.T. B.A.T.
Investment
Total for Segment ($) 921 x 103 NA
Per plant (average) ($) 230 x 103 NA
Percent of average annual NA NA
investment in segment
Annual
Total for segment ($) 379.8 x 103 NA
Per plant average ($) 95,000 NA
Percent of sales 0-3.5 NA
Price increase — Percent None NA
(Varies from product to product)
Plant closings 3 NA
Percent of total in segment 37.5 NA
Displaced workers 250 NA
Percent of total in segment 20.8 NA
Number of community impacts None NA
Impact on industry growth None NA
Direct balance of payment effects None NA
Total plants in Segment 8 NA
Total plants not on municipal 4 NA
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TABLE 1-3
THE RUBBER PROCESSING INDUSTRY
SIC CODE 3041
Hose and Belting
Impacts B.P.T. B.A.T.*
Costs
Investment
Total for Segment ($) 1.250 x 106 ** 135,000
Per plant (average) ($) 139,000 15,000
Percent of average annual NA NA
investment in segment
Annual
Total for segment ($) 0.495 x 106 ** 27,000
Per plant average ($) 58,000 3,000
Percent of sales 0 — 5.8 < .1
Price increase (Percent) 0.34 0
(Varies from product to product)
Plant closings 0 0
Percent of total in segment 0 0
Displaced workers 0 0
Percent of total in segment 0 0
Number of community impacts None 0
Impact on industry growth None 0
Direct balance of payment effects None 0
Total plants in Segment 55 9
Total plants not on municipal 8 0
*Not stipulated exactly at this time, but guidelines are anticipated
for plants using the lead process for hose manufacture, whether on
municipal or not.
**lncluding costs of lead elimination ($15,000 investment, $3000
operating costs each for B.P.T. and B.A.T.)
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TABLE 1-4
THE RUBBER PROCESSING INDUSTRY
SIC CODE 3069
Miscellaneous Rubber Products
Impact B.P.T. B.A.T.
Costs
Investment
Total for Segment ($) 14.763 x106 NA
Per plant (average) ($) 119,000 NA
Percent of average annual NA NA
investment in segment
Annual
Total for segment ($) 5.262 x 106 NA
Per plant average ($) 42,000 NA
Percent of sales 0-4.1 NA
Price increase 0.6 NA
(Varies from product to product)
Plant closings 12 NA
Percent of total in segment 1.0 NA
Displaced workers 600
Percent of total in segment 0.477 NA
Number of community impacts None NA
Impact on industry growth None NA
Direct balance of payment effects None NA
Total plants in Segment 1189 NA
Total plants not on municipal 124 NA
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TABLE 1-5
THE RUBBER PROCESSING INDUSTRY
SIC CODE 3293
Gaskets Sealing
Impacts B.P.T. B.A.T.
Costs
Investment
Total for Segment in $ 1.664 x 106 NA
Per plant (average) in $ 118,000 NA
Percent of average annual NA NA
investment in segment
Annual
Total for segment in $ 707.2 x 103 NA
Per plant average in $ 50,500 NA
Percent of sales 0-7.14 NA
Price increase None NA
(Varies from product to product)
Plant closings 4 NA
Percent of total in segment 3.0 NA
Displaced workers 200 NA
Percent of total in segment 0.68 NA
Number of community impacts None NA
Impact on industry growth None NA
Direct balance of payment effects None NA
Total plants in Segment 133 NA
Total plants not on municipal 14 NA
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SECTION II
DESCRIPTION OF RUBBER PROCESSING INDUSTRY
The categories of the rubber processing industries covered by this document are:
Rubber Footwear (SIC 3021) Rubber Products (SIC 3069)
Reclaimed Rubber (SIC 3031) Rubber Gaskets, Packings, and
Rubber Hose and Belting (SIC 3041) Sealing Devices (SIC 3293)
Tire Retreading (SIC 7534)
An economic analysis of proposed effluent guidelines, EPA-230-1-73-024, September,
1973, evaluated the effect of guidelines on the synthetic rubber industry (SIC 2822), and
the tire and tube industry (SIC 3011), which represents the major outlet for rubber. Of the
total new rubber consumed in the United States, 65% was used by this category (the
production of tire and tire products) and covered in the prior report.
The remainder, about 35%, was used for non-tire products which are covered in this
document. Table II-1 shows a breakdown of the total new rubber consumption for the years
1970 through 1973.
The consumption of rubber by various sections of the industry is shown below. The
tire and related products sector of the rubber processing industry shipped about 250 million
units worth $8-9 billion (6 billion tires and tubes) and consumed about 1,700,000 long
tons of synthetic rubber, and 515,000 long tons of natural rubber.
The non-tire sector converted 1,056,000 long tons of synthetic rubber, and 190,000
long tons of natural rubber to $5 - 6 billion worth of products.
The value of shipments for the SIC codes covered by this report in 1972 is shown in
Table II-3.
Since the last census in 1967, the non-tire segment of the industry has grown about
22%, averaging between 4 and 5% per year.
The products are described in this document by SIC codes. Because of the variety and
complexity of the products within the fabricated rubber industry, it is necessary to evaluate
the industry size, growth, and financial aspects on the basis of average figures for each
particular segment. Small plants are obviously affected more seriously by the control costs.
However, an estimated 90% are tied into municipal systems.
The guidelines document separates the industry into four major groupings which relate
to processing methods rather than financial considerations. These groupings, and con-
clusions on each, are shown in the Appendix. The groupings used in the impact analysis use
S.I.C. code groupings because they segregate the industry by products which have similar
financial and marketing considerations.
9
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TABLEIM
TIRE PRODUCTS VS. NON-TIRE PRODUCTS
(000 Long Tons)
1
Year
1970
1971
1972
1973*
New
Rubber Total
2,477
2,683
2,929
3,150
Tire and
Tire Products
1,578
1,771
1,919
2,075
Non-Tire
Products
899
912
1,010
1,075
% Tire and Tire
Products to Total
64
66
65
66
'Estimated totals
Source: Rubber Manufacturers Association, Rubber Industry Business and Economic
indicators, 1964 to 1973,
TABLE 11-2
RUBBER USAGE
1970
Tire and Tube Products
Mechanical Goods
Footwear
Latex Foam Products*
Wire and Cable
Other
Totals
'Includes carpet backing
Percent
64.0
18.5
6.0
3.5
1.0
7.0
100
not covered in
Long tons
(000)
1,578
458
149
87
25
173
2,477
this study
1971
Percent
66.0
16.5
6.0
3.5
1.0
7.0
Long tons
(000)
1,771
443
160
94
27
188
1972
100
2,683
Percent
65.0
17.5
6.0
3.5
1.0
7.0
100
Long tons
(000)
1,919
513
176
103
29
205
2,929
Sources: Rubber Manufacturers Association, Business and Economic Indicators 1964-1973 arid Rubber Age,
Jan., 1971-73
TABLE 11-3
VALUE OF SHIPMENTS OF SIC CATEGORIES, 1972
SIC Code Products $ mill ions
3021 Rubber Footwear 525
3031 Rubber Reclaim 35
3041 Hose and Belting 740
3069 Rubber Products Not Elsewhere Classified 3,750
3293 Gaskets, Packing and Sealing Devices 150
7534 Retread Tires 66.3
10
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SECTION III
DESCRIPTION OF RUBBER PROCESSING INDUSTRY SEGMENTS
SIC 3021 - RUBBER FOOTWEAR
Introduction
This segment of the industry covers companies that manufacture all-rubber and plastics
footwear, waterproof fabric upper footwear, and other fabric upper footwear having rubber
or plastic soles vulcanized to the uppers. Our report covers plants that make products of
P.V.C. as well as of rubber. Both types are made in many cases in the same plant and
industry reports do not separate the two.
Technology
With rubber goods the rubber stocks are mixed in a Banbury mixer or on compounding
rolls (the same as in tire plants), then formed into stock. This stock is then formed onto the
canvas uppers by screw injection, conventional injection compression, or transfer molding
techniques. The fabric for rainwear products is produced by calendering. In addition, a
certain amount of latex is used as adhesives.
The technology of manufacture places this product in Roy Weston's Category A -
general molded, extruded, and fabricated rubber products.
Number of Companies
There are 59 companies in this segment. Of these, about 12 have sales of more than $7
million. Five of the twelve are multiplant companies and account for about 50% of the
dollar value of shipments. Table III-l lists 61% of the companies, their plants, value of
shipments, employees and percentage of total value of shipments in this segment.
Number of Plants
There are 70 plants in this segment ranging in size from 2400 employees to less than
50. (See Table III-l.) Table III-2 lists plants by sales size versus the number of plants.
Many small plants in this segment do less than $500,000 worth of business a year.
These small plants as well as the somewhat larger plants which do up to $5 million worth of
business a year operate from rented facilities and use leased equipment. Rented facilities are
generally in industrial parks and they are tied into municipal sewage systems. In most cases
the rubber or polyvinyl chloride that is used in manufacture is purchased and no compound-
ing is done in the plant. The effluent is only cooling water. Our estimate is that 90% of the
small plants are on municipal systems.
11
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Is}
TABLE 111-1
RUBBER FOOTWEAR COMPANIES AND PLANTS
Rank
1
2
3
Name of Company/Location
Uniroyal, Inc.
Naugatuck, Ct
Thomson, NC
Dublin, Ga
Farmville, Va
Total
Converse
Maiden, Ma
Andover, Ma
Bristol, R.I.
Berlin, NH
Presque Isle, Me.
Lumberton, NC
Total
Bata
Belcamp, Md
Salem, Ind.
Elkins, W.Va
Shipment*
In Millions $
63.2
25.0
13.0
5.8
106.0
15.0
5.2
12.0
16.5
14.1
36.2
100.0
21.0
24.9
7.1
% of U.S.
17.67
16.67
Total
53.0
Cum. % Employees
3,011
1,145
610
233
17.67
34.34
8.83
43.17
4,999
1,000
350
800
1,100
950
2,400
6,600
1,200
1,400
400
3,000
*Sales are estimates based on reports from industry and calculations based on number of employees.
**Plant Size - Large, Medium, Small
Annual
Pounds
Raw Materials
300,000
170.000
31,000
16,000
527,000
29,000
10,150
23,200
31,900
27,550
69,600
191,400
34,800
40,600
11,600
Size*»
L
L
L
L
L
M
L
L
L
L
L
L
M
87,000
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TABLE 111-1 (Continued)
Rank Name of Company/Location
8 Suave Corporation
Miami Lakes, Fl.
