Truck Tyres
That Continental wants to manufacture tyres in China, has already been decided. The questions now are “Where” and “How”, so Continental executive committee Hans-Joachim Nikolin told the “Hannoversche Allgemeine Zeitung” (HAZ).
Through its quality monitoring process, Michelin has come to the conclusion that a limited number of tyres within this production range may present, under Australian conditions of use, a risk of reduced robustness in the crown area, which may lead to a rapid loss of air pressure. As a consequence of this the company is recalling 10,000 tyres manufactured at Michelin’s truck tyre factory in Thailand between January 2003 and September 2003. The designated tyre is the Michelin brand 295/80 R22.5 XZE2+ TL 152/148M.
Goodyear is to serve as Penske’s primary supplier of tyres in North America until at least 2008. Goodyear supplies Penske with a variety of truck tyres, including replacement and retreaded tyres. “We have developed an excellent supply relationship with the Penske team, and we are pleased to announce an extension of the agreement,” said Steve McClellan, Goodyear’s vice president of commercial tyre systems. In recognition of Goodyear’s past outstanding service, Penske named Goodyear as a Supplier of the Year.
According to American media reports Continental Tire North America will raise prices for its Continental, General and private brand passenger car and light truck tyres in February. Prices will increase from three to six per cent.
Cooper has expanded its Far Eastern presence with a joint venture with Taiwanese tyre manufacturer Kenda. The two companies will build a plant to make radial passenger and light truck tyres, which will be situated in the Jiangsu Province of the People’s Republic of China and jointly owned by the two manufacturers. Construction will begin in the middle of next year, with tyre production starting late 2005. The tyres will be aimed at markets outside China. Speaking of the deal, Cooper’s Thomas A. Dattilo said: “It will allow us to add capacity and lower costs in our tyre business. It also gives us a base for sales in China down the road as the Chinese market increases significantly over the next decade.”
The Goodyear Tire & Rubber Company announces that Freightliner LLC, North America’s largest manufacturer of heavy-duty trucks, has named Goodyear as its standard tyre supplier. Officials of Goodyear and Freightliner recently signed the agreement, and Freightliner has begun communicating this decision to its network of truck dealers. “Being awarded new business is a testament to what Goodyear offers, in terms of products, service and a network of commercial outlets. And having a customer like Freightliner choose Goodyear to be its standard tyre supplier really makes us proud,” said Steve McClellan, Goodyear’s vice president of commercial tyre systems. Goodyear is supplying a variety of truck tyres for Freightliner LLC’s various commercial vehicle needs. This includes supply to the company’s commercial vehicle brands Freightliner, Sterling, Western Star, American LaFrance and Thomas Built Buses.
The near 90 years old tyre manufacturer Cooper, has so far always been noticeable with two digit operational profits, has held its ground even after the rather difficult economic conditions in the United Stated after “September 11”. Whilst Cooper has been more or less in the doldrums during the first six months of the current year, the company again gathered way under the guidance of CEO Thomas A. Dattilo. Cooper could convince the market of the fact that this tyre and rubber company will find the way back to its old earning power. In the fourth quarter of 2002 there have been preferred sales because of announced price increases for 2003, so that the manufacturer was inevitably lagging behind its sales figures during the first months of this year. Since September however Cooper progresses again relatively steeply with light truck tyres. In particular, the last quarter showed strong upward tendencies. While the market grew by around four per cent, Cooper in turn created a growth of nine per cent by special arrangements with customers, so that up to the end of the year many arrears can be caught up. This at least is what Tom Dattilo explained to T&A in an interview at the SEMA show in Las Vegas.
