Across the Atlantic they are called tires, while over here we use a “Y” and say tyres. This tag provides the latest tyre business news emanating from the United States of America (USA), whichever way you spell it.
A Memorandum of Understanding was signed this week regarding the purchase of 80 per cent of the tyre manufacturing business of Kumho. The buying consortium is headed by JP Morgan Chase and includes US equity fund Carlyle Group. At an estimated $1.5 billion, the sale – which still has to be finalised – would be South Korea’s largest-ever asset sale to foreign interests.
Dayton Wheel Products, the manufacturer of wire wheels in Centerville, Ohio, has been acquired by Charles G. Schroeder. This is only the third time the business has changed ownership in its 85 year history. The company recently launched a range of alloy wheels, but Schroeder says that Dayton wire wheels have a discerning customer with whom quality will always count – over 80 per cent of customers in the USA ask for Dayton wire wheels by name. The new owner plans to develop the business by concentrating on quality products and capitalising on the loyalty and enthusiasm of his workforce. The company employs 43 people.
Kumho Industrial recorded a net loss for 2001 of 221.5 billion Won (US$169.5 million) on a turnover of 2.68 trillion Won. This loss is an increase of 114 per cent over the year 2000 loss of 103.4 billion Won. Half the loss is accounted for by sales of assets, such as buildings, at a loss. On the positive side, Kumho’s tyre business performed very well, turning in a profit. Kumho is currently involved in negotiations to sell its tyre division for US$1.5 billion in order to reduce group debt.
Lear and partner Beru have confirmed the award of a contract to supply Ford with Tyre Pressure Monitoring Systems, as reported here earlier in January. The contract is to supply TMPS for a future model of the Ford Explorer. Sales of the Lear Beru TMPS are expected to generate several hundred million dollars as a result of federal regulations requiring TPMS devices to be fitted to every new car sold in the USA.
The new Mini Cooper and Mini Cooper S cars, now made by BMW, are due to arrive on the US market in March. The cars will be fitted with Goodyear NCT 5 EMT run-flat tyres, manufactured in Fulda, Germany. The tyre size is 195/55 VR15.
Goodyear is set to invest the equivalent of US$ 36.4 million in Goodyear South Asia Tyres Pvt Ltd., the company which runs a tyre factory at Aurangabad, India. This follows a previous investment by Goodyear in 1999 of US$ 62.2 million. The factory produces tyres for both the OE and replacement markets.
William Clay Ford has presented his restructuring programme which he hopes will lead the car giant out of crisis. The company wants to reduce the workforce by 35,000; 22,000 of which will be in the USA. None of the redundancies will affect German (or UK) Ford operations. Ford told journalists in Detroit that he wants to reach profits of $7bn by the year 2005. But first Ford has to make provision for $5bn in restructuring costs.
For the first time in the Firestone recall saga, Bridgestone is being sued alongside its US subsidiary. A 46-year old nurse, injured in an Explorer rollover accident, is suing Bridgestone Tokyo, the US-based subsidiary Bridgestone/Firestone Americas Holding Inc. and Ford. In the past, Bridgestone has claimed that it is not liable because its US company is independently operated, although in November a US District Judge ruled that Bridgestone can be held liable, as it transacts business in the United States and is therefore subject to US laws.
The bids for 80 per cent of Kumho’s tyre operations are due in by tomorrow and the company expects to name a final candidate by the end of the month. Press reports say that at least two bids have been submitted so far by US-based consortia. If the deal goes ahead, it will be among the largest-ever asset sales by a South Korean company to foreign investors. Earlier today, Kumho’s shares rose 8.4 per cent while the overall stock market was down 0.41 per cent.
The Kumho Group, by the 11th January, will be in receipt of a letter of intent to take over the tyre division. The bid comes from a duo of US-based consortia seeking to gain position as priority negotiators in the sale of the tyre division. One consortium is led by Carlyle, the other by Goldman Sachs. Kumho aims to sell around 80 per cent of its interest in Kumho Tire for about $1.5 billion (1.67 billion Euro).
Hayes Lemmerz, the wheel manufacturer that has been undergoing difficult times recently, has filed for restructuring under Chapter 11 of the US Bankruptcy Code. The company is at pains to point out that it has not “gone bankrupt”, neither is it going out of business and that Chapter 11 is a court-supervised restructuring proceeding, not a liquidation proceeding. It also applies only to Hayes Lemmerz’s own operations in the USA and that operations outside the country (except for one plant in Mexico) and joint ventures are not included. Declining market conditions and excessive debt were blamed for the action. Hayes Lemmerz shares fell to 52 cents at the news.
This is a business on the move, this business is exciting. Tyres may sometimes be regarded as commodities in the eyes of marketing strategists, tyres seem to be boring, but insiders know that this is not correct. Tyres are high-tech products, the only problem is that most consumers do not realise this. Because of this we are looking for communicators who can whip up enthusiasm. The most important task of the tyre business must be to raise the image of the “round black things”. In reality this industry has for a long time collaborated with companies from the high tech electronics sector and there are many points of contact with the so highly-regarded IT companies. Applications in seemingly remote areas of science are checked for a possible transfer to tyres. In building tyres a revolution has happened, historical inventions since the first pneumatic tyre from John Boyd Dunlop as well as radialisation or the tubeless tyre, silica compounds or lamella technology in respect of materials or tread design, are all in the past and are only little steps in the history of the tyre. The dynamic of the tyre business in terms of technology is fantastic: a “brave new world” of tyres has begun. Unfortunately this feeling of progress and the many technical innovations which have had such an impact on the tyre industry and the tyre trade have not filtered through to everyday business. We – who deal with tyres day in and day out – ought also to be infected by this contagious enthusiasm which is rife in research and development departments, whose technicians are sometimes regarded by outsiders as somewhat staid. Let’s have a review of the year 2001: whoever reads the headlines of this business and comes from a totally different sector will envy us for being in such a dynamic industry.
Bridgestone/Firestone Inc. has taken a major step forward in its efforts to draw a line under the tyre recall saga by hammering out a settlement to avoid lawsuits by US States. The company will pay $500,000 to each of the 50 states and to the District of Columbia, Puerto Rico and the US Virgin Islands. BF Inc. will also spend $5 million on a consumer education campaign and a further $10 million for the states’ legal costs. Up to another $10 million could be spent reimbursing those motorists who have not yet replaced their tyres. Total costs could reach $51.5 million (57.5 Million Euro).
The world’s largest wheel manufacturer, Hayes Lemmerz, which is facing heavy financial difficulties and is struggling for survival, has announced the closure of its manufacturing facility in Bowling Green, Kentucky in the middle of next year. 235 employees will lose their jobs. The closure will entail costs of about 55 million US-$ for the current fiscal year.
Industry consultants Autopolis have produced a report on the US Auto industry. The terrorist attacks in September make forecasting difficult, so Autopolis has developed two scenarios. The first assumes that the US economy moves back to pre-September 11th levels fairly quickly, resulting in only “a typical US recession” with auto sales falling 14 per cent in 2002. Scenario number two is described as “bleak” and presumes a prolonged war on terrorism, problems with oil supplies, rising inflation and a fall in the value of the Dollar. In this case US sales and production would fall by one third, and fall for two years before stabilising. The reality is likely to lie somewhere between these two extremes, says Autopolis, and flexibility is the key for businesses to survive and prosper.
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