9 Endicott Johnson
Johnson City, NY
Actual
Shipment Pounds
11.0
10.0
1.83 56.17 650
1.67 57.84 550
18,850
15,950
Size
4
5
6
7
Cambridge Rubber Company
Tarreytown, Md.
Littletown, Pa.
Total
Servus Rubber Company
Rock Island, Illinois
Williamansette, Ma
Total
Lacross
La Crosse, Wise.
Bon An
Auburn, Me
17.8
7.2
25.0
7.2
8.8
16.0
14.0
12.0
1,000
400
4.17 47.34 1,400
400
500
2.67 50.00 900
2.33 52.34 800
2.00 54.34 700
29,000
11,600
40,600
11,600
14,500
26,100
23,200
20,300
M
M
M
M
L
M
M
M
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TABLE 111-1 (Continued)
Rank Name of Company/Location
10 Randy Manufacturing Corp.
Randolph, Ma
11 Gerbo Industries
Huntington, Pa
12 Rubber Corp. of Arkansas
DeQueen, Ark.
13 Rubber Corp. of Pennsylvania
West Hazelton, Pa
14 Ramer Industries. Inc.
New York, NY
15 Genesco. Inc.
Nashville, Tenn.
16 Allied Hampshire Chemicals
Saco, Me
17 Central Slipper Company
Frier Industries, Inc.
Wilkes-Barre, Pa
Annual
Shipment Pounds
In Millions $ % of U.S. Cum. % Employees Raw Material
9.0
9.0
9.0
9.0
9.0
9.0
7.0
7.0
1.50 59.37 500
1.50 60.87 500
1.50 62.37 500
1.50 63.87 500
1.50 65.37 500
1.50 66.87 500
1.17 68.04 400
1.17
69.54 500
14,500
14,500
14,500
14,500
14,500
14,500
11,600
11,600
Size
M
M
M
M
M
M
M
M
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TABLE 111-1 (Continued)
Rank Name of Company/Location
18 Quaker Shoe Corporation
Allentown, Pa
19 Injection Footwear Corp.
Miami, Fla.
20 Alfred Footwear, Inc.
Limerick, Me
21 Roberts Shoe Company
Somersworth, NH
22 AMFESCO
Plainview, NY
23 Daizy Footwear
Passaic, NJ
24 Gator Shoe
Miami, Fla.
25 Joy Footwear
Hialeah, Fla.
Annual
Shipment Pounds
In Millions $ % of U.S. Cum. % Employees Raw Materials Size
7.0 1.17 70.71 400
5.0 0.833 71.54 280
4.5 0.75 72.2 245
4.5 0.75 72.2 245
3.75 0.06 73.57 210
2.5 0.04 73.99 140
2.5 0.04 74.40 140
2.5 0.04 74.82 140
11,600 M
8,120 S
7,100 S
7,100 S
6,100 S
4,060 S
4,060 S
4,060 S
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TABLE II1-1 (Continued)
Rank Name of Company/Location
26 Peerless Footwear
Telford. Pa
27 Nohel Mfg. Corporation
Providence, R.I.
28 Raton Enterprises, Inc.
Raton, NM
29 Qsinski Mfg. Company
Brooklyn, NY
30 Carter Rubber Company
Wilkes Barre, Pa
31 Alsam Mfg. Company
Lititz, Pa.
32 Columbia Novelty Company
Hazelton, Pa.
33 Littonian Shoe Company
Littlestown, Pa.
Annual
Shipment Pounds
In Millions $ %of U.S. Cum. % Employees Raw Materials Size
2.5 0.04 75.25 140
2.5 0.04 75.66 140
2.5 0.04 76.07 140
1.8 0.03 76.37 100
1.8 0.03 76.97 100
1.25 0.02 77.18 70
1.25 0.02 79.18 70
0.8 0.01 80.18 50
4,060
4,060
4,060
3,045
3,045
2,030
2,030
1,420
S
S
S
S
S
S
S
S
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TABLE II1-1 (Continued)
Rank Name of Company/Location
34 Adorn Slipper Company
New York, NY
35 Bon Doren Rubber Company
Anaheim, Cal.
Totals
Total Other
Annual
Shipment Pounds
In Millions $ % of U.S. Cum. % Employees Raw Materials Size
0.6
0.37
464.42
135.58
0.01
0.01
81.18 35
82.18 25
82.18
17.82
1,000
725
Grand Total
600.00
100.00
-------
TABLE III-2
PLANT AND COMPANY SIZE
A
B
C
D
Sales in Millions
Greater than 50
12 to 50
5 to 12
Under 5
Number of
Companies
3
3
13
17
Number of
Plants
1
13
16
17
Size of Plant*
3
3
2
Total 36 47
Total Estimated 1971 SIC 65
Industry estimates 70
"Category Pounds Compounded Per Day
1 Small Less than 8200
2 Medium 8200-23,000
3 Large Greater than 23,000
Rubber Consumption
PVC and rubber are consumed in footwear manufacture. SBR and natural rubber are
used to the greatest extent and nitrile or neoprene are used where oil resistance is necessary.
Total rubber consumption in 1970 was 148,600 long tons; in 1972, it was 176,700 long
tons.
Profit Range
The profit range for the shoe industry is low — only 1 to 3% after taxes. The larger
companies generally have the higher profits.
Employees in Segment
This segment employed about 29,200 (about 24,600 production workers) as of 1971.
Value added per production worker was $12,081.*
'Annual Survey of Manufacturers, 1971.
18
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Diversification
About 40% of companies have sales outside of this segment. The major companies and
their degree of diversification are listed in Table III-3.
TABLE 111-3
COMPANY DIVERSIFICATION
Company Percent of Sales In This Segment
Uniroyal 6.05
Suave Shoe Company 13 .
Servus Rubber Company 5.39
Scoa I ndustries 21
Randolph Manufacturing Co. 59
Genesco 1
Carroll Shoe Company 79
Pepsico Company 0.01
Surft Company 0.03
Source: Industry and Contractor estimates
Markets
About 250 million pairs of canvas shoes were sold in the United States in 1972. Of
these, some 70% were rubber soled and 30% vinyl. About 115 million rainwear (boots) were
sold in the United States and approximately 80% of these were vinyl. Imports were about
28% of the total for canvas upper shoes. Of the 23 million pairs of rubber waterproof
footwear sold in the United States about 47% were imports. Table III-4 summarizes this
data.
A variety of factors influence sales of U.S. manufacturers, the most important of which
are consumer trends, dollar value, and type of product. Fabric upper shoes, and athletic
shoes have become increasingly popular, whereas the popularity of overshoes (boot manu-
facturers) has declined gradually. However, there has been a steady increase in the dollar
value of sales over the years as shown in Table III-5.
TABLE MM
FOOTWEAR SALES
Millions of Percent
Type of Product Pain Sold Percent of Rubber Imports
CanvM 250 70 27.6
Booti > 115 20 NA
RubbtrBooti 23 100 47.7
19
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TABLE 111-5
RUBBER FOOTWEAR VALUE OF SHIPMENTS
Year $ Millions
1960
1963
1966
1969
1970
1971
265.5
354.2
410.2
471.9
515.0
519.8
Substitution
Rubber's major competition for use in soles, boots and rainwear is polyvinyl chloride.*
For almost all applications it can replace rubber, and it is easier to process.
'Penetration into this market was about 24% - valued at $155 million in 1972.
20
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SECTION IV
SIC 3031 - RECLAIMED RUBBER
Introduction
This category includes establishments which are engaged primarily in reclaiming rubber
from scrap rubber tires, tubes, and miscellaneous waste rubber articles by processes which
result in devulcanization, depolymerization, or regenerated products that contain added
ingredients. These products are sold for use as raw materials in the manufacture of rubber
goods, sometimes mixed with crude or synthetic rubber, sometimes not.
The value of sales of the reclaimed rubber has dropped sharply since the price of oil
extended SBR dropped. During 1973, the average selling price of reclaimed rubber was
between 10 and 11 cents (at 50% hydrocarbon content) per pound with prices ranging
anywhere from about Si per pound up to 15 or \6i per pound. During 1973 oil extended
SBR could be purchased for 12 to 13^ per pound. At the same time, the cost of reclaiming
rubber increased because of higher costs for collecting scrap tires and for labor. Thus, the
reclaimed-rubber producers have been caught in a profit squeeze. Many of them operate at a
loss, or at a very low profit margin.
Reclaim production has declined from 565 million pounds in 1968 to about 430
million pounds in 1973.
The oil crisis has increased demand for reclaim rubber, and this has resulted in
increased production at the plants that remained in operation. The consensus is that
shortages of synthetic elastomers and compounding ingredients can be anticipated during
1974 and later. These will result in price increases for synthetic and natural rubber. If this
increase amounts to 50%, reclaim begins to look attractive as a substitute. In addition, as
prices of reclaim are increased, the financing capabilities and profits of these companies
should improve. Statistics that relate to financial aspects of the industry are shown in Table
IV-1, and point out clearly the loss in sales of the industry over the years up to 1973. The
reversal of the downward trend in that year shows the effects of shortages.
Technology
There are three processes for reclaiming rubber: the digester process, the pan process,
and the mechanical process. All three processes employ similar rubber scrap-separation and
size-reduction methods. They differ in the depolymerization and the final processing steps.
21
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TABLE IV-1
FINANCIAL TRENDS
Year
1958
1960
1962
1964
1966
1968
1969
1970
1971
1972
1973*
Employees
(000)
2.2
2.4
2.1
1.9
2.0
1.7
1.6
1.6
1.2
—
—
Production
Workers
(000)
1.8
2.0
1.7
1.5
1.6
1.4
1.3
1.3
1.0
Value of
Shipments
($ millions)
39.3
49.2
49.8
44.4
52.7
48.3
44.8
41.2
32.1
-
41.9
Capital
Expenditures
($ millions)
1.0
2.8
1.0
3.6
1.3
1.5
1.2
1.0
.7
Value
Added
($ millions)
20.8
29.1
26.7
24.4
25.3
26.0
22.2
18.6
17.8
—
Cost of
Materials
($ millions)
18.6
21.7
22.9
20.4
27.6
23.4
23.0
21.2
14.5
*1973 consumption 170,000 long tons (380.8 million pounds)with an estimated value of $41.9 million.
Source: Rubber Age, January, 1974
Digestion Process (Category B in the Development Document). In this process the rubber
product is ground, heated with depolymerizing agents in an autoclave digester, then in a
caustic medium to further polymerize and defiber the rubber; it is then washed, dried and
packaged. Many of the major companies use both the digestion and dry pan process, but
most are switching to the dry process.
