‘Stronger together’: the Yokohama TWS off-highway tyre integration delivers many opportunities – Pompei

In May, Yokohama officially completed the acquisition of Trelleborg Wheel Systems. As a result, the well-respected off-highway tyre and wheel manufacturer rebranded as Yokohama TWS. With any acquisition, questions of integration are front-and-centre. In Yokohama’s case, the previous acquisition of Alliance Tire Group, which now runs under the Yokohama Off-Highway Tires (YOHT) banner, brings with it further questions relating to the integration of the businesses and their respective brand portfolios as well as how the different operations will be organised and practically structured in relation to one another. With all this in mind, Tyres & Accessories recently spoke to Paolo Pompei, president and CEO of Yokohama TWS, in order to hear the latest on the integration process.

Our conversation started at the beginning. There’s obviously been significant change since the acquisition, so how has the acquisition impacted the newly-rebranded Yokohama TWS operation?

“There are not many changes. I don’t know if I am going to disappoint anyone…”, Paolo Pompei explained setting his update in context: “The good news is that the integration went extremely smoothly.” Indeed, the former Trelleborg-owned business is said to have entered Yokohama’s ownership “fully-set”, which makes the current new chapter “an exciting period”.

“We are moving from a company operating in [the] polymers segment to a company really, fully dedicated to the tyre business. And that is really important because we speak the same language and have the same values”, Pompei continued. That’s significant because the newly-integrated operations therefore “share the same logic” when it comes to business “and that is an opportunity for all of us”.

Crucially, now that TWS has “entered the Yokohama world”, Yokohama TWS operates as a “standalone company”. The reasons for this are clear when you compare the tailored approaches of the business with its new parent company: “Our business model is a bit different from that of our new colleagues and clearly we want to create a specific focus supporting our business model and our brands that are covering different market segments.”

The world’s widest off-highway tyre manufacturing footprint

Paolo Pompei’s explanations demonstrate his optimism about Yokohama TWS’s prospects moving forward, with the president and CEO framing the current circumstances as “an integration that will deliver a lot of opportunities”.

One dimension of opportunity is that of synergies. And within that category, one specific example of synergies is the purchasing of raw materials. “We all buy raw materials. And we all buy goods that are related to the tyre business, so I am sure that we can leverage [that] together with our colleagues in the off-highway business.”

Manufacturing footprint represents another synergy opportunity. “Together we can leverage… the widest manufacturing footprint in the world in the off-highway segment.”

The four legs of the Yokohama’s off-highway business

At the top of the tree, Yokohama’s tyre operations serve three main branches, the consumer and the commercial businesses as well as the off-highway business. In practice, the consumer and commercial businesses generally run together as they do in the UK, for example. However, the off-highway operations are made up of four constituent parts, which can illustrated with the help of the parallel metaphor of the four legs of a table.

Firstly, there’s the Yokohama Off-Highway Tires (YOHT) business, which includes the former ATG business. Secondly, there’s Yokohama TWS, which is, of course, the former Trelleborg business that Paolo Pompei now leads. Then there’s the Yokohama OTR business, which is branded Yokohama and centres on OTR tyres made in Japan. And finally, there’s the Aichi business which focuses on industrial tyres.

“This is quite a clear classification that gives the opportunity for all the businesses to focus on different markets and different typologies of customers”, Pompei explained.

In light of our previous discussion of synergies, the obvious question is: will that lead to the production of Yokohama-branded tyres at Yokohama TWS or Yokohama TWS brands such as Trelleborg, Mitas, Maximo and Cultor at other Yokohama production sites?

“Together we can leverage… the widest manufacturing footprint in the world in the off-highway segment.” Paolo Pompei, president and CEO of Yokohama TWS

“This is fully dependent on the business model…One of the main reasons Yokohama acquired Trelleborg Wheel Systems is the local-for-local business concept. We want to be local. We have factories and sales operations in [four] continents. US for US, Europe for Europe, and Asia for Asia. We are in South America for South America.

“…we strongly believe that – in particular at OE level – it is extremely important to be close to the customer in order to be extremely flexible, reduce the supply chain time and also a component related to the sustainability part…if you really want to be a sustainable business in future you have to make sure you have supply chain that is made by local suppliers.”

‘Stronger together’ – synergies and brand positioning

Does that mean that Yokohama TWS will not make any manufacturing synergies with the other “legs” of the table? “Not at all”, Pompei explains adding: “we will have the opportunity to share – for particular products – the same manufacturing facilities. However, in principle we can clearly say, that the business model of Yokohama TWS remains focused on local manufacturing facilities.”

And that’s important because Yokohama TWS has seven production facilities in Europe, which are explicitly there to serve the Trelleborg, Mitas, Maximo and Cultor brands. Speaking of brands, how do the different brands relate to each other in terms positioning and priority and – outside of Yokohama TWS – with those former ATG-now-YOHT brands as well as those Yokohama OTR?

“Any brand has a different value proposition. We should be proud – and actually we are very proud – that today we have a portfolio of brands that is covering so many market segments in different parts of the world…Some of the brands are fully dedicated to specific product categories and I think this our strength today compared to some companies that are mono-brand. They are not able to fully service different market segments.”

“….What is important for us is to differentiate and to give a different value proposition…”, Pompei continued. And that is where the rubber meets the road – or perhaps more appropriately where the tractor hits the field: differentiation. Isn’t there a danger of cannibalisation within such a big brand basket?

“I, frankly speaking, see almost no overlap”, Pompei countered, explaining: “Trelleborg and Mitas, for instance, are covering a strong part of the OEM business and are covering the ‘high end’ of the market.” Other Yokohama group brands such as the former ATG monikers are said to be covering “different market segments” offering “a completely different value proposition”. So, in other words, Yokohama TWS’s leading brands are positioned slightly higher than those other brands. As a result, “we are stronger together and that is what is making this platform extremely unique and…extremely strong in the off-highway industry”.

The combination not only provides opportunities for growth, but that breadth also means the wider Yokohama off-highway propositions can compete against “any competitor”. But with the entrance of relative new brands adding more choice and with existing brands setting ambitious growth goals how will Yokohama TWS successfully compete?

“I know that there are many other brands coming into the market. I strongly believe our brands are offering much more – in particular in the sustainability part. Today we are one of the few companies that fully recyclable at the end of life…either in our own business or in other segments. And [also] in our local-for-local strategy”. Essentially, that point highlights the sustainability benefits of having factories across all the main market continents as opposed to producing in one or two locations and shipping around the world.

The second pillar of strength Yokohama TWS offers over its competitors is said to be in the realm of digitisation – using tyre and sensor technology to optimise the performance of end-user vehicles. “By transmitting data to the driver, they can adapt the pressure, for instance, on the soil in order to reduce soil compaction and to increase traction.” (See textbox for one recent indication of this growing trend).

In order words, it is not just about production, having a wide portfolio and service, but also about out-competing in terms of sustainability and digitisation. Ultimately, as Paolo Pompei says, “….Competition is about being better”.