Looking Forward Tire Company Execs Talk About the Future - Tire Review Magazine

Looking Forward Tire Company Execs Talk About the Future

“The problem with the future is that it keeps turning into the present.” – Calvin & Hobbes creator Bill Watterson

And the present has an odd way of getting in the way.

Forinstance, when we first planned for this story, we thought it would beneat to peer into the future and see what the tire industry – products,companies and dealers – might look like in 2030.

That was inJune 2008. In October, the future became the present and our planschanged. While a 20-year trip to the future might be interesting,near-term issues such as financial recovery, changes at automakers andshifts in consumer preferences became more pressing.

As futuristauthor H.G. Wells once said, “The future is the shape of things tocome.” And so we posed three questions to the heads of the nine majortire companies operating in North America to get their take on theshape of things today – and those to come.

Taking part in this interview were:

• Mark Emkes, chairman, president and CEO of Bridgestone Americas

• Matthias Schoenberg, CEO of Continental Tire North America

• Roy Armes, chairman, president and CEO of Cooper

• Rich Kramer, Goodyear COO and president of its North American Tire unit

• Greg Pae, president of Hankook Tire America

• Dick Wilkerson, chairman and president of Michelin North America

• Hugh Pace, chairman and CEO of Pirelli Tire North America

• Yasushi Takagi, president and CEO of Toyo Tire USA Corp.

• Takao Oishi, president and CEO of Yokohama Tire Corp.

Theanswers to the questions we posed we at once expected and interesting,especially the glints of detail on particular projects and programs.

1)How has the current economic situation forced you to make changes inyour company today and how will it form your business approach movingforward?
mark emkes, chairman, president and ceo of bridgestone americas
Bridgestone’s Emkes:We believe that the current economic situation presents us with aunique opportunity to find ways to work smarter, leaner and become moreefficient. We’ve formed an economic response team to look at everyfacet of our business and find ways to better serve our customersand reduce costs while still enhancing safety and quality. Ourteammates have stepped up and provided a lot of smart suggestions,which are helping us achieve these objectives. We have had to adjustproduction in our plants and in some cases reduce our workforce toalign our business with current market demand and hit responsibleinventory targets. These decisions are painful but necessary due to theeconomic downturn. But we’re also continuing to push our businessforward by investing in our Bridgestone and Firestone brands.Studies have shown companies that continue to market their brandsduring economic downturns do measurably better during the economicrecovery than those who cut marketing programs. And our research showsthat our sports marketing partnerships are clearly moving the needle.We’re also making organizational changes to improve our speed to marketand make us even more customer focused. Bridgestone Americas willcontinue to be well-positioned for growth and sustainable profits whenthe economy recovers.

Continental’s Schoenberg
:The economic downturn has actually opened some new avenues forContinental in the Americas. We’ve created a product portfolio that iseasier for our dealers to sell. As a result, we as a company areacutely aware of the need for tires that deliver more value in terms ofproven performance, excellent treadwear, and even value-added roadsideassistance packages. In addition, the economic situation has freed upcapacity in our plants, which allowed us to transfer production fromEurope to the Americas faster than originally forecasted. MoreContinental and General tires will be U.S.-produced in both the UHP andwinter tires segments. Our focus is on the right kinds of vehicles thatwill deliver the best replacement results in terms of sales andprofits. This is precisely the strategy behind our ContinentalExtremeContact lines and the powerline launch for General Tire’sAltimax line – each of which is targeted to deliver 80% marketcoverage. We’ve also taken into account that in today’s economy,consumers are more apt to do their homework and they understand thedifference between price and value. We are able to stand behind ourtires with industry-leading warranties because they are built withimpressive performance attributes and are engineered to last. Our tiresrepresent a solid value. Our growth roy armes, chairman, president and ceo of cooperstrategy in the Americas will placeadditional focus on the South American markets in upcoming years aswell as U.S. market.