Dry Digestion.* One company, U.S. Rubber Reclaim, uses a patented mechanical dry
process which defibers the rubber scrap and runs it through a heated extruder where it
directly obtains a finished product that is dry.
In the dry pan process, the rubber scrap is mixed with reclaiming oils, heated in open
pans on a horizontal heater which is kept at 365°F for 2 to 18 hours. After further
processing, the product is packaged and shipped.
Company Size and Production
Much of the rubber reclaim produced today is used internally by the major tire
companies and thus it is extremely difficult to obtain exact figures on the amount of
reclaimed rubber that is produced. The Federal Trade Commission reports 420 million
*Dry or Pan Process and the Mechanical Process (Category C In the Development Document)
22
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pounds were produced in 1972. This dropped to about 380 million pounds in 1973. Reports
from industry are somewhat higher, but may take into account material that is used
internally and not reported. These estimates run as high as 450 million pounds for 1973.
Eight plants remain in the business; each is owned by a separate company. Midwest Rubber
Reclaim operated three plants at one time, but only the St. Louis plant is in operation at
present. A plant in Barberton, Ohio, was recently shut down.
Both Goodyear and Uniroyal operate in Canada. Goodrich also operates a pan process
in Akron, Ohio, for internal use, but it is understood to be phasing out this operation
gradually. The companies are listed in Table IV-2.
TABLE IV-2
AVERAGE PRODUCTION BY COMPANY
Location
Uniroyal
Naugatuck, CT
Midwest
St. Louis
Goodyear
Akron, OH
Firestone
Memphis, Tenn.
U.S. Rubber
Vicksburg, Miss.
Centrex
Findley, OH
B.F. Goodrich, Akron
Neopara
Trenton, NJ
Pounds/Per Day
250,000
348,000
260,000
200,000
142,000
85,000
85,000
40,000
Pounds/Year
61,000,000
87,000,000
50,000,000
50,000,000
43,000,000
20,000,000
20,000,000
10,000,000
341,000,000
Process
C
BandC
Municipal
Municipal
C
B
Municipal
Municipal
Wet Digestion Cat. B
Pan or Mechanical Cat. C
Source: Industry Spokesmen and Arthur D. Little Estimates.
23
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Employees in Segment
This segment employed 1200 (1000 production workers) in 1971, which results in a
production of 200.5 tons/production worker, or $17,800 value added per production
worker.
Markets
The eight companies in this segment are listed by the Bureau of Census as reporting
their value of shipments as $31 million in 1972. Industry reports about $43 million. A high
proportion of reclaim is used internally by tire companies.
As shown in Table IV-3, consumption of reclaim rubber has declined gradually over the
years. There does not appear to be any prospect of altering this trend without a substantial
upheaval in the current price structure of virgin rubber or government action to promote its
use.
TABLE IV-3*
CONSUMPTION OF RECLAIM RUBBER
Year Consumption Pounds
(long tons) (millions)
1973 170,000 380
1972 187,582 420
1971 200,474 449
1970 199,571 447
1968 250,426 560
1966 264,506 592
The markets served by reclaimed rubber are shown in Table IV-4.
TABLE IV-4*
RECLAIM CONSUMPTION BY PRODUCT
Product Percent
Tire and Repair Materials 67.4
Innertubes 3.3
Auto Materials 9.9
Hose and Belts 5.6
Mechanical Goods 5.8
Cements and Dispersion 3.5
Heels and Soles 1.0
Rubber Surface 0.9
All others 1.4
100
*Source: U.S. Department of Commerce.
24
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Diversification
There are four major companies in this segment - Uniroyal, Goodyear, Firestone, and
Goodrich - all of whom have widely diversified interests. They produce reclaim largely for
internal use and as a means of disposing of their own scrap. Other independents are
diversifying to reclaim other materials or to use reclaim in special products of their own.
Most also do reclaiming for others. These programs have been successful to only a limited
extent.
Profit Range
The profit for companies producing reclaim is low, and for that reason many com-
panies have closed.
Substitution
Rubber reclaim has always been considered as a low-cost replacement for virgin rubber,
and depending on cost, oil extended virgin can replace reclaim. Reclaim's advantage is that it
promotes easy processing if used as part of a rubber composition. Virgin SBR now sells for
21 cents per pound. In 1973 it sold for 17 cents per pound and oil extended at 13 cents per
pound. In addition to the price increase, shortages have also developed which make reclaim
attractive and allow a cost increase of 10 to 11.5 cents (50% hydrocarbon) from the 1973
figure.
Effects of Pollution Control Costs
Reclaim companies have been operating in a declining market and have suffered from a
cost squeeze between increased costs for tire collection and processing, and the low price of
oil extended SBR. With the added cost of pollution control, as covered in the guidelines
document, 5 of the 8 companies probably will close, assuming conditions are similar to
those that existed during 1973. Factors which will influence the final decision will be:
(1) The effect of the oil crisis on reclaim markets and price. 1974 has already
shown an increased demand.
(2) Action by the government relating to waste disposal of tires and incentives
to keep reclaimers in business.
(3) Other interests such as plastic reclaim, rubber processing, ecology, etc.
25
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SECTION V
SIC 3041 - RUBBER HOSE AND BELTING
Introduction
This section covers establishments engaged primarily in the manufacture of rubber hose
and belting, including garden hose. This segment was originally carried as part of SIC 3069,
but in 1972 was broken out as a separate classification.
Technology
The hose category covers a variety of hoses, including machine-wrapped ply hose,
hand-built hose, and braided and spiral hose. Each is made on a slightly different type of
equipment, but common to all is the compounding equipment, which is similar to that used
in the tire industry. The process of fabrication is basically extrusion with variations to
produce the particular end product.
The other major portion of this segment, belting, includes conveyor, elevator, and
transmission and V-belts. Compounding is carried out in the conventional manner as in tire
plants. The compounded rubber is then calendered onto fabric cured in an autoclave or by
continuous cure. V-belts are made on special equipment. They have a wire reinforcement
center and are covered with rubberized fabric. The rubber is mixed by standard methods,
i.e., in intensive mixers. The stock is then calendered onto fabric, slit, and wrapped onto
wire by means of special equipment. The method of processing places these products in
Category A - general molded extruded and fabricated rubber goods.
Company Size
The companies that manufacture these products are the major rubber companies. As in
the tire industry, the equipment used to manufacture these products requires a large capital
investment, and smaller companies have gradually dropped out of the business. At present
55 companies manufacture hose and belting and most of the majors are multiplant
companies. Many manufacture mechanical goods in the same plants and the mechanical
goods fall into SIC 3069 — Rubber products not elsewhere classified. Table V-l lists the top
18 producers, and their approximate sales. Exact figures are not available in published
statistics nor split out by the individual companies from their total fabricated rubber
products sales.
Our estimated breakdown by company size is shown in Table V-2.
27
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TABLE V-1
HOSE AND BELTING PLANTS
Company Name/Plant Locations
Gates Rubber Company — Denver, Co
Denver, Co
Elizabethtown, 111
Galesbury, III
Goodyear Tire & Rubber Company
Akron, Oh
Lincoln, Ne, Marysville, Oh
North Chicago, III
Swan Rubber Company, Division of
Amerace
Esna, Bucyrus, Oh
Bucyrus, Oh
Stillwater, Oh
Worth ington, Oh
B.F. Goodrich Company — Akron, Oh
Akron, Oh
Marion, Oh
Uniroyal Industrial Products
Kenneth, Mo
Marysville, Mo
Passaic, NJ
Philadelphia, Pa
Red Oak, la
Sandy Hook, Ct
Dayco Corporation, Dayton, Oh
Dover, NJ
Spingday, Mo
Dayton, Oh
Inland Manufacturing Division, General
Motors Corporation — Dayton, Ohio
Goodall Rubber Company — Trenton, NJ
Boston Woven Hose & Rubber Company
Division of American Biltrite Inc.
Chelsea, Ma
Firestone Tire & Rubber Company
Noblesville, In
Prescott, Ar
Noblesville, In
Sales
($ millions)
>200
>200
Type
V-Be Its & Hose
V-Belts&Hose
>50
>50
>50
Industrial
V-Belts & Hose
V-Belts & Hose
>50
Automotive
>50
45
40
40
Automotive & Hose
Hose & Belting
Garden & Heater
Industrial
28
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Company Name/Plant Locations
TABLE V-1 (Continued)
Sales
($ millions)
Electric Hose & Rubber Company
Wilmington, De 40
Caterpillar Tractor - Peoria, III 25 - 30
Hewitt-Robins, Inc.
Division of Litton Industries
Buffalo, NY 30
Atlantic Tubing & Rubber Company
Cranston, Rl 20
Mercer Rubber Company
Hamilton Square, NJ 1Q
Acme-Hamilton Corporation
Trenton, NJ <1Q
DeVilbiss Company — Toledo, Oh g
H.K. Porter, Tnermoid Division
Bellefontaine, Oh Q
Source: Industry estimates
Type
Garden Hose & Industrial
Tractor Hose (Captive)
Industrial & Belting
Garden Hose
Reinforced
Conveyor Belt
Industrial
Industrial & Automotive
29
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Plants
There are about 77 plants in this segment with the major companies operating several.
The location of these plants is shown in Table V-3.
Guidelines
Sales in Millions Number of Plants Plant Size
Greater than 50 1 L
12 to 50 13 L
5 to 12 16 M
Under 5 40 S
Employees
This segment has an estimated 17,000* production workers and total employment is
about 22,900.
Diversification
The companies in this segment have extensive sales in other categories. In most cases
plants also produce a line of products that may be classified as mechanical goods and that
includes products such as weather stripping, bumper guards, gaskets, etc.
TABLE V-2
SALES BY COMPANY
$ Millions Number of Companies
Greater than 200 2
50 to 200 5
20 to 50 6
8 to 20 4
All others 38_
Total 55
' Estimate based on sales
30
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Markets
In 1973 total sales in this category amounted to about $1 billion, including garden
hose. The Rubber Manufacturers Association (RMA) estimates are shown in Table V-3.
In 1972, this category was included in products not elsewhere classified and a good
breakdown of industry sales has not been made available. RMA estimates, however, have
been published for 1973, as shown in Table V-4. These estimates do not include garden
hose, which is a $70 million business. Further revisions in the early 1973 estimates indicate
they should be increased and a more accurate total estimate, including garden hose, is $960
million to $ 1 billion.