Earlier this year it was clear that the CTNA (Continental Tires North America, previously General Tire) would again have to report a three-figure million loss. In the meantime it seeped through that this number is closer to 150 million Euro than “only” around 100 million Euro. This frighteningly high loss shows: In the European tyre business the company makes huge earnings and if the American losses have finally come to an end, the tyre section is not just strongest in turn-over (despite the expected next year’s higher growth in the Automotive business unit), but also the yield-strongest. Tyres still have good expectations in the company; among other things this assumption was underpinned by the majority purchase of the tyre business of the Malaysian company Sime Darby Berhad with two tyre factories with an already existing production capacity of four million passenger car, one million small truck as well as 300,000 heavy truck tyres.
Talking to T&A at the SEMA Show in Las Vegas, Manfred Wennemer (55) and Martien de Louw (57), who is responsible for Continental’s passenger car tyre unit as well as CTNA, affirmed that the American tyre business will reach break-even by the end of 2005. Wennemer specifies: “With the CTNA we will reach break-even in the last quarter of 2005 even though naturally we would be pleased, if we could reach it even earlier.”
Continental was not represented at the SEMA show with its own stand, unlike Bridgestone/ Firestone, Cooper, Goodyear, Michelin and Pirelli and other competitors, probably a cost-based decision. All too tragically this might not have been, because more important than meetings in the company’s booths at the show are meetings accompanying the SEMA show in the surrounding luxury hotels of the craziest city of the world. Martien de Louw and his executive team had invited the customers to an evening in the Mandalay Bay hotel, where hundreds of Continental’s “Best Friends” arrived. De Louw used this opportunity to present his complete executive team. Manfred Wennemer, who travelled to Las Vegas, too, was accessible “on the floor” for everyone, without pushing his colleague de Louw into the background. Optimism was noticeable in Las Vegas; but in order to see that the distance remaining to be covered remains rough and stony, requires no clairvoyance.
So far the acquisition of General Tire in 1987 has not been a success story. During this year the loss will amount to 100 million Euro at least. This has to be changed, according to Conti’s chairman Manfred Wennemer and Martin de Louw who is responsible for Continental’s passenger tyre division and works in the North American headquarters in Charlotte, North Carolina. The two set out the goal: during the last quarter of 2005 the break-even point has to be reached. Wennemer puts his hope in de Louw as a new member of the board. De Louw in his strategy focuses on new products, the extension of low cost production sites such as Mexico, and the persuasion of a multi-brand strategy that in turn is borne by the brands Continental and General Tire. For the replacement market Continental hopes for good business with the car dealers because the tyres with the prancing horse have been widely sold on the OE market during the last couple of years – there will be a pull-through effect. Wennemer states clearly that Continental will continue its business with truck tyres in North America because this division has always been very profitable.
Ford has great hopes for the 2004 version of its F-150 4×4 vehicle. The F-150 is already the US’s most popular-selling vehicle and the 2004 version is marketed with the phrase “built Ford tough”. It includes larger-than-before tyres and wheels and the Goodyear Wrangler AT/S tyres supplied as OE are in the size LT 275/65 R18 – representing Goodyear’s first 18″ OE selection in radial light truck tyres. The same size of Wrangler tyres have also been chosen as OE on the 2004 Ford Harley-Davidson Edition pickup and the Ford F-250 Super Duty.
T&A talks to Martin Sutherland, general manager at Toyo in the UK, for an update on the company development.
Toyo is perhaps one of the most recognised mid-market brands in the UK. A series of targeted media campaigns both above and below the line have gone a long way to establishing the brand as the performance tyre of choice for many driving enthusiasts. In spite of the success of the UK operation it remains answerable to Toyo Reifen in Germany, so there is no UK managing director, the head of the chain of command in the UK is Martin Sutherland. Martin Sutherland has been with Toyo in the UK for the past 21 years, joining the company from Pirelli; so he knows a thing or two about the market in the UK.
Toyo has recently moved premises at Rushden. The re-location was only about 100 yards up the road, but the new premises have doubled the available storage space allowing Toyo to improve its stock capacity and as consequentially improve its service to its customers. Martin Sutherland says, “We have virtually doubled our stock capacity by moving to this unit. It offers us 70,000 square feet, which is twice the area of the old unit. However, we have managed to relocate without too great a disruption to our service or distribution. In fact, in the past we used to hold stock at the dockside and at one point had as many as 70 containers sitting in storage. All that stock is now held here, and we still have room to expand.