Cooper’s Armes:We have actively been moving along a path that was outlined in ourStrategic Plan. This calls for the establishment of a sustainablecompetitive cost base, delivering profitable top line growth andenhancing our organizational capabilities. The downturn in the globaleconomy forced us to make some difficult decisions. We also had to movefaster on some projects and it slowed us down in other areas.  We’llcontinue to be cautious about our liquidity while there is uncertaintyin the capital markets. Regardless of what occurs with the economy, weare working to make Cooper a more competitive company during thisdownturn and should be positioned for greater success when the economyrevives.

Goodyear’s Kramer:Weak industry demand, coupled with peak raw material costs, has drivena year-over-year decline in financial results. For the most part, wehave stayed on our strategies, which are imbedded with flexibility. Webelieve Goodyear is positioned for success when markets recover. Thiscontinuing strategy includes a combination of new products, thestrength of our customer relationships, an advantaged supply chain, ourportfolio breadth, our manufacturing and distribution footprint, andmore. We also believe that Goodyear’s new product engine andindustry-leading innovations have placed us in a good spot. Thatinnovation mindset transcends products to business processes and ourapproach to the market, utilizing flexibility to adapt to changingconditions. Perhaps best of all, from the tire dealer’s point of view,Goodyear’s innovation and leadership serve as a guide for our customersto help stay a step ahead of economic challenges. greg pae, president of hankook tire america

Hankook’s Pae:Our business plan remains unchanged. We have continued with ourinvestments in building our brand through advertising and marketingsupport. We are constantly working to make it easier for all of ourdealers, large and small, to do more business with us. Our focus is onefficiency. For example, we know that many dealers have reduced theirinventories and are looking for smaller but more frequent deliveries.Our new Web-based ordering system is designed to reduce the amount oftime a dealer needs to spend placing and tracking their orders. At thesame time, we’ve expanded and improved our warehousing and distributionsystems to substantially improve fill rates. These initiatives areworking and the interest and demand for our products remains strong.

Michelin’s Wilkerson
:We battened down the hatches to best weather this economic storm. Thatmeans temporarily lowering plant production and inventory levels tomeet reduced market demand and delaying some capital expenditures. Ourcost-cutting and efficiency improvement effort was already well underway as part of our Horizon 2010 plan and those gains gave us a greatleg up during this crisis. We’ve also worked closely with our dealers,fleets and other customers in a collaborative fashion to help bestmanage their tire inventories, optimize fleet maintenance and adjustconsumer marketing efforts to the current market reality. We are wellpositioned to ride out this difficult period and come out strong on theother side. The one thing that all crises have in common is that theyall end. Michelin is working hard to make sure our plants, our teamsand our customers are well prepared to take full advantage when themarket rebounds.
hugh pace, chairman and ceo of pirelli tire north america
Pirelli’s Pace:We were quick to launch an aggressive restructuring initiative duringthe fourth quarter, 2008. At that time the company took a 100 millioneuro charge, announced the 2009 closure of its tire plant in Spain andbegan a right-sizing program throughout Europe to reduce 15% (1,500) ofour blue-collar and white-collar personnel. Within our North Americanbusiness, manufacturing schedules were adjusted to balance inventoryagainst weakening market demand; product planning was revisited toaccelerate production of new, high value added tires for our MIRSfacility in Rome, Ga.; marketing and communications strategies wererefocused to exploit tactical opportunities; and cost reductionmeasures were introduced in every area of the company. As the economyimproves and demand picks-up, we are well positioned for growth becauseof our continued investments in R&D, new products and leading edgemarketing. And, of course, we will maintain an emphasis on continuousimprovement in operating efficiency and cost control.