The annual growth rate predicted for this segment through 1978 is 5.75%. Exports
exceed imports and represent about 2% of sales.
TABLE V-3
INDUSTRIAL PRODUCTS*
(Millions of Constant 1973 Dollars)
Product 1970 1971 1972 1973
Hose 360 385 410 512
V-Belts 175 183 190 216
Flat Belting 120 130 140 162
Totals 655 688 740 890
'Source: Rubber Manufacturers Association
Profit Range
The profit before taxes for this segment averages about the same as the tire segment (8
to 12%).
Diversification
For the most part the companies in this segment are major rubber companies that have
diversified products in the fabricated rubber sector of the rubber processing industry, and
that make products such as tires, mechanical goods, coated fabrics, footwear, etc.
31
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Substitution
Most of the products in this category require the unique characteristics of rubber and
substitution with plastic would in most cases result in products with inferior properties.
However, plastics have replaced rubber in applications where cost is of major importance,
garden hose, for example.
Effect of Pollution Control Costs
Many of these plants dump into municipal systems. None of the plants questioned
indicated any intention of closing down because of the guidelines costs.
32
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SECTION VI
SIC 3069 - FABRICATED RUBBER PRODUCTS
Introduction
This category covers all fabricated rubber products not elsewhere classified. It includes
establishments engaged in manufacturing industrial and mechanical rubber goods, vulcanized
rubber coatings, and miscellaneous rubber specialties, such as dipped goods and drug
sundries.
Technology
The products in this classification fall into the guidelines Categories A and D. In the A
category the stock for further processing is prepared in the conventional manner by
compounding in an intensive mixer or on rubber mills. The stock is then handled by a
variety of forming techniques, depending on the end product that is to be produced. For
example, the stock may be cut into solution for spread or dip coating or used directly for
extrusion calendering or molding.
In latex processing (Category D), the latex is compounded with fillers, and curing
ingredients, stabilizers, etc. then used for latex cements, foamed products, thread, or as a
dip for forming gloves, balloons, etc.
Number of Companies
In 1971 this category showed 1189* plants doing business. Of these, 646 companies
are listed as doing more than $500,000 per year in this category. Of the 646 companies, 474
are single-plant companies, and 172 are multi-plant operations. The market in this category
is dominated by the major rubber companies. The largest of these - Goodyear, Uniroyal,
and Dayco Corporation — do more than a $100 million worth of business, and share about
20% of the total market. There are roughly 71 companies doing over $10 million worth of
business a year. These companies represent about 65% of the total market in this category.
A list of the top ten companies is shown in Table VI-1, along with their relative
position in the industry.
'Census of Manufactures U.S. Department of Commerce.
33
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TABLE VI-1
SALES BY COMPANY
SINGLE- AND MULTI-PLANT COMPANIES RANKED WITHIN SIC 3069
Shipments % of Cumul % of
Company (million $) U.S. % Company Rank
Goodyear Tire & Rubber
Akron, Ohio 350.1 9.73 9.73 13.03 1
Uniroyal, Inc.
Middlebury, Conn. 199.3 5.53 15.26 14.12 2
Dayco Corporation
Dayton, Ohio 144.5 4.01 19.27 51.74 3
General Tire & Rubber Co.
Akron, Ohio 77.5 2.16 21.43 7.25 4
B.F. Goodrich Co., Inc.
New York, N.Y. 68.1 1.89 23.32 5.92 5
Firestone Tire & Rubber Co.
Akron, Ohio 63.0 1.75 25.07 3.42 6
American Biltrite Rubber Co.
Chelsea, Mass. 62.7 1.74 26.81 62.70 7
Amerace Esna
New York, N.Y. 61.3 1.70 28.51 41.59 8
Garlock, Inc.
Rochester, N.Y. 60.1 1.66 30.17 48.55 9
McCord Corporation
Detroit, Michigan 50.0 1.39 31.56 35.54 10
Raybestos Manhattan Inc.
Bridgeport, Conn. 49.3 1.37 32.93 41.32 11
Rubbermaid, Inc.
Wooster, Ohio 44.9 1.25 34.18 78.63 12
Shelter Globe Corp.
Toledo, Ohio 39.5 1.10 35.28 21.64 13
Electric Hose & Rubber Co.
Wilmington, Delaware 38.0 1.05 36.33 100.00 14
Chicago Rawhide Mfg. Co.
Chicago, Illinois 37.5 1.05 37.38 69.06 15
Gates Rubber Co., Inc.
Denver, Colorado 37.1 1.03 38.41 16.43 16
Eagle Richer Industries
Cincinnati, Ohio 34.0 .93 39.34 14.40 17
A.M.F. Corporation
White Plains, N.Y. 31.8 .88 40.22 5.86 18
Plymouth Rubber Co., Inc.
Canton, Mass. 31.2 .86 41.08 100.00 19
International Paper Co.
New York, N.Y. 30.0 .83 41.91 1.95 20
34
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Company Size
The top three companies in this segment shipped about $350 million worth of
products in 1972. The distribution of dollar sales versus number of companies in the
segment is shown in Table VI-2.
TABLE VI-2
SALES CLASSIFICATION
Sales ($ millions) Number of Companies*
Greater than 100 3
50 to 100 7
20 to 50 20
10 to 20 41
5 to 10 60
1 to 5 285
0.5 to 1 234
646
'Economic Information Systems - includes plants.
Employees in Segment
These companies employed about 126,000 workers in 1972, of which about 93,000
were production workers.
Markets
Products produced in this segment and an approximate breakdown of the sales of the
different types are shown in Table VI-3. This category acts as a catchall for the vast number
of items that are produced by rubber manufacturers. As soon as a particular segment of this
SIC code grows to a relatively large volume, it is reported separately.
The total value of shipments in this category was $3,260 million in 1970, and $3,750
million in 1973. Growth has averaged about 5% a year. The portion of this segment most
affected by imports has been soles and heels, which has declined 1 to 2% a year. In 1973,
sales were $123 million. Other products in the segment have not been as seriously affected.
This segment also includes many captive companies, small specialty plants, and com-
panies that sell only through jobbers. Major companies that are not primarily in the rubber
industry, for example, may produce an end item that requires rubber rolls, shock mounts, or
like accessories. Even though volume requirements may be relatively large, they cannot
35
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justify their own rubber processing plant. Manufacture of the products is put out forbid or
a company is selected because of reputation.
Many of the plants in this segment are relatively old, and much of their equipment is
completely depreciated. Overhead is low, and they can take on small jobs that the larger
companies could not produce at a reasonable cost.
Product Classification
General molded
General extruded
General fabricated
General latex
TABLE VI-3
PRODUCT TYPES
Types of Products $ Total Sales
Heels, soles, drug sundries, battery boxes 45
Hose, profiles 25
Coated fabrics, tape rainwear, etc. 23
Gloves, balloons, thread 7
Diversification
Of the 646 companies listed in this category, about 100 have interests outside this
category that represent more than 50% of their total business. Examples are: synthetic
rubber or resin production, tires, and other fabricated rubber goods.
Substitution
Many of the products in this category can be replaced by plastics such as polyvinyl
chloride. However, subtle changes in properties might occur with raw material changes.
Normally, a long-term approval is required on products and since specifications have been
built around rubber, they are difficult for a plastic to meet.
Profit Range
The profit for this segment of the industry is about average for the rubber industry,
and will run between 8 and 12% profit before taxes, 4 to 6% after taxes. This varies with the
companies, depending on the competitive situation in their segment of the business.
36
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Effect of Pollution Control
About 85% of the companies in this segment are estimated to discharge into municipal
systems. Many of these plants are plants built prior to 1950. Many new plants that have
been built outside the major cities have found it necessary to meet the local ordinances for
pollution control already and these will need to make only relatively minor investments.*
' Based on a survey conducted as part of this study.
37
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SECTION VII
SIC 3293 - GASKETS PACKING SEALING DEVICES - COMPOSITIONS ONLY
Introduction
This category covers establishments engaged primarily in manufacturing gaskets, gas-
keting materials, compression packings, molded packings, oil seals, and mechanical seals.
The SIC code includes gaskets made of leather, metal, and asbestos. Many gaskets are made
of compositions containing relatively small proportions (under 50%) of rubber. Rubber-con-
taining products represent about $175 million of a total of $375 million listed in the annual
survey of manufacturers.
Technology
Rubber gaskets included in this section are made with conventional equipment similar
to that used in the tire industry; that is, intensive mixers, mills, etc. Flat sheets are
compression molded or calendered and gaskets dinked out. The technology of manufacture
places this product in Roy Weston's Category A - General Molded Extruded and Fabricated
Rubber Products.
Number of Companies
This category includes 133 companies with more than $500,000 in sales. Of these, 32
are multi-plant companies, and 101 single-plant companies. The total segment, i.e., including
all types of gaskets, has a sales volume of about $375 million. However, the portion of this
segment that represents gaskets with a rubber content of more than 50% is about $175
million, according to industry reports. The total segment is dominated by 10 companies,
which among them have about 55% of the sales. The top three in this segment are: The
Federal Mogul Corporation— 10% of the market, Garlock, Inc., and the Crane Packing
Corporation, each with about 9% of the gasket total market. (See Table VII-1.)
Company Size
The major company in this segment, the Federal Mogul Company, shipped about $38
million worth of goods classified in this segment. The distribution of dollar sales per
company to number of companies is:
39
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TABLE VIM
SINGLE-AND MULTI-PLANT COMPANIES* RANKED WITHIN SIC 3293
Company Name/Address
No. of Shipments Cumulative % of
Plant* ($ millioni) Percent Percent Company Rank
Federal-Mogul Corporation
Detroit, Michigan
Garlock Inc.
Rochester, N.Y. 14603
Crane Packing Co., Inc.
Morton Grove, III 60053
Johns-Manville Corp.
New York, N.Y. 10016
Int'l Packings, Corp.
Bristol, N.H.
Dana Corporation
Victor Division
3M Company
St. Paul, Minn 55101
Shelter Globe Corp.
Toledo, Ohio 43612
Armstrong Cork Company
Lancaster, Pa. 17604
Joslyn Mfg. & Supply Co.