“One of the limitations we had on developing the business was the warehouse capacity and our restriction on turning stock around. That is no longer an issue and that allows us to offer a full width of patterns and sizes in all ranges. That gives us the potential to further build the business and we have the capacity here to grow considerably in all areas.”
The wholesale and distribution side of the tyre trade is going through a period of expansion and we could point to a number of companies investing considerable sums in new premises and expanding coverage. Toyo, though, is probably one of the few manufacturers talking so positively of expansion. What makes Toyo such a strong developer at this stage?
“There are probably a number of contributory factors,” says Martin Sutherland, “In the last fiscal year to 2003 we had our best ever results in terms of income and in terms of unit sales. In a market said to have declined by 2 per cent we saw an across the board increase of 12 per cent. That includes passenger car, 4×4, light truck and truck tyres. In high performance car tyres we saw a 37 per cent increase in sales.”
Winning volume and value in today’s tyre market is an uphill struggle, competing against established brands and in some sectors having to fend off price-led competition from the far east means that a 12 per cent increase is no mean feat. What do you attribute the success to?
“Without doubt,” says Martin Sutherland, “Much of our success is due to the quality of the marketing campaigns we have established over the years. Mike Rignall came to Toyo with the remit to redevelop our marketing and to increase brand awareness and he has done an excellent job in raising our profile in the trade and with the consumer. The way we have marketed the brand is now paying dividends for us. We established a policy of exclusivity for dealers and we have stuck to that policy and we have ensured that our availability is good.”
Cooper Tire & Rubber has signed an agreement with Hangzhou Zhongce, whereby the Chinese manufacturer will produce 250,000 – 350,000 radial medium truck tyres (RMTs) a year. Moulds and other equipment are being transferred to China from Cooper’s plant at Albany, Georgia, where all of Cooper’s RMTs are currently manufactured. Albany makes 25,000 tyres daily, of which 1,200 are RMTs and the plant employs 1,500 workers. The Chinese-made tyres will be produced under Cooper’s brand names and will be manufactured according to Cooper’s technical specifications.
Goodyear Dunlop Tyres UK Limited has announced that it has initiated an information and consultation process with Union Representatives regarding possible redundancies as a result of the removal of car and radial light truck tyre production at its Plant in Wolverhampton, West Midlands. The company has advised the UK Department of Trade and Industry and our Unions today that we will be ceasing production of car and radial light truck tyres in Wolverhampton and that up to 420 associates could potentially be affected. The remaining production from Wolverhampton is unaffected by this decision, with tractor tyre manufacturing and other processes used in tyre production, such as mixing, calendering and retreading, continuing on the site.
A number of tyre companies have published financial results for the first half of the year, with figures varying from not-so-good to impressive. These are analysed in detail in the magazine, but some brief highlights are as follows:
Michelin: Sales were down 6 per cent to 7.348 billion Euro, but excluding currency effects, this would be a rise of 4.4 per cent. Operating profit rose one per cent to 578 million Euro and net income was 165 million Euro; below what was expected, but this was almost entirely due to charges of 178 million Euro for restructuring in Spain, where 1,200 jobs will go over the next three years.
At an analyst meeting, Michelin executives were extremely cautious concerning the outlook for the rest of the year, forecasting a drop in volume for the second half and only a slight improvement in the impact of currency fluctuations. Other obstacles to improvement are the continuing high costs of raw materials and the continuing losses of the recently-acquired Viborg chain. The acquisition was a major factor in the 0.1 billion Euro increase in Michelin’s debt, to 3.9 billion Euro.
