Now one of the largest tyre-producing countries in the world, China has an indisputable influence on the direction of global tyre trade. The home of both fast-growing up-and-coming brands as well as a burgeoning domestic market, this tag chronicles China’s involvement with the tyre business.
Hankook’s Chinese operation is planning to raise 90 million dollars in capital. This will be used to meet maturing debts and facilitate expansion. Some 50 million dollars of the funding will be guaranteed by Hankook.
Michelin has released its first half figures. Compared with 1H 2001, turnover is up 1.4 per cent to 7.8 billion Euros and operating profits up 16 per cent to 569.6 million Euros. Net profits were down 31.2 per cent to 254.1 million Euros, but the figures for 1H 2001 included a sale of Peugeot shares; when these are factored out of the equation, net profits for 1H 2002 rose 279 per cent. Much of the credit for the results goes to Michelin’s restructuring programme and debt has been reduced by one billion Euros, with operating margins improving one point to 7.3 per cent of net sales. Raw material costs declined by 6 per cent over the period. Looking ahead, Finance Director Michel Rollier described the second half of the year as “challenging and uncertain”, particularly the economic crises in South America. Michelin’s shares rose nearly 4 per cent on publication of the results.
Commodities traders are predicting that China will soon outstrip the USA as the world’s biggest consumer of rubber, importing one million tonnes this year and producing 400,000 tonnes itself. Demand from the tyre industry accounts for 80 per cent of this figure, as car sales increase to an estimated one million this year – a 40 per cent increase over last year. Sumitomo Rubber has announced that it would begin radial tyre production next April in China for both home and export markets.
Japanese car manufacturer Honda has revealed details of a three-year business plan, in which it rules out any chance of a merger with another manufacturer. Of Japan’s five biggest car manufacturers, only Honda and Toyota are independent. Honda also revealed that it will increase production outside Japan, including the building of a second factory in China.
Jamie Ma (28) has been appointed President of Taiwanese tyre manufacturer Federal Corporation. Formerly Executive Vice President, Jamie Ma succeeds De-Ling Ma. Jamie Ma has been instrumental in directing Federal towards the ultra high performance sector and he plans to expand the R&D team, aiming to introduce a new tyre pattern design each year to meet high demand from overseas. As well as Federal Corporation President, Jamie Ma is also Chairman of Federal Tire (Jiangxi) Ltd., in China, where Federal produces the Maxon and Hero tyre brands.
Yokohama has increased its share of the joint venture company Hangzhou Yokohama Tire Co Ltd. From 45 to 80 per cent. The other two shareholders, YHI Holdings Pte. Ltd and Hangzhou Rubber (Group) Co. each have 10 per cent of the holdings. At the AGM in March seven out of nine directors were already appointed from Yokohama. Production of Yokohama radial car tyres in China will begin in May 2003 with the construction of a tyre plant with a capacity of 750,000 units per annum. This will be increased in time to 1.5 million units.
Tyres are among 132 different products which will have to carry the China Compulsory Certification (CCC) mark from next month if they are to be sold in the People’s Republic of China. This applies to domestically-produced and imported products. The CCC mark is a product safety and quality certification system and the mark can be acquired from the Certification and Accreditation Administration of the PRC.
Consolidated results from 2001 for China Enterprises Ltd. show a varied year for the group with as many ups as downs. The company states that Chinese tyre prices fell by 3-5 per cent during the year due to 2001 high inventories and high levels of competition. Although raw material costs remained low, warranty claims were higher than expected – a result, according to the company of end-users overloading their vehicles.The Company’s gross margin fell from 9.90 per cent for 2000 to 8.87 per cent for 2001. The decline was substantially due to Yinchuan CSI, whose margin was adversely affected by weak selling prices and provisions for warranty claims. On the other hand, Hangzhou Zhongce increased its margin to 11.8 per cent in 2001 compared to 10.1 per cent for the previous year. Revenues for 2001 were up by 20 per cent on 2000, mainly due to increases in sales of radial car tyres in the domestic market. Export sales though dropped by 3.7 per cent in value. China Enterprises sold 6.2 million vehicle tires, 34 million bicycle tires and 2.5 million wheelbarrow tires in 2001.