Toyo’s Takagi
:Our goal of offering quality products and outstanding customer servicehas remained steadfast since 1945. Over time, our products have evolvedand we have grown to meet the needs of our dealers and the demands ofconsumers. Today, I can proudly say we offer a well-rounded line ofproducts.  We believe that growth in sales and market share will notcome from focusing on just one segment but rather from a mix of qualitytires that provide consumers with excellent value. For example, rightnow everyone wants to talk about small cars and yet we continue to seegrowth in light truck tire sales.  Are new light truck vehicle and SUVsales down? Yes. Are there still light trucks and SUVs on the road thatneed replacement tires? Yes. And, to be frank, the demand is nevergoing away. As a company, we must continue to provide excellentproducts for all vehicles and applications. When a customer is pleasedwith a product and believes it is a great value, they will buy Toyotires again and again. And when I say value, I don’t mean the verylowest price. I mean exceeding in areas that are important to acustomer – quality, performance, long wear, options when it comes tosize and a reputable company with a consumer relations department readyto answer questions. If you can give all of this at a price thecustomer considers fair, you are delivering great value to thatcustomer. This brings me to the current economic situation. Over thelast 18 months, we as an industry have seen an overall decrease insales. When people are purchasing tires, many are more price-sensitivethan two or three years ago. Fewer people are considering plus sizingor expensive wheel and tire packages. Taking all of this intoconsideration, we recently introduced a new line of products focused ondelivering Toyo tires quality at a price that will likely surprise afew people. From a marketing perspective, our overall approach has notchanged. Every year we work to maximize our budget and evaluate ourefforts. Like consumers, we want the best value for our money. Ourfocus remains on increasing brand and product awareness. We know thisis critical to our success as well as the success of our partners, the independent tire dealers. An integrated marketing approach thatincludes national TV and print advertising, point-of-purchase kits, auser-friendly web site, public relations efforts and a variety of eventsponsorships puts the Toyo name in front of potential customers anddrives business to our dealers.takao oishi, president and ceo of yokohama tire corp.

Yokohama’s Oishi:We’re concentrating on continually moving forward and working throughthese difficult economic times. Obviously there’s a slowdown in theentire industry, and like every other good company, we know that cashpreservation is critical. So we’re reviewing everything we do all overagain. ‘Is it critical today?’ ‘Can we delay it?’ ‘Can we do it whenthe economy comes back?’ We’re practicing the three ‘Rs’ – reuse,reduce and recycle – to stay lean. The key is to remain strong and beready when the recession is over. What’s also been helpful is thatwe’re confident of our products and have a strong customer base. Goodcustomers, good employees and good products drive a good company,especially through tough times.

2)With the changes we have seen in the auto industry and consumer demandfor smaller, more fuel efficient vehicles, how do you see these changesimpacting your company and the industry over the next 10 years?

Bridgestone’s Emkes:The demand for smaller, more fuel-efficient vehicles is being driven bytwo factors: volatile fuel prices and consumers embracing the ‘green’movement. While we can’t control fuel prices, we can and do strive tomanufacture fuel-efficient products in an environmentally-friendly way.Through our ‘One Team, One Planet’ global initiative we’re embracingthis challenge and working every day to improve our processes andsystems while reducing energy consumption in our facilities. We arerefining our procedures and, where possible, we are eliminating wasteand recycling what’s left over. We’re also embracing innovativetechnologies to save energy. In our plants, we are using low energylighting and high efficiency fans. The use of hydrogen fuel cells inour plant’s material movers has enabled us to efficiently movematerials and reduce energy consumption and emissions in ourfacilities. We’re especially proud of our Warren County, Tenn., plant,which earned LEED (Leadership in Energy and Environmental Design)Silver Certification from the U.S. Green Building Council last year.LEED is a recognition of outstanding environmental building design andutilization that is rarely given to existing manufacturing sites. Thisis the first LEED certification for a tire plant in the world. On theproduct side, this year we introduced our low rolling resistanceBridgestone Ecopia tires in North America. We’re also building Ecopiatechnology into some of our more popular Bridgestone brand tire lines,including the Turanza and the Potenza lines. Retreading truck tires isalso an effective way to reduce a tire’s environmental footprint. Wehave made a concentrated effort to reduce, re-use and recycle. Byretreading a tire casing four or five times, we are reducing the needto manufacture new tires. The green movement is here to stay. And we’recommitted to being an environmental leader through the kinds ofproducts we make and how we make them. Consumers demand it. Thegovernment mandates it. Our planet needs it. It’s not simply about goodbusiness; it’s the right thing to do.  
  matthias schoenberg, ceo of continental tire north america
Continental’s Schoenberg:Our ongoing challenge is to build environmentally friendly tires usingsustainable materials and processes. In the coming years, we willcontinue to focus our efforts on engineering tires with lower rollingresistance for improved fuel economy and reduced CO2 emissions. Vehiclemanufacturers and consumers alike are demanding it, and we’ve made someimpressive inroads. With our ExtremeContact line, our engineers havebeen able to combine both performance and lowered rolling resistanceinto the same tire, without compromising either characteristic.However, we will not compromise product attributes such as braking for‘popular’ marketing efforts. Continental will continue to focus inthese areas over the next 10 years, as well as monitor the changingconsumer market and react to changes in that environment.