Goodyear: Second quarter (Q2) figures reveal that the company lost $73.6 million, compared to a net income in Q2 last year of $28.9 m. Sales were up nearly 8 per cent at $3.8 billion (3.5 bn), but volumes were down half a million units to 52.8 million pieces. The single most important factor in the deterioration of operating performance was an increase in raw material costs of around, $124 million, said Goodyear, even though this was offset in part by cost reductions, improved price and mix and a positive currency translation benefit of some $9 million.
The net loss for the first six months of the year was $236.9 million (1H 2002: $34.3 million loss). The 2003 figures included a rationalisation charge of $78.6 million to cater for staff reductions, while the 2002 figures were boosted by an income benefit of around £10 million as a result of the Ford tyre replacement programme. Sales for the first six months of 2003 reached $7.3 billion; 7.6 per cent up on the 1H 2002 figure of $6.8 billion. Tyre unit volume was down at 105.4 million units (106.3 m).
Continental: 2Q results exceeded the forecasts of industry experts. Compared with 2Q 2002, turnover was down 3.4 per cent to 2.825 billion Euro (2.925 bn), but operating income rose 11.3 per cent to 216 million Euro (194 m), against a forecast of 187 million Euro.
Of the four divisions, Car Tyres, Truck Tyres and Continental Automotive Systems (CAS) all showed slight reductions in turnover compared with 2Q last year, while ContiTech was up slightly. When it came to operating income, however, Truck Tyres was the only sector to show a decrease, while the best performance came from Car Tyres, which posted a 44.2 per cent improvement.
The group’s operating margin was 7.6 per cent and, while the car tyre and truck tyre divisions were slightly below this (6.7 and 7.4 per cent). ContiTech and CAS achieved 8.5 and 9.0 per cent respectively. Industry analysts were pleased at the figures, saying that the group is exhibiting “improving internal dynamics and a favourable mix of businesses with some growth and some cash flow contributors.”
Trelleborg Wheel Systems: TWS achieved sales for the first half of the year of 1,470 million Swedish Kroner (SEK), or 160.2 million Euro. Operating profit was up 33 per cent to SEK 84 million (9.15 m Euro), compared with last year’s first half figure of SEK 63 million (6.87 m Euro). During the second quarter, turnover was SEK 713 million (77.7 m Euro) and operating profit was SEK 39 million (4.25 m Euro).
Operating profit was favourably affected by the company’s restructuring programme, an improved product mix and increased productivity. High raw material prices were partially offset by price increases, especially in farm tyres.
A success story for Marangoni is its activities in Brazil, thousands of miles from its European activities. Marangoni’s involvement in Brazil began in the early 90s as a partnership with Brazilian market leader UNISA for the transfer of technology for the manufacture and marketing of the Ringtread product. At its height, there was a network of 15 authorised RTS dealers in Brazil.
However, the serious economic downturn saw UNISA go bankrupt, threatening Marangoni’s progress in Brazil, but the operation in that country was kept alive by the determination of a group of former directors of UNISA, headed by Mr. Dary Fernando Figueiredo. The reason that Marangoni was so keen to remain established in Brazil is that the country is the world’s second largest market for retreads, with a monthly consumption of 12,000 tonnes of rubber, which corresponds to some 10 million retreaded truck tyres annually.
In 1998, Mr. Dary Fernando Figueiredo founded a new company with its head office in Sao Paulo, which had a small warehouse and just one customer. This eventually became Marangoni do Brasil and, in April 2001, a new facility was opened for the production of precured treads, representing an investment equivalent to nearly 12.6 million Euro at current exchange rates and covering an area of 53,000 square metres. Growth was rapid and, in 2002, the volume of treads produced reached 220,000, for 30 customers. The key to this success lies in the close partnership established between authorised dealers and Marangoni do Brasil; a relationship focused on the distribution of the product and the commercial assistance provided to the dealers in their work in the fleet market.
As far as Marangoni is concerned, the story is far from over, as future sales objectives involve a portfolio of more than 50 customers and sales of 550,000 retreads by the year 2005.
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