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Moving In All Directions: Hankook Expands Presence to Improve Global Positioning

Hankook Expands Presence to Improve Global Positioning

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When you size up Hankook Tire Co., you have to look beyond to the global positioning of this company in order to get a true snap shot of where it is headed.

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Back in March 2007, Hankook celebrated its 100 millionth tire to roll off the production line, which occurred in the company’s Jiaxing factory in Jiangsu Province, China. It was not only an important milestone for Hankook’s global progress, but it also spotlighted the rapid development of China’s tire industry as a whole, and Hankook’s growth within that market.

The industrial ranking of Hankook in the world market is also on the move, up from 11th in 2001 to the seventh slot at present. The company’s goal is to be the fifth largest tiremaker worldwide by 2010. How does Hankook intend to accomplish this challenge? By establishing global management systems, ensuring a higher level of customer service and product quality, and upgrading its organizational flow and human resources management to achieve world-recognized standards, it says.

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With those routes to further success in mind, Hankook is targeting global sales of about $3.6 billion in 2007. During a recent media event in Seoul, South Korea, Hankook executives discussed a number of issues that succinctly define the company’s progress in this direction.

China and Beyond
Hankook regards China as one of the most important markets in its global strategy, such that the tiremaker attaches great importance to the investment and development in that market.

Statistics show that Hankook has supplied radial tires to almost all well-known domestic auto manufacturers in China since 2002, capturing nearly a 30% share of the OE market. The company supplied three million passenger car tires in 2006, as opposed to one million units in 2004. At present, Hankook has the highest marketshare among Chinese domestic OEMs.

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“Hankook Tire has experienced rapid growth; we have recently celebrated the 100 millionth tire off the production line and have sustained the top position in China’s market,” says S.H. John Suh, president and CEO of Hankook Tire Co. “This has helped Hankook to build a solid foundation for ranking the seventh in the global market, and to lay down a solid foundation for the further high speed growth in the China market.”

Hankook established two factories in China, one in Jiaxing, Zhejiang Province and the other in Jiangsu Province. With a combined annual capacity of 28 million units, both factories play an important role in Hankook’s global markets.

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“The production capacity of China’s factories make up around 40% of Hankook Tire’s global production volume, and more than half the products made by the China factories are sold to overseas markets,” Suh says. “From these figures, you can see the strategic importance of China’s factories in Hankook Tire’s global market.”

Hankook has built an R&D center in the Jiaxing factory, one of its five global R&D centers, and is taking increasing R&D responsibilities over products and new technologies for China and beyond.
The China Technical Center, established in 1998 and expanded in 2006, currently is comprised of 110 researchers and over 70 pieces of high-tech equipment. Hankook is currently planning to build a 3 million-square-meter proving ground for the R&D center. Once complete, the site will be responsible for a growing number of domestic and international research assignments.

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“With sustained efforts in production capacity, R&D and marketing, Hankook Tire’s goals for 2007 are to seize more than 25% of China’s total market for car tires, build a large-scale distribution network covering the whole country, and provide large quantities of tires for use on luxury cars manufactured both at home and abroad,” says Hankook China President Jin-Wook Choi, formerly president of Hankook Tire America Corp. “It is hoped that through the realization of these goals in 2007, Hankook will ultimately become Chinese consumers’ favorite tire brand.”

T-Station Expansion
Part of that goal includes bringing Hankook’s “global premium brand image store,” T-Station, into China. The direct-invested aftermarket service shop that opened in Shanghai in April 2007 marks the first T-Station built outside of South Korea, and is the first of 300 T-Stations that will be constructed in China within five years, the company says. The second was a franchised location built in Ha’erbin in August 2007.

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The shops are dedicated to tire and related services in a one-stop-shop format. All Hankook T-Station shops are equipped with advanced management concepts and unified pricing, which provide high quality services to consumers.

Relying on extensive services and multiple profit points, T-Stations have been a great success in South Korea, Hankook says, since the first one opened in 2004. T-Station offers fast maintenance services and sells a range of automotive products. Hankook considers the locations to be comprehensive retail aftermarket shops, and not just for tire sales and service.

“Our decision to establish the first T-Station franchised center in Ha’erbin is a start to further develop China’s provincial area markets,” Choi says. “With the brand image of Hankook, we will further stretch our overall plan in China with an integrated business model of franchise and direct sale, bringing Hankook’s all-dimensional service into China’s inland areas as well as coastal cities.”

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Hankook has set up unified standards from franchisee selection to equipment investment and management of franchised stores, which are strictly carried out to ensure the quality services.

Ultra-High Performance
Another aspect in Hankook’s quest for better global positioning is expanding its UHP product line. The latest of the tiremaker’s offerings, which debuted at this year’s SEMA Show in Las Vegas, include the Ventus V12 evo K110 for high-end modified cars and the Ventus S1 evo K107, which adopts Hankook’s “run-on-flat” technology. The company will also launch several models of high-performance tires in 2008.

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K110 is suitable for high-end tuning vehicles, its target group being active and trendy tuners, it says. The linear and Y-shaped pattern design provides superior control and cornering performance in high-speed running, while four grooves effectively channel water away from the tire, Hankook says.

The K107 adopts advanced run-on-flat technology, and provides even ground contact and stable cornering performance. A 3D linear groove pattern enables the tire to provide control on wet roads and  solid braking performance on any road. In addition, the high grip silica compound has a fuel-conservation effect, the company says. It is a tire that Hankook attaches great importance to in promoting in the high-end replacement market.

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“Hankook Tire plans to gradually increase UHP tire sales volumes,” Suh says, adding that the company intends to establish a name for itself as a premium brand in China through several channels, including advertising, developing a retailer network and adjusting production structures in its factories.

Part of Hankook’s strategy also includes OE supply deals with premium automakers