Cooper’s Armes:Consumer’s needs have always changed over time. To be a successfulcompany you need to adapt to those changes. Cooper has a wide offeringof products that satisfy a variety of consumers needs. We offer afuel-efficient tire, the Cooper GFE, and have the sizes that driversneed. We will continue to develop products that will meet the marketsneeds. As relevant as the increase in smaller, more fuel-efficientvehicles will be the continued increase in the number of differenttires that are offered. This is driven by the use of unique fitmentsand applications used by the OEMs. Dealing with the complexity thisbrings to a tire manufacturer is extremely important. The footprint wehave developed over the last several years provides the opportunity forthe company to take advantage of changing market needs. 
rich kramer, goodyear coo and president of its north american tire unit
Goodyear’s Kramer:Most research shows consumers want smaller, more fuel-efficientvehicles, but they must have vehicles that meet their needs – and thoseneeds will always change. Our relationships with OEMs, combined withour research, allow us to stay ahead of the changing needs of themarket. Timely introductions of products that fulfill the needs ofdrivers make it easier for our retailers to meet those consumer needs.A great example of this is the new Goodyear Assurance Fuel Max – a tirethat helps provide improved fuel efficiency without compromisingperformance. We quickly brought this tire to market when consumersexpressed an interest in saving gas after prices reached $4 per gallonlast summer. Our retail network knows Goodyear will continue todemonstrate flexibility and innovative thinking to meet current andfuture needs.

Hankook’s Pae:Realistically it is still too early to tell what the long-term effectswill be. Our investments in manufacturing technology and capacityexpansion give us very good production flexibility so we will be ableto meet the demand as trends develop. We have been and remain afull-line supplier. With a renewed consumer interest in ‘value,’ Ithink this will lead to even more opportunities for Hankook. Withregards to tire sizing, as OEMs make changes, we’ll be ready to adjustas appropriate but these changes may be one or two more years down theroad for the replacement market.
dick wilkerson, chairman and president of michelin north america
Michelin’s Wilkerson:The current economic crisis has definitely magnified consumer attentionon value for the dollar. Consumers are driving fewer miles, delayingvehicle and tire purchases and shopping hard for good bargains. At thesame time, consumers are not willing to sacrifice safety or long tirelife – they are demanding it all. That consumer need fits perfectlywith Michelin’s emphasis on fuel-efficient tires that deliversignificant savings at the pump without sacrificing the long tire lifeand excellent safety performance that consumers have come to expect.OEMs are recognizing Michelin’s superiority in this arena as well,choosing Michelin Green X tires for a variety of fuel-efficient andhybrid fitments. The pending NHTSA regulation on consumer informationregarding tire fuel economy offers an opportunity to educate consumerson the important role tires play in the overall fuel-efficiency oftheir vehicles. It’s vital that we, as an industry, working with theNHTSA and state regulators, get it right in terms of fuel-efficiencygrading, labeling and standards.

