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Cooper’s Growth Strategy

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At its Investor Day, held in New York on May 15, Cooper Tire & Rubber outlined the measures it will implement to support the company’s goal of sustained annual operating profit in the 8 to 10% range and, over the long term, operating profit above 10% plus annual net sales in the vicinity of USD $5 billion to $6 billion.

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Within Europe, we can expect Cooper to further rely on products sourced from its factory in Serbia, a plant it says provides the advantages of competitive cost production and in-market manufacturing while also benefiting from Serbia’s zero duty arrangements with both the European Union and Russia. The company will also focus on profitable growth in Western Europe through new products and efforts to improve brand awareness, and drive growth in core markets such as the UK and Germany.

Sales outside North America currently account for around 30% of Cooper’s total global revenues but should eventually make up one half, according to the tiremaker’s plans. In China specifically, Cooper expects to drive sales growth by increasing the pace of new product introductions and significantly expanding points of distribution. Cooper plans to grow its already established original business in China, as this is key to driving consumer replacement tire pull-through in the region. Cooper says it is committed to growing its presence in China regardless of the ultimate ownership of Cooper Chengshan Tire, although this may have an impact on the specific plans and timing related to financial targets.

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In North America, Cooper says it intends to enhance “mix and margin” through the launch of new products, further sales of Cooper-brand products and a greater presence in “underpenetrated” channels. The company also intends to become more active in the original equipment business, although Cooper management expects this segment will ultimately account for no more than 10% of its total business within the region. The company’s North American growth plans will also be aided by expanding its manufacturing presence in Mexico.

“Cooper has strengthened the foundation of our business over the past several years by improving efficiencies and enhancing our technical capabilities to launch world-class products in the fastest growing and highest value segments of the tire business,” said Cooper chairman, chief executive officer and president Roy Armes. “We have transformed our manufacturing cost base, resulting in a balanced and competitive manufacturing footprint, and we’ve achieved strong operating and shareholder results. Through solid execution of our strategic plan, Cooper is poised for continued profitable growth, having developed a geographic manufacturing footprint well positioned to sell into our key markets with great performing, cost competitive tires and with additional capacity to support future expansion. In fact, with our current assets, we have the potential to expand by 17 million to 18 million units at one-third the cost of equivalent greenfield plant expansion.

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“Going forward, we are focused on continuing to improve our globally competitive manufacturing cost structure while delivering great products and driving demand for our house brands across our regions in the most attractive product segments,” Armes continued. “In addition, we plan to continue to increase original equipment penetration when it aligns with our strategic plan. Cooper remains committed to China as a growth region and to the global truck and bus radial tire market regardless of the ultimate outcome of CCT ownership. Overall, our goals are aggressive, but attainable, and we’re excited to start writing the next chapter in our company’s 100-year history.”

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Chief Financial Officer Brad Hughes added that although the ownership of Cooper Chengshan must be resolved before Cooper Tire can publish any specific details on its 2014 capital deployment plans, company management view Cooper Tire as being “well-positioned to grow and to continue to drive strong shareholder value creation.” (Tyres & Accessories)

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