Chicago, III. 60606
All other
Totals
4
3
1
2
2
1
7
2
2
1
37.9
34.7
34.2
30.0
18.5
13.7
11.0
9.9
7.9
7.8
169.0
374.6
10.10
9.25
9.12
8.00
5.24
3.41
2.93
2.64
2.11
2.08
45.12
100.00
10.10
19.35
28.47
36.47
41.71
45.12
48.05
50.69
52.80
54.88
100.00
15.71
28.03
81.43
6.47
5.24
2.54
1.12
5.42
2.14
9.97
1
2
3
4
5
6
7
8
9
10
'Source: Rubber Red Book, 1973 Economic Information Systems, Inc.
40
-------
Sales ($ millions) Number of Companies
Greater than 30 4
Between 10 and 30 3
Between 5 and 10 8
Between 1 and 5 51
0.5 to 1 67
Plant Size
The Rubber Red Book lists over 450 plants that produce gaskets, packings or o-rings as
part of their production. The reason is that plants with molding and compounding capa-
bilities (Category A) can also make gaskets and o-rings. For this reason they promote
business in this area, advertise and make products although it may represent only a small
amount of their total business.
Diversification
The bulk of the companies in this segment produce a variety of products classified as
mechanical goods and a portion of these will be gaskets. The companies are large, with
diversified interests, and the gaskets and packings plants are a division of the company. The
larger companies of this type are:
Company Percent of Total Business
Federal Mogul Corporation 15
Garlock, Inc. 28
Johns-Manville 6
Dana Corporation 3
3M Company 1
Sheller Globe Corporation 5
Armstrong Corporation 2
Josylyn Manufacturing & Supply Co. 10
McCord Corporation 2
Rubber Consumption
This segment of the industry consumed about 22,000 long tons of rubber in 1972.
Types of rubber used depend on the application; automotive applications require nitrile or
neoprene rubber. Other uses not subject to attack by fuels may use SBR or EPDM. Acrylics
or fluorinated rubbers are used in hydraulic seals or for high temperatures.
41
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Profit Range
The profit range for the gasket industry averages between 8 and 12% before taxes, and
between 4 and 6% after taxes, making it about normal for the industry. With smaller
companies, much of the business will be in other products and they do riot segregate
profitability by product.
Substitute Materials
Since gaskets require the special recovery and resilience characteristics of rubber,
substitution for elastomers with non-elastomers would present difficult technical problems.
The gasket industry, particularly o-ring manufacturers, represent one of the major outlets
for the specialty rubbers such as fluorinated polymers, silicones, nitriles, acrylics, etc.; since
specifications are extremely difficult to meet, substitution possibilities are very limited.
Employees in Segment
This segment employs a total of about 29,500 and about 26,100 production workers as
of 1971.
Markets
This segment of the industry requires production capabilities to make large numbers of
items at low cost for the automotive industry as well as to make small numbers of specialty
items. The elastomer compounds are selected to meet unique problems of solvent resistance,
heat, etc. Large quantities of the specialty rubbers such as silicones, fluorinated and acrylic
elastomers go into these products.
Since so many products today use gaskets, including items produced in low volume,
business is available for companies willing to make short runs. In most cases the customer
pays for the mold, the rubber processor makes the product and both parties are satisfied.
The job is big for a small company, but too small to interest the big company. Foreign
competition is not a significant factor.
Effect of Pollution Control Costs
Many of these plants dump into municipal systems. The average profitability of this
segment is about typical for the rubber fabricating industry, and the companies' financial
situation is generally stable. We do not expect any plant closings as a result of the control
costs.
42
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SECTION VIII
SIC 7534 - RETREAD TIRES
The guidelines contractor has established that the retread industry's process waste
waters meet proposed standards and therefore require no control equipment. The reason for
this is that most retread operations are either part of a tire operation where the camelback
tread portion is made at the company, or the camelback is shipped to the retreaders. The
retread step does not present a problem.
There are many small retreaders among an estimated 5000 establishments in the United
States. About 4500 are registered with the National Tire Dealers and Retreaders Associ-
ation. Most of the major tire companies run retread operations.
The retread business is changing. Passenger tire retreading has declined but truck tire
retreading has increased. A drop in sales of the camelback in 1972 is one barometer that the
total retread business is falling off. The cause has been related by many experts to concern
over safety rules relating to retread passenger car tires. The full problem is not completely
clarified at the moment. However, a survey of dealers indicates they anticipate growth.*
Technology
Tires are retreaded either by hot cap techniques or by cold bonding cured tread. In
both techniques the carcass is inspected and the old tread buffed. In the cold proces cured
tread stock is bonded to the tire carcass. In the hot cap process, an uncured rubber strip is
laid onto the carcass, very similar to building a new tire, and the combination is cured in a
press.
Number of Plants
There are between 4000 and 5000 shops in the retread business. Among these are the
the major tire companies: Firestone, Goodyear, Goodrich, and General, etc. A number of
different rubber companies make camelback for sale to retreaders but the major tire
companies use their own stock. Most are tire dealers as well and the specific job assignments
are difficult to separate.
Size of Shops
Tables VIII-1 and -2 reflect the output profiles of the establishments that retread
passenger tires.
"Tire Retreading Institute
43
-------
Passenger tire retreaders in the sample vary from small shops to huge production
concerns. The median establishment produced 12,500 passenger tire retreads while the
largest concern turned out over 200,000 units annually.
During 1972 these shops produced an average of 20,674 units per year.
TABLE VIII-1
ANNUAL PASSENGER OUTPUT OF RETREADERS BY VOLUME
By Volume Categories - 1972
Annual Output % Shops
2,500 Sunder 18.2
2,501 - 5,000 10.6
5,001 - 7,500 13.6
7,501-10,000 9.1
10,001 - 15,000 7.6
15,001-20,000 9.1
20,001 - 30,000 10.6
30,001-45,000 12.1
45,001 - 60,000 4.6
60,001 & over 4.5
Total 100.0
TABLE VIII-2
ANNUAL TRUCK OUTPUT OF RETREADERS BY VOLUME BRACKETS
1972
Annual Output % Shops
500 or under
501 - 1,000
1,001 - 1,500
1,501 - 2,000
2,001 - 3,500
3,501 - 5,000
5,001 - 7,500
7,501 - 10,000
10,001 - 12,500
12,501 Stover
19.4
3.2
3.2
21.0
19.4
8.1
12.9
6.4
3.2
3.2
Total 100.0
44
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Diversification
The major companies are tire producers and retreading represents a very small portion
of their total business. The smaller retreaders in most cases also act as agents for the sale of
new tires.
Markets
The production of tread rubber from 1968 to 1972 is shown in Table VIII-3. This data
was obtained from Industry Surveys,* September, 1973, and the 1972 figures are not in
agreement with those of tire dealers, who quote a total of 693 million, versus 569 million
pounds by Industrial Surveys in 1972. The breakdown of this portion of total poundage
used in the various types of tires is shown in Table VIII-4. This poundage resulted in the
production of 47 million tires in 1972 (Table VIII-5).
TABLE VIII-3
SHIPMENTS OF TREAD RUBBER (CAMELBACK)
Year Production
1972
1971
1970
1969
1968
569,298
608,513
622,413
598,417
610,108
Source: Modern Tire Dealer, 1973
TABLE VIII-4
RUBBER USAGE BY TIRE TYPE
Type of Tire Pounds of Rubber
(millions)
Passenger 277.2
Commercial 69.3
Truck 277.2
OTR 55.4
Specialty 13.9
Total 693.0
Source: Modern Tire Dealer, 1973
*Sourca: Industry Surveys, Standard and Poor's Sept 13,1973.
45
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TABLE VIII-5
NUMBER OF TIRES RETREADED IN 1972
Type of Tire Number
(millions)
Passenger 30.8
Commercial 5.8
Truck 10.6
Total 47.2
Source: Modern Tire Dealer, 1973
Substitution
Tire retreading provides an inexpensive tire that, if properly retreaded, gives excellent
and low cost per mile service. Well-built original equipment tires can be retreaded and
reduce the number of tires that normally contribute to solid waste loads. However, low-cost
lines of new tires compete closely with the retreads.
Reports from tire dealers, including retreaders, provide data on median prices (Table
VIII-6).
Sears, Roebuck for example, offers a good polyester, tubeless blackwell, G78-14, for
$26.95, versus a similar sized highway retread for $13.44. However, it also offers a low cost
4-ply nylon of the same size for $17.95. (See 1973 catalog, Fall and Winter.)
TABLE VIII-6
RETREAD TIRE PRICES
($)
Median Price
Type of Tire 1972 1973
Passenger Retread 13.51 14.04
Passenger New 31.91 34.22
Truck Tires 10.00-20
Top Cap 32.86 -
Full Cap 38.30
Effects of Pollution Control
This segment is not affected by the guidelines since no controls are required in the
stual retreading step.
46
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SECTION IX
ECONOMIC IMPACT ANALYSIS
Methodology
In evaluating the effect of pollution control costs on the economy, we have assumed
that if possible the cost will be passed along in the form of higher prices. However, there are
industries such as those manufacturing footwear and related products or reclaimed rubber
where it will be impractical for these costs to be passed along because of a competitive
business situation. In other cases, if most of the competitors are on municipal systems, the
competitors will have no incentive to raise costs and will tend to reduce or prevent increases.
In our calculations we have assumed the plants studied in this report will be working at
their 1972-1973 production levels during the years 1977 through 1983. We have also
ignored price increases that may be anticipated because of increased cost of raw materials,
utilities, and labor.
For purposes of this study we have also assumed that companies currently on
municipal systems will incur no additional charges and will not be affected by these costs.
We have also assumed that 90 to 95% of the plants with less than $5 million in sales are on
municipal systems and will not be impacted. These figures are based on data from industry
spokesmen and a survey of companies' published data.
In evaluating the impact we have used the following assumptions with respect to plants
on municipal systems:
(1) Small plants, under $5 million in sales, are generally located in areas where
they have been tied into municipal systems. The survey indicates that 90 to
95% fall into this category.
(2) Medium-sized plants are frequently located in areas where municipal systems
are not as readily available. Our survey indicates that 85% are on municipal
systems.
(3) Large plants are the most likely to be placed in small towns or in areas where
they cannot tie into municipal systems. Our figures show that 80% are on
municipal systems, or have already met the guidelines.
A summary analysis and the assumptions and mathematics of our Methodology follow
as they relate to different criteria for judging economic impact.
47
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Assumption 1
Small companies that have limited capital and that cannot increase prices are con-
sidered as potential candidates for closing if the costs and retirement of debt exceed 50% of
their before-tax earnings. Liabilities for a small Category A plant that had to borrow money
at 10% and wished to retire the debt in five years would be $24,242 per year, less
depreciation. The annual costs, including depreciation, are shown in Table IX-1.