Pirelli’s Pace:Meeting the challenge of shifting market trends is where Pirelli’sabove industry average R&D investment really pays off. We continueto focus on developing tires that make significant improvements invehicle fuel efficiency.  Pirelli just introduced new technology inEurope that lowers rolling resistance and improves mileage in car, SUVand commercial tires. The first tire to incorporate this technology isthe new P7 Cinturato that we believe to be the first green performancetire on the market. This same technology will be incorporated in thenew tire lines soon to be introduced in North America. While fuelefficiency improvements will continue to evolve in the U.S., we do notsee consumers easily sacrificing safety, comfort and interior size byshifting to small size cars.  Popularity of large platform vehicleswill decline, but SUVs are proliferating in scaled-down versions andwill progressively replace traditional sedans. Tire sizes won’t getsmaller, but dimensions will change while overall diameters remainconstant. For example, the185/65R14 will shift to a 195/55R16 or to a205/45R17, and the 185/70R14 will transition to a 205/45R17 and then toa 215/35R19.

Toyo’s Takagi:The changes in vehicles will certainly have an impact on our industryand Toyo as a company. One area that is constantly evolving andinfluenced by the auto manufacturers is wheel and tire size. Whenplanning for new products and growing existing lines we always considerOE sizes for the target vehicles. For several years the trend waslarger OE wheels and tires; we released sizes to meet those replacementneeds. The Yasushi Takagi, president and CEO of Toyo Tire USA Corp.question is: What is next? Will OE sizes remain relativelyflat, topping out at about 19 inches, or will they begin to decrease?Regardless, this will influence the replacement tire market.  In a fewyears, those vehicle owners will need new tires and we must have theright tires for them. We must also consider features when we areplanning for future replacement tires. The movement towards moreeco-friendly, fuel-efficient tires is being led in part by consumers,as well as legislative action. As a result, we will continue to seemore and more tires, both OE and replacement, marketed as such.However, how much weight this truly has on a consumer’s purchasingdecision is still to be seen. How much emphasis will the sports carowner put on this over other features and benefits? Part of our job isto meet this growing demand with safe, quality products. We want todeliver a tire with low rolling resistance as well as high marks inperformance such as braking and wet handling. For example, we wererecently awarded a 17-inch OE fitment on the new Toyota Prius V, whichis their premium model. The Toyo Proxes A20 was selected for its lowrolling resistance as well as handling and ride comfort. Our newExtensa A/S also has improved marks in low rolling resistance overolder products. Our engineers in Japan were recently honored with theAward for Technical Development by the Society of Automotive Engineersof Japan.  Partnering with Honda R&D Co., their work focused on atire tread rubber that reduces rolling resistance and decreases brakingdistance. The technology has now been applied to a tire in Japan. Asthis R&D continues, we will continue to improve and enhance ourproducts sold in the U.S.

Yokohama’s Oishi:Vehicle manufacturers realize the world will not be populated with justmicro cars. Consumers will drive the manufacturers to producefuel-efficient models in all categories of vehicles. We think consumerswill buy the vehicle that’s the right size for them, so we willcontinue to produce tires in a variety of sizes for all types ofvehicles. What’s important for us is not the size of the tire. Instead,we focus on how it’s made and what it’s made of. For example, Yokohamajust launched the dB Super E-spec tire in the U.S. This eco-focusedtire blends orange oil extracted from peels at juicing plants alongwith natural rubber to drastically cut the use of petroleum – withoutcompromising performance. The dB Super E-spec and orange oil technologyare part of Yokohama’s overall company mandate to produce world-classproducts while protecting the environment. Every gallon of gas saved bythe tire means 20 fewer pounds of CO2 released into the atmosphere.This idea of making eco-friendly tires also includes the Zenvironmentline of longer-lasting, fuel-efficient truck tires. So no matter whatOEMs produce – small or large vehicles – Yokohama will havefuel-efficient, low rolling resistance tires ready for them. The key isto make these types of tires perform as good as or better than regulartires.

3) Every majortiremaker has its own “green” initiatives – be it in their products orapproach to society. But what one green avenue do you see as the mostimpactful and sustainable and how is your company tackling that issue?

