At the 2008 SEMA Show, Tire Review had the opportunity to interview Masaharu Yoshimoto, then president and CEO of Toyo Tire USA Corp., and Yasushi Takagi, then executive vice president and COO of Toyo Tire USA Corp.
Shortly after the show, Yoshimoto was promoted to president and CEO of Toyo Tire Holdings of Americas Inc., of which Toyo Tire USA is a subsidiary. Takagi was promoted to president and CEO of Toyo Tire USA.
Takagi wrote Toyo’s corporate Mid-Term Plan ’08 and Vision 15, documents outlining strategies and setting goals for global expansion by the company’s 70th anniversary in 2015. He also played a key role in negotiating the recent business alliance with Bridgestone Corp.
Q) With regard to the Bridgestone-Toyo Agreement, give me a sense of where this relationship is heading? Is this simply a cost-cutting effort? Are you trying to create a business model for the rest of the industry?
Yoshimoto: Both companies are taking to each other about how we can work with each other and seek a good partnership. We will still have wholly independent marketing and sales. For instance, in North America we will compete with each other. Toyo brand will compete with Bridgestone brand and Firestone brand. We are not going to be selling Toyo brand in their company stores. Of course we don’t talk about pricing or new product development or what kinds of products we can introduce in the market. Both companies have told their employees that these kinds of discussions are prohibited. The parent companies announced this partnership in May, and then we set up teams to discuss certain areas, like production or logistics or procurement, and each team can only focus on their specific subject. And as you know, both companies purchased stock in each other in October.
Q) Is this partnership viewed as being more around reducing costs?
Yoshimoto: Of course both companies are very interested in reducing costs. Also we have discussed development of equipment, building machines and other equipment. We have unique automated production systems like our ATOM and Bridgestone’s BIRD. We are looking at both systems and learning he benefits of each and discussing how we can integrate certain aspects. Bridgestone people can see our operations and we can see theirs, so we can compare systems and processes. But the exact processes are still secret.
Q) Is there a view that this relationship is creating a new business model for the tire industry?
Yoshimoto: No, I don’t think so. No other companies are involved. Right now we are discussing exchanging information and possibly production. Where they have available capacity and where we have available capacity, we want to use that available capacity. For example, at our Georgia plant, we have already said we can produce tires for them. Which brand – Bridgestone or Firestone – I don’t know. Bridgestone already said they can produce some tires for us in Brazil. That is a market we are interested in being in. We are both looking at where there is available capacity and matching that to what we each need for certain markets. We are looking to penetrate into certain markets and we want to use some of their capacity. Of course, if they don’t have any available capacity, then they can say ‘no.’ Neither company will cut production to make capacity available to the other company.
Q) Is there room in that arrangement for other tire companies? Have there been discussions with others?
Yoshimoto: Just Bridgestone and Toyo.
Q) Will the agreement reach the point of a full out merger between Bridgestone-Toyo?
Yoshimoto: No, I don’t think so. Nobody knows for sure what will happen in the future. But right now we have no intentions and we have had no discussions like that. In Japan Bridgestone has almost 50% marketshare, we have around 10% or 15%. Because of antitrust laws we cannot have those kind of discussions.
Q) Who initiated this agreement?
Takagi: Both company presidents started to talk in early 2008. And then in May we announced this collaboration and basically within one month we started to talk in detail, and then the teams were assembled. It was then that a limited number of people began to meet. Then we agreed in mid-May and we announced the partnership.
The agreement really centers around five key issues: technical exchange with ATOM and BIRD, raw materials procurement, exchange of production capacity, logistics and warehousing, and exchange on other tire production equipment. The procurement of raw materials is a sensitive matter because it is a little bit difficult to agree on many things because of supplier relationships. On production exchange, we have agreed to utilize each other’s available capacity in certain markets. We will continuously study the partnership further and if we can do something more then we move forward.
Q) Toyo wants to have 7% share of passenger and light truck/SUV markets in North American – Canada and the U.S. – by 2015. How do you plan to achieve this? How are current conditions impacting your progress, if at all?