On the basis of this criterion, companies were considered to have a high potential for
closing if they were in extremely competitive industries (such as footwear or rubber
reclaiming), could not raise prices, and would find it necessary to borrow. We have assumed
money would be available for companies that have profits and sales greater than those
shown in Table IX-2. Conversely, companies with sales lower than those shown and that
must bear the full costs because they are not on municipal systems or have not already
invested in some control equipment, may close.
TABLE IX-1
POLLUTION CONTROL COSTS - CATEGORY A PLANTS
($)
Before-Tax Costs After-Tax Costs
Investment 79,000
Capital Repayment* 15,800 15,800
I merest Charges** 4,342 4,342
Depreciation*** 7,900 7,900
Operating and Maintenance 11,400 11,400
Energy and Power Costs 600 600
Totals 40,042 24,242 15,800
The assumptions are as follows:
"Capital borrowed and repaid in equal installments over five years.
**ln "est at 10% on unpaid balance — monthly payments.
***Dei_, jciation — ten years.
48
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TABLE IX-2
MINIMUM-SIZED PLANTS WITH REQUIRED CAPITAL
Before-Tax Profit on Sale* Sal«t
(%) ($ millions)
1 4.84
2 2.42
3 1.62
4 1.21
5 0.97
6 0.81
Assumption 2
Price increases should be made to hold after-tax profits at their original value. Capital is
available. Return on investment is 10% per year after taxes. Where prices can be raised the
calculation is a direct relationship between control costs and sales as follows:
Control Costs
Percent Price Increase = Sales
Control costs include return on investment. Thus, for a small Category A plant, the
cost would be $24,242 including depreciation and the price increase for a company with a
million dollars in sales would be 2.42% This cost would present a major problem in critical
segments such as footwear, reclaim and suppliers to these industries. Suppliers of soles and
heels, who are part of Segment 3069 (Products Not Elsewhere Classified), are an example.
Basis for Conclusions
Annual operating costs due to pollution control equipment were calculated for the
plants in our survey by applying the appropriate tentative cost estimates given to us in the
effluent guidelines development document for each segment. Depreciation is straight line
over a period of ten years. The development document uses a five-year depreciation figure.
However, since ten years is more commonly used, this figure is used in our calculations.
Borrowed money is repayed over a five-year period. The new investment in pollution
control equipment is calculated as being financed by debt through borrowing from banks.
Interest costs are estimated at 10% per year as a pre-tax expense.
Tables IX-3 and IX-4 summarize the important data used in our evaluation of the
impact of pollution control costs for B.P.T., and B.A.T. treatments are the same as B.P.T.:
except in the lead sheathing process for making hose. Estimates of the total number of
49
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SIC
Code Title
3021 Footwear
Number of Plants
Total Direct
in U.S. Discharge
70 9
Investment ($ 000)
Average
Total Per Plant
1,414 156
TABLE IX-3
B.P.T. COSTS
Annualized Costs ($ 000)
Average
Total Per Plant
585.3 65
Costs/Sales (%)
Sales ($ millions)
Total Not on
Segment Municipal
600 191.0
Plants in
Sample:
Direct Discharge
0.31
Plant Range
0 - 7.14
Possible Loss in
Plant Sales
Closings 1$ millions)
3 3.25
3031 Reclaim
921 230
379.8
95
43
23.0
1.65
0-3.5
18.27
3041 Hose & Belting
55 8 1,250 139 495.0 58 1,000 140.0
.34
0- 1.4
3069 Rubber Products 1,189 124 14,763 119 5262.0 42 3,750 858.0
Not Elswhere
Classified
.59
0-7.14
12 17.75
3293 Gaskets/Sealing 133 14 1.664 118 707.2
51
375
63.5
1.1
0-7.14
4.75
Totals
1,455 159 20,012 126" 7429.3 51* 5.768 1275.5
0.58*
22 44.02
'Average for all plants - direct discharge
-------
B.P.T. COSTS
Costs/Sales (%)
Number of Plants Investment 1$ OOP) Annuitized Com ($ OOP) Sales ($ millioni) Plants in Possible LOB in
SIC Total Direct Average Average Total Not on Sample: Plant Sato
Co* Jjtie inU.S. Discharge Total Par Rant Toul Par Plant Segment Municipal Direct Discharging Plant Range Closings ($ millions!
3041 Hose Only
Lead Process 9 0* 135 15 27 3 40 40** .067 NA 00
'All on municipal
"All Plants must comply with regulation
(si
-------
companies and the proportion of companies on municipal systems in each segment are based
4
on discussions with associations, industry spokesmen, and the U.S. Tariff Commission
figures. Table IX-5 tabulates this data and shows the number of companies reported for each
segment and the percent of plants in this segment that are not on municipal systems. This
figure is used in the calculation of investment and annualized costs in Tables IX-3 and IX-4.
Table IX-6 summarizes investment and annual cost as a percent of sales for the various
segments for B.P.T. and B.A.T. pollution abatement levels. B.A.T. applies for only a small
portion of the industry and includes plants which make hose by the lead process. Table IX-7
presents an analysis of typical large and small plants in the various segments.
Price Effects
The range of calculated price increases for each of the segments is given in Tables IX-3
and IX-4, and summarized in IX-6. This range is based on the effluent guidelines document
estimates for meeting the B.A.T. pollution standards. The probable price increase is based
on companies that have $5 million in sales since smaller companies will not be able to
establish prices higher than those established by companies this size or larger.
The price increases that could be expected to attain B.A.T. pollution control standards
are based on 1973 prices. B.A.T. requirements apply only to hose made by the lead process.
The critical segments are footwear and reclaimed rubber, and price increases are a
problem. However, this analysis has been made at a time when inflationary trends are at
work and the dollar value is low; there will be a tendency to increase prices to take care of
pollution control costs. The deterring factor will be competition and plants on municipal
systems that do not need to raise prices.
The smaller firms need to raise their per-unit prices to a greater degree than the larger
firms. Small companies, specifically footwear companies, that are not on municipal systems
are expected to tie into them. However, we do not expect any major changes in the
industry. Price increases will be held to a minimum because of foreign competition.
Manufacturers of rubber products may tolerate temporary price increases in reclaimed
rubber because of the current rubber shortage. The effects on the various segments will vary.
We anticipate the following effects:
Footwear Industry (SIC 3021). The smaller companies in this segment that are not on
municipal systems will be the most severely affected. To avoid the cost they will probably
attempt to tie into municipal systems, and if necessary, will change locations and rent
facilities that are tied into municipal systems.Plant closings in these cases may be only a
relocation. In many cases, where municipal systems are available, the new location may be
in the immediate vicinity and the old workers will be retained.
52
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TABLE IX-5
TOTAL NUMBER OF PLANTS USED IN CALCULATIONS
SIC Code 3021 3031 3041 3069 3293
Hose and Other Products
Name Footwear Reclaim Belting N.E.C.* Gaskets; Sealing
Number of Plants in Segment 70 8 55 1.1891 133
Size by Sales ($ millions)
over 50 1 7 10 0
12 to 50 13 8 50 5
5-12 16 3 191 9
Under 5 19 5 515 59
£ Other 23 32 647 60
Number of Plants in Sample
Not on Municipal 948 1242 14
Size by Sales ($ millions)
over 50 1 120
12 to 50 3 2 10 1
5-12 2 1 29 1
Under 5 2 1 51 6
Other 1 3 32 6
*Not Elsewhere Classified
1. 1971 Bureau Census
2. Includes three latex plants
-------
TABLE IX-6
PRICE EFFECTS
SIC Code
3021
3031
3041
3069
3293
Product
Footwear
Reclaim
Hose & Belting
Misc. Rubber Products
Gaskets, Sealing
BPT Range Probable Effect
fl
0-
0-
0-
0-
0-
7.14 None
3.5 None
5.8 0.34
7.14 0.6
7.14 <1
BAT Range
NA
NA
0-0.6
NA
NA
Probable Effect
NA
NA
None
None
NA
Price Effects
Other Products
None
None
None
Variable
Variable
Plant
Shutdown
3
3
0
0
0
* Depends on product
Only one plant which makes latex foam seating
-------
TABLE IX-7
ANALYSIS OF SELECTED COMPANIES
Company
A
B
C
D
E
F
G
H
1
J
Product
Footwear
Footwear
Reclaim
Reclaim
Hose- Belting
Hose-Belting
Misc. Products
Misc. Products
Gaskets
Gaskets
Sales
($ millions)
100
2
6.7
4.7
40
8
40
6
18
1
BPT
Investment
($000)
212
79
265
265
212
163
569
163
212
79
BPT
Investment/
Sales
(%)
0.212
3.95
3.9
5.6
0.53
2.0
1.42
2.7
1.2
7.9
BAT
Investment/
Sales
(%)
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
BPT
Annual
Cost/Sales
(%)
0.0856
1.78
1.58
2.25
0.21
0.85
1.71
1.13
0.5
3.57
BAT
Annual
Cost/Sales
(%)
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
Plant Closing
No
Yes
No
No
No
No
No
No
No
Yes
-------
Rubber Reclaim (SIC 3031). We anticipate the closing of 37% of the plants in this
segment (3 plants) if they are forced to meet the standards. The loss to manufacturers is
that reclaimed rubber improves the processing characteristics of rubber compounds if it is
added in small proportion to the total compound. Reclaimed rubber is also important in
many adhesive applications. From the standpoint of ecology, it has provided an outlet for
used tires and other rubber products that constitute a difficult problem in waste disposal.
Hose and Belting (SIC 3041). Within this segment there may be certain small changes.
Because of differences in plant size, age, and already existing pollution abatement equip-
ment, the larger companies will increase their prices less than the smaller companies would
like to increase their prices. Generally, this segment is composed of larger companies ($5
million and greater) that can absorb cost increases relatively well. The products are often
somewhat specialized and are less competitive than those in many other segments. For this
reason many may increase prices. We anticipate no closings.
Rubber Products Not Elsewhere Classified (SIC 3069). Many of the products manufac-
tured in this category eventually end up as components of other products. A typical
example is soles and heels, which yield a comparatively low margin of profit. Price increases
would probably be passed on to the footwear companies. Smaller footwear companies will
suffer the most. Increased costs of these materials in addition to other increased costs that
the footwear manufacturer, would by necessity, have to add would have the net effect of
making the footwear manufacturers less competitive with foreign imports.
This is a large segment with many small companies. We anticipate about one percent
may close because of high costs and low profits. There are 1189 plants in this segment and
we estimate about 12, or one percent, will close because of the guidelines.