Bridgestone’s Emkes:By continuously improving our process and systems to eliminate waste,reduce energy usage and increase recycling, we’re making changes thatare sustainable and significantly lessen our impact on the environment.Since 2003, we’ve reduced total waste per ton of product by 34%, whileincreasing waste recycled per ton of product by 25%. This is areduction of 10,000 tons of waste per year. By embracing innovativegreen technologies like hydrogen fuel cells to power our materialmovers we’re reducing consumption and eliminating harmful emissions. Wewill continue to employ new technologies to improve our environmentalfootprint and make our operations more efficient. 

Continental’s Schoenberg:Nearly 20 years ago, we became one of the first tire manufacturers inthe world to launch an environmentally-friendly passenger tirefeaturing special fuel-saving and high-mileage benefits – theContiEcoContact. Continental also has a long-standing relationship withthe European Union REACH program and the World Business Council forSustainable Development, focused on environmental responsibility. Foryears, Continental has been a global-supplier to the auto OEMs thatrequire that rolling resistance and fuel efficiency built into thetires they put on their vehicles at the factory. Now and going forward,we are focused on what we call ‘responsibility,’ which entailsenvironment, fuel efficiency and community. We have implemented anumber of corporate-wide business practices aimed at reducing thiscompany’s carbon footprint by reducing waste and our energy needs. As amanufacturer, Continental will continue to focus on using sustainableraw materials whenever possible, and we are committed to investing inlean manufacturing processes. We support a variety of community effortsand will continue to seek new opportunities. Every employee in thecompany is working toward this goal.

Cooper’s Armes:We have not only developed more fuel-efficient tires, we have alsofocused on ‘greening’ our processes. To that extent Cooper has earnedthe U.S. Department of Energy’s Energy Star Partner designation,distinguishing it as the sole tire manufacturer to merit such an honorand as an industry leader in completing green activities. Having wonthis recognition demonstrates how we approach opportunities like beingenvironmentally friendly. It’s not a single action we have taken, but apart of our everyday actions. As we move forward we will find evenbetter ways to ‘green’ Cooper.

Goodyear’s Kramer:Goodyear has multiple green initiative, from the recycling of fluids inour stores, to the water and energy conservation in our factories, toits leadership role in achieving a ‘zero waste to landfill’ initiativein the area of manufacturing wastes. But what seems to be mostimpactful and sustainable for a tire company is to provide productsthat can help consumers achieve their goal of using less gas. Thispractice is obviously good for the environment, but also beneficial forthe drivers who wish to save money. Goodyear has been promoting propertire maintenance and inflation for years, as a way for motorists toachieve better product performance and to save on fuel costs. Recently,Goodyear has been a leader in commercial truck tires with the extensiveline of Fuel Max truck tires, and earlier this year, we introduced theAssurance Fuel Max line for most passenger cars on the road today. Thisrepresents coverage of about 80% of target automobiles with anaffordable product that consumers really want. This type ofbreakthrough technology is impactful and sustainable, and Goodyear willcontinue to strive for technological advances that deliver relevantbenefits.

Hankook’s Pae: Last year we introduced our Kontrol technology philosophy, whichacknowledges our responsibility to reduce rolling resistance and reduceemissions while respecting and protecting the environment for futuregenerations. Our key initiative in ‘being green’ is to move forward onall fronts that can affect this from materials, to manufacturingprocesses, to distribution and, of course, to the tires themselves.However, we refuse compromise when it comes to safety and performanceas we are developing the technologies and products that are better forthe environment and the economy. With this safeguard in mind, we remainfocused on our core values: providing the highest quality tires to meetconsumer demand for low cost per mile and contributing to fuel economy,and maintaining a supply chain that maximizes the efficiencies of orderprocessing, tire warehousing, shipping and distribution all of whichhelps us and our dealers manage costs and environmental impact.

Michelin’s Wilkerson:Michelin has a stated objective to reduce the impact of our productsand activities on the natural world. That commitment takes many formsfrom the environmental footprint of our ISO14001-certified pl

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