Yoshimoto: Yes, that is the goal. Right now Toyo production in U.S. at our Georgia plant represents about 15% of the tires we need. The rest of the tires we need right now are coming from Japan and China. We are trying to make all of our tires in the U.S. – passenger, high performance, light truck. That is our factory’s plan. We want to develop the tires here, test them here and produce them here. Our aim is to have everything here, with no tires coming from Japan or China. Of course, some will, but we want the majority to come from here. We have finished the first and the second stages of the Georgia plant. The third stage is on the way, but problems in the market situation has slowed our expansion plans in Georgia. We cannot just expand, expand, expand. We need to slow down a little bit, so we are a little bit behind the original schedule. We’d like to be on schedule, but market forces from outside make it very difficult. When we have all three stages complete, we will have enough capacity to meet al of our current North American needs, plus we will have enough capacity to reach our marketshare goals by 2015.
Our ATOM system, as you know, is very flexible. It joins together all parts of the tire-building process – Banbury and mixing and components, etc. With ATOM we can make tires one by one, by types and sizes. We can make small lots to meet market or customer needs. When market conditions improve we can add equipment and expand our ATOM system in Georgia. That is our current intention, and that will give us the capacity here to meet our market plans.
Q) In your Vision 15 plan, Toyo mentions liquidation of non-core assets. Please explain.
Takagi: Toyo will focus on tire and anti-vibration rubber businesses as its core business. We will continue to explore opportunities to sell non-core business assets, such as land, in order to create liquidity. In addition to land, one example of this is the recent sale of an instrument panels company in Australia.
Q) What is Toyo doing regarding so-called “green” tires?
Takagi: As a company we just created our vision statement on the environment and a new symbol mark – an Eco logo. We are currently developing eco products, and we will focus on eco in the future. Right now our focus is on fuel efficiency and investigating different materials.
Yoshimoto: Some of the materials we are already testing and very good results are coming. We also have set a goal that whenever we introduce a new tire that new tire will have 5% lower rolling resistance. That is the minimum. We will have 5% better rolling resistance every time. Sometimes we can reduce it 10% or 15%, but always at least 5% at minimum.
Q) As a company does Toyo view, are “green” tires a fad, or are they a long-term product?
Yoshimoto: This green tire concept is not a Toyo concept. Every tire manufacturer is involved in environmental areas, whether it is on the factory side with CO2 or emissions or on the product side with lower rolling resistance. And there may be other things in the future. So I don’t think it is a fad or something we will not be doing long-term. We’re trying to make tire that doesn’t sacrifice anything in performance but still delivers 5% improvement in rolling resistance. That is our goal. Maybe in the future we can make something far better, maybe 25% or 50% lower rolling resistance.
Q) From an R&D standpoint, what is Toyo doing to reduce its raw material costs? Are you working on any innovative new components? Increasing the use of recycled tire rubber?
Takagi: Yes, sometimes we use different compounds. When the price of natural rubber was high and synthetic rubber was lower, we looked at if we could increase the volume of SBR instead of NR. Of course it depends on how those kinds of changes impact tire performance. That is our first concern. But we are always looking for ways to reduce our costs. That is natural.
Our research and development department is always looking at special and different materials. Some things we cannot change, like carbon black. Everyone uses carbon black. But we look at some materials that we can mix with carbon black to reduce the amount of carbon black and maintain the performance of the tire.
Q) With all of the growth efforts by all tire companies focused on China, India and other emerging markets, will the North American market become less and less important?
Yoshimoto: No, no, no. The North America market is very important and unique because only North America is a market where competition increases. Of course there is competition in China and Japan, but here there are all brands. So this market is unique and getting bigger. Maybe China in the future is the Number 1 market for tires or maybe India, but the U.S. is still a very important market for us. The U.S. market won’t shrink. The Japan market has shrunk because the population is getting smaller every year.
Q) How long will Toyo continue with Nitto operating as a separate unit in North America? Will it eventually be pulled in as a brand vs. a separate company?
Yoshimoto: Toyo and Nitto will continue to operate as completely separate businesses not only in the U.S., Canada and Mexico but also all over the world, in the future. This includes competing freely in the open market through different sales channels. At this time, we have no plans to consolidate the companies or those sales channels.