Gaskets, Packing and Sealing Devices (SIC 3293). Within this segment there may be
relatively minor changes. Because of plant size and the pollution abatement equipment that
many already have, the larger companies will increase their prices less than the smaller
companies would like to increase theirs. In other words, the profitablility of the smaller
firms would decrease relative to the larger firms. This segment contains a number of small
firms but we estimate that less than 3%, or 3 out of 144 plants, will close.
Financial Effects
Raising prices to maintain return on equity, should not have any major financial effects
on the industry as a whole. However, certain of the smaller firms would need to raise their
prices more than the larger firms. If they cannot, their profit margins will decrease. In the
long run this could change the structure of the industries slightly, particularly among the
smaller companies. In the footwear segments, for example, companies not on municipal
systems cannot compete because of costs and they may be forced into a position where
larger companies will acquire them for reasons such as deferred depreciation, etc. Small
companies on municipal systems will not be affected.
56
-------
Capital Availability
Of all the companies we have studied we consider those with lower profit margins —
e.g., the footwear and reclaimed rubber - could have problems raising the necessary capital
to meet the pollution guidelines. Obviously, this is a problem also with smaller companies in
all segments. However, the rubber business requires a large financial investment in operating
equipment to remain competitive. Smaller companies have always had this problem of
capital but survive because of higher-cost specialty orders. As mentioned previously (As-
sumption 1), we have assumed that any company that retains less than 50% of its pretax
profit after pollution control costs can be expected to close.
Production Curtailment
Plants that are not on municipal systems would probably have to shut down tempo-
rarily to segregate their process effluent lines from other effluent lines. In the footwear
segment, plants are generally operating under capacity at present, and closings would cause
the needed capacity to be made by other plants in the industry. Shortages of reclaimed
rubber, can be anticipated and probably a price increase, but'this increase would not be
expected to cover all control costs. With increased costs, SBR will be the preferred choice.
Plant Closings
On the basis of our data and industrial responses, the segments where we feel there is a
potential for plant closings are in SIC Codes 3021, Rubber Footwear; 3031, Reclaimed
Rubber; 3069, Rubber Products Not Elsewhere Classified; and in 3293, Gaskets Packings
and Sealing Devices. The major effect will be on plants that are not tied to municipal
systems. These manufacturers will give serious consideration to closing or moving to
locations where they can tie into municipal systems.
Many reclaimed-rubber plants have already closed because of pollution control and
economic problems. We anticipate that more will do so when these guidelines go into effect.
Of the eight plants now in operation, we anticipate that three will close.
All small companies that are not on municipal systems have a potential for closing if
they cannot go onto municipal systems. These companies operate on a low profit margin
and would have high annual pollution control costs. We estimate that four or five plants that
make soles and heels and certain latex products and are not on municipal systems have
potential problems.
Community Impact
If these plants were shut down, workers would be laid off. We estimate that the layoffs
would amount to about 250 workers in the reclaimed rubber business, between 200 and 300
in the footwear business, and 700 in the other categories. These plants are spread out over
the country.
57
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Impact of Pretreatment Standards for New Sources
Of the pollutants being controlled, the metals will require pretreatment before dis-
charge into municipal systems. These metals are: (1) lead from the hose plants (General
Molded, Extruded, and Fabricated Rubber Products categories) which use a lead sheath
cure, (2) chromium from the plants which use chromic acid in form-cleaning from latex
dipping manufacture, and (3) zinc from the use of zinc oxide as a rinsing agent in latex foam
manufacture. The effect of Pretreatment Standards for New Sources (PSNS) covering the
above pollutants is explored below.
PSNS could affect either industry growth or the incentive to tie into municipal
systems. Industry growth will not be affected to a significant extent because: (a) the cost
of pretreatment is small compared to the total cost of construction of a Rubber Processing
plant, (b) the cost per pound of product is small and is partly recoverable by price increases
in some cases, and (c) the net effect on profitability is small and not nearly enough to
. discourage investment in these industry segments. Discussion of the effect of New Source
Performance Standards (above) applies in part to the effect of Pretreatment Standards for
New Sources.
PSNS could produce a disincentive to tie into municipal systems if pretreatment for
the metals would require removal of most of the other pollutants so that an entire treatment
plant must be constructed. This is not the case here because the lead-laden stream in the
lead sheath cure process can be isolated and treated separately. The chromium-laden rinse
water from the form-cleaning operation in some latex dipping plants can also be segregated
from the principal waste stream and treated. Chromic acid might be substituted for in order
to reduce the pollution load still more. Finally, the zinc-laden foam rinse waters in latex
foam manufacture can be pretreated to the standards by precipitation and clarification. In
all cases, the standards for the three metals could be pretreated without building the entire
treatment system, hence the incentive to tie into municipal systems to gain economies-in-
scale will remain.
The proposed standards do not include pretreatment standards for existing sources,
which will be issued later; however, some analysis of the potential impact on existing
sources has been performed. The cost and impact of lead treatment on those plants
discharging into municipal systems are included in this analysis. The cost and impact of
chromium pretreatment has not been included because the pretreatment standards do not
apply to minor discharges into municipal systems (defined as discharging less than 50,000
gallons per day), and because the use of chromic acid for form washing is not widespread
and chromic acid might be substituted for to reduce the pollution load. Because the only
latex form plant is a direct discharger, the cost and impact of the zinc standard has been
factored into this analysis.
In summary, PSNS will have a minor effect on industry growth and will not hinder the
incentive to tie into municipal systems. In addition, preliminary analysis of the impact of
potential pretreatment standards for existing sources indicates a minor impact.
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Industry Growth
We do not believe that the economic effects of the B.P.T. or B.A.T. guidelines will
adversely affect the growth or the growth potential of the industries, since it represents such
a small portion of total investment. We have no way of evaluating the effect on plant
expansion decisions.
International Trade Effects
The recent devaluations of the U.S. dollar have made the U.S. produced products much
more competitive on the international scene. This is particularly true in the footwear
industry, which has been suffering from imports over the last two years. Currently, the U.S.
dollar has been relatively stable with respect to the currency of other countries. Although
no one can forecast what the situation will be in 1977 and thereafter, it is doubtful that it
will be much different from now.
An initial analysis of the economic impact of the proposed water effluent guidelines
upon the Rubber Processing Industry; Rubber Footwear (SIC 3021), Rubber Reclaim (SIC
3031), Hose and Belting (SIC 3041), Rubber Products Not Elsewhere Classified (SIC 3069)
and Gaskets Packing and Sealing Devices (SIC 3293) and Retread Tires (SIC 7534) was
performed based on the abatement costs supplied by EPA. On this basis, 22 plant closings
are anticipated, or about 1.5% of the non-tire segment of the rubber processing industry, the
capital investment required for pollution control will be $19.5 million. BAT requirements
apply only to the lead hose process and amounts to $135,000. Annual operating costs will
be $5.1 million for BPT and $27,000 for BAT.
The rubber footwear (SIC 3021) and Rubber Reclaim (3031) segments will be the
most severely impacted with probable closures of 4.2 and 37.5%, respectively.
Limits of the Analysis
When interpreting the findings of this study, one must be aware of the limitations of
the cost data, specifically as regards BPT guidelines and the key assumptions used. Invest-
ment costs of the pollution control equipment were defined to include the direct, incre-
mental investment required to obtain environmental standards. The operating costs for the
pollution control were defined to be incremental costs.
The establishment of pollution standards as well as the determination of the cost basis
for investment and operating costs was provided in the effluent guidelines development
document. In the Appendix to our report we have listed the cost data used in estimating the
investment and operating costs for the plants. Additional data input to our study was
provided through interviews and questionnaires to industry representatives. This data was
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used to supplement the information. Only pollution abatement costs associated with
Federal standards were considered and these costs were assumed to be independent of air
and solid waste control requirements.
The guidelines from the Contractor did not supply data relating to plants that are on
municipal systems vs. those that were not. Our assumptions relating to the percentage of
companies on municipal systems are based on a limited survey of the industry in each
segment. The percentages reported to us by industry spokesmen were used in our calcula-
tions. They are only to be considered as best estimates.
The calculated price effects on the various segments of the pollution guidelines BAT
and BPT are maximum expected price increases. Certain companies and certain plants
already meet the BPT guidelines. Because of this, they may not increase their prices at all,
and other companies within the industry may follow suit.
Because of the nature and sources of statistics available a certain number of plants have
been reported in one or more segments. One plant, for example, may report products that
are made in two segments, and thus would have been used twice in our statistical analysis.
This is unavoidable and will give a total number, of plants that is high.
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APPENDIX
Conclusions From the
"DEVELOPMENT DOCUMENT FOR EFFLUENT LIMITATIONS,
GUIDELINES AND STANDARDS OF PERFORMANCE"
There are four major groupings in the rubber processing industry. These groupings,
determined on the basis of raw materials usecr or products produced, include: 1) the
General Molded, Extruded, and Fabricated Products industry; 2) the Reclaimed Rubber
industry; 3) the Latex-based Products industry; and 4) the Polysulfide Synthetic Rubber
industry.
For the purpose of establishing effluent limitations, the General Molded, Extruded,
and Fabricated Rubber Products industry has been termed Category A. This industry has
been further subcategorized by facility size, as determined by usage of raw materials.
Process waste water flow rates and loadings and costs of control technologies substantiate
this breakdown. Factors such as manufacturing process, final product, raw materials, plant
age, geographical location, air pollution equipment, and the nature and treatability of the
waste waters are similar within each size subcategory and- further substantiate the subcate-
gorization of this industry.
Process waste waters evolved from facilities within Category A included discharges of
processing solutions, washdown of plant areas, runoff from outdoor storage areas, spills and
leaks of organic solvents and lubricating oils, and vulcanizer condensate. Primary pollutants
(or indicators of pollution) in these waste waters are oil and grease, suspended solids, and
acidity and/or alkalinity (pH). Lead and COD are other pollutants of importance encoun-
tered in hose fabrication which employs lead-sheathed or cloth-wrapped cures.
To be controlled and treated, process waste waters must be isolated from other
nonprocess waste waters such as service water discharges and uncontaminated storm runoff.
Treatment of process waste waters in a combined process/nonprocess system is ineffective
because the relatively large volume of nonprocess waste waters dilute the contaminated
process waste waters. Segregated processing solutions such as anti-tacking agents can be
containerized. Segregated oily process waste waters can be treated in an API-type separator.