Yokohama Rubber Company Limited has taken majority possession of its Hangzhou Yokohama Tire Company Limited joint venture in Hangzhou, China. Just two weeks in advance of the ground-breaking for the venture’s radial tire plant, scheduled for 22nd April, 2002.
Michelin is offering 100,000 employees worldwide the chance to become preferential shareholders in the group. Employees will be able to purchase shares until the end of April with a discount and they will have usual shareholder rights, including access to financial information sent by Michelin to its employees. The object is to strengthen the relationship between the company and its employees and to give them a stake in the group’s development.
Goodyear has released details of the group’s performance in various markets, for the year to date, to end February. Brief details are as follows: North American Tire: February industry shipments of consumer replacement tyres were 8 per cent up on last year. Goodyear shipments to dealers were flat, as some dealers pre-bought at the end of last year. Goodyear shipped 400,000 tyres as part of the Ford replacement programme. Industry shipments of commercial tyres were 14 per cent up on last year’s levels. Goodyear’s shipments were up, but not as high as the industry figure. Industry shipments of OE tyres were up 10 per cent for car tyres and down 17 per cent for commercial tyres. Goodyear’s unit shipments outperformed the industry. European Union: Consumer replacement tyres: industry shipments + 3 p.c. Goodyear shipments lower. Commercial replacement tyres: industry shipments – 6 p.c. Goodyear shipments reflect this figure. Consumer OE tyres: both industry and Goodyear shipments up. Commercial OE tyres: both industry and Goodyear shipments down. Eastern Europe: No segmentation available, but Goodyear replacement tyre sales were up, due mainly to market recoveries in South Africa and Turkey. Goodyear OE tyre sales were down slightly. Latin America: Goodyear replacement tyre sales down, mainly in Brazil and Argentina. OE sales were up. Currencies in Brazil and Mexico were revalued, but this was offset by devaluations in Argentina and Venezuela. Asia: Replacement tyre sales were up from last year, while OE unit sales were slightly down. Improved volumes in China and India helped improve operating margins over last year.
In 2001, the Michelin corporation generated a world-wide turnover of 15.775 billion Euro (+2.5% compared to 2000) and an operating profit of 1.04 billion Euro (-10.5% compared to 2000), thus showing a net profit of 314 million Euro (-28.4% compared to 2000). Under difficult economic circumstances world-wide, Michelin’s two main competitors, Bridgestone and Goodyear, could not even get close to Michelin’s operating profit, which corresponds to 6.6% of turnover. Bridgestone is still suffering from the consequences of the Firestone tyre recall in the USA, in 2000, and Goodyear has shown a loss for 2001. During a press conference at the end of February in Paris, Michelin’s COO, Edouard Michelin, clarified the course of business events during the last year, and Michel Rollier, Chief Financial Officer, offered a detailed view on the corporation’s figures. For the very first time, the corporation answered questions during a big press conference (other conferences were held in London and New York), and mentioned turnover and profit figures for the individual divisions.
Bridgestone and Toyo have both announced plans to boost output in China, destined for the Chinese domestic market. Bridgestone will raise production in total by 40%, with its Tianjin factory producing 13,000 tyres per day, an increase of 30%. Meanwhile, Toyo is looking at methods of increasing production at Jiangsu by 60%.
Federal Corporation, based in Taiwan, reported that, as a result of the success of its innovative quality ultra high performance tyre products coupled with the outstanding sales performance of its worldwide distribution network, the company grossed over $89,373,000 in 2001. This is an annual sales record for the company and a 13.26 percent increase on the year 2000.
Goodyear has announced the closure of its factory at Marikina in the Philippines on February 1st. Overcapacity and weakening demand were cited as the reasons. The plant employed 175 people and produced 1,200 tyres a day. Goodyear Asia Region tyre manufacturing director Harold Smith said that the Philippines tyre market was highly competitive “with a flood of low-cost imports from China and South East Asia.” The company has another factory in the Philippines, at Las Pinas, and some associates from Marikina may transfer there.
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