The reclaimed rubber industry has been further subdivided in this study based on the
process employed. Category B - Wet Digestion Rubber Reclaiming employs a wet process;
Category C - Pan (Heater), Mechanical, and Dry Digestion Rubber Reclaiming uses dry
processes. Process waste water flow rates and loadings substantiate this categorization.
Process waste waters evolved by both Category B and Category C plants include
discharges of processing solutions, washdown and runoff from all plant areas, spills and leaks
of organic solvents and lubricating oils, and discharges from wet air-pollution devices. An
A-l
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additional process waste water evolved by the Wet Digestion process (Category B) is
dewatering liquor. No additional process waste waters are evolved in the dry processes
(Category C). Primary pollutants (or indicators) are COD, oil and grease, suspended solids,
and acidity and/or alkalinity (pH). Zinc can be present in Wet Digestion waste water.
The technologies necessary to control and treat waste waters from the Pan (heater).Dry
Digestions, and Mechanical processes (Category C) are similar to those employed for the
Molded, Extruded and Fabricated Rubber industry. These include isolation of process waste
streams, containment of processing solution wastes, and treatment of other process waste
waters for suspended solids and oil.
Treatment of processing waste waters from the Wet Digestion process involves isolation
and containment of processing solutions and the recycle and reuse of oil-contaminated
dewatering liquors and discharges from wet air-pollution equipment.
The Latex-based Products industry, termed Category D, has been further subcate-
gorized based on the process, plant size, waste water characteristics, and treatability of the
waste waters. There are two subcategories: Type 1, the latex dipped goods, latex thread,
and latex molding industry; and Type 2, the latex foam industry.
Process waste waters evolved from both subcategories include product wash and rinse
waters and spills, leakage, washdown, and runoff from all plant areas. Primary pollutants (or
indicators) are COD, BOD, suspended solids, oil, and acidity and/or alkalinity (pH). In
addition, zinc is present in process waste waters evolved at latex foam facilities. When
chromic acid is used as a form-cleaning agent, chromium will be present in the process waste
waters from latex-dipped or latex-molded facilities.
The technologies necessary to control and treat waste waters from the production of
latex-based products (Category D) include segregation of process waste water streams,
coagulation and clarification of latex-laden waste waters, and biological treatment. In
addition, chemical precipitation of zinc in rinse waters is necessary at facilities producing
latex foam.
The Polysulfide Synthetic Rubber industry (Category E) is not covered in this docu-
ment. Rather, this industry will be examined in a future document which, when completed,
" will be incorporated into this report.
As a result of this study the recommendations for the segments were:
Process waste waters evolved from the General Molded, Extruded, or Fabricated
Rubber Products category (Category A) should be treated and monitored for suspended
solids, oil and grease, lead, and pH. Proposed limitations and standards for the best
practicable control technology currently available are based on raw material usage. For
plants consuming less than 3,720 kg/day (8,200 Ibs/day) of raw materials these are:
A-2
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Suspended Solids 0-64 kg/kkg (lb/1,000 Ibs) raw material
Oil and Grease °-l6 kg/kkg (lb/1,000 Ibs) raw material
6.0 to 9.0
For plants consuming between 3,720 kg/day (8,200 Ibs/day) and 10,430 kg/day
(23,000 Ibs/day) of raw materials the limitations and standards are:
Suspended Solids 0.40 kg/kkg (lb/1,000 Ibs) raw material
Oil and Grease 0.10 kg/kkg (lb/1,000 Ibs) raw material
pH 6.0 to 9.0
Finally for plants using raw material at a rate greater than 10,430 kg/day (23,000
Ibs/day) the recommended effluent standards are:
Suspended Solids 0.25 kg/kkg (lb/1,000 Ibs) of raw material
Oil 0.063 kg/kkg (lb/1,000 Ibs) of raw material
pH 6.0 to 9.0
For the best practicable control technology currently available, no limitation is
proposed for lead.
For all three subcategories, no additional reduction is proposed for the limitation and
standards on suspended solids or oil represented by the best available technology eco-
nomically achievable (BATEA) or for new sources coming on-stream after the guidelines are
put into effect.
However, for both the BATEA and for new sources, limitations and standards are
proposed for lead in process waste waters. This limitation applies only to plants producing
hose by the lead-sheathed cure process. For plants consuming less than 3,720 kg/day (8,200
Ibs/day) of raw materials, the standard is 0.0025 kg/kkg (lb/1,000 Ibs) raw material. For
plants consuming less than 3,720 kg/day (8,200 Ibs/day) and 10,430 kg/day (23,000
Ibs/day) of raw materials, the standard is 0.0015 kg/kkg (lb/1,000 Ibs) raw material. For
plants consuming more than 10,430 kg/day (23,000 Ibs/day) of raw materials the standard
is 0.0010 kg/kkg (lb/1,000 Ibs) raw material.
Process waste waters evolved from the Wet Digestion Rubber Reclaiming industry
(Category B) are contaminated with BOD, COD, suspended solids, oil and pH. Only one
plant using this process is currently discharging to navigable waters and this facility is
employing a best available treatment economically achievable. Therefore, no limitations or
standards are being proposed for the best practicable control technology currently available.
Limitations and standards for the best available treatment economically achievable are as
follows:
BOD 1.20 kg/kkg (lb/1,000 Ibs) of product
COD 6.11 kg/kkg (lb/1,000 Ibs) of product
Suspended Solids 2.31 kg/kkg (lb/1,000 Ibs) of product
Oil 0.58 kg/kkg (lb/1,000 Ibs) of product
pH 6.0 to 9.0
A-3
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It is recommended that no new reclaimed rubber sources using the Wet Digestion
process be permitted to come on-stream. Reasonable alternatives to the Wet Digestion
process are the pan, dry digester, or mechanical processes. These processes generate a less
contaminated waste water and, according to industry spokesmen, are economically more
favorable.
Process waste waters evolved from the Pan, Dry Digestion or Mechanical Rubber
Reclaiming industry (Category C) should be treated and monitored for suspended solids,
oil and pH. Proposed limitations and standards for the best practicable control technology
currently available are based on raw material usage and are as follows:
Suspended Solids 0.192 kg/kkg (lb/1,000 Ibs) raw material
Oil 0.144 kg/kkg (lb/1,000 Ibs) raw material
pH 6.0 to 9.0
No additional reduction is proposed for the limitations represented by the best available
technology economically achievable or for new sources coming on-stream after the guide-
lines are put into effect.
Contaminants in the process waste waters evolved from latex-dipped, latex-thread and
latex-molding operations (Category D Type 1) should be controlled and treated for BOD,
suspended solids, oil, chromium, and pH. The proposed limitations and standards for the
best practicable control technology currently available are:
BOD 2.20 kg/kkg (lb/1,000 Ibs) of latex solids
Suspended Solids 2.90 kg/kkg (lb/1,000 Ibs) of latex solids
Oil 0.73 kg/kkg (lb/1,000 Ibs) of latex solids
Chromium 0.0036 kg/kkg (lb/1.000 Ibs) of latex solids
pH 6.0 to 9.0
No additional reduction is recommended for the limitations represented by the best
available technology economically achievable or for new sources coming on-stream after the
guidelines are put int••> effect.
Contaminants in process waste waters evolved from latex foam operations (Category D
Type 2) include BOD, suspended solids, zinc, and pH. The proposed limitations for the best
practicable control technology currently available are as follows:
BOD 9.43 kg/kkg (lb/1,000 Ibs) of latex solids
Suspended Solids 1.6 kg/kkg (lb/1,000 Ibs) of latex solids
Zinc 0.083 kg/kkg (lb/1,000 Ibs) of latex solids
pH 6.0 to 9.0
A-4
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Proposed limitations and standards for the best available technology economically
achievable are:
BOD 1.41 kg/kkg (lb/1,000 Ibs) of latex solids
Suspended Solids 0.94 kg/kkg (lb/1,000 Ibs) of latex solids
pH 6.0 to 9.0
As of the submittal date of this report, no limitations or standards had been developed
for the Polysufide Synthetic Rubber industry.
Reference: Development Document for Effluent Limitations Guidelines and Standards
of Performance; Rubber Processing Industry Phase II.
A-5
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imiNICALKI-TORT
IMTA PACJI
I. Keport No.
EPA-230-1-73-024
3. Recipient's Accession No.
4. Tillc .md Subtitle
Economic Analysis of Proposed Effluent Guidelines -
The Rubber Processing Industry
S. Report Date
August 1974
6.
Kenneth R. Sidman
7 A nl hurls)
John T. Howarth
') IVrlorminn Organization Name and Address
Arthur D. Little, Inc.
Acorn Park
Cambridge, Mass. 02140
8. Performing Organization Rept. No.
10. Project/Task/Work Unit No.
Task Order No. 16
11. Contract/Grant No.
68-01-1541
12. Sponsoring Organization Name and Address
Office of Planning and Evaluation
Environmental Protection Agency
Washington, D.C. 20460
13. Type of Report & Period Covered
Final
14.
15. Supplementary Notes
16. Abstracts
An initial analysis of the economic impact of the proposed water effluent guidelines
upon the Rubber Processing Industry; Rubber Footwear (SIC 3021), Rubber Reclaim (SIC
3031), Hose and Belting (SIC 3041), Rubber Products Not Elsewhere Classified (SIC 3069)
and Gaskets Packing and Sealing Devices (SIC 3293) and Retread Tires (SIC 7534) was
performed based on the abatement costs supplied by EPA. On this basis, 22 plant closings
are anticipated, or about 1.5% of the non-tire segment of the rubber processing industry, the
capital investment required for pollution control will be $19.5 million. BAT requirements
apply only to the lead hose process and amounts to $135,000. Annual operating costs will
be $5.1 million for BPT and $27,000 for BAT.
17. Key Words and Document Analysis.
Economic Analysis
Effluent Guidelines
Rubber Processing Industry
Footwear
Reclaimed Rubber
Gaskets and Sealing
Hose and Belting
17b. Identifiers/Optn-Ended Terms
Miscellaneous Rubber Products
Retread Tires
I7a. Descriptors
I7c COSATI Held/Group
IK. Availability Statement
19. Security Class (This
Report)
UNCI.ASSII II I)
20. Security Class (This
Pace)
ifNCt.ASSIl II-I)
21. No. of I
71
22. Price
IORM NTIS-.15(RI;V. .1-72)
MJ.S. GOVERNMENT PRINTING OFFICE: 1974 582-413/67 1-3
USCOMM-IX' 14952-1-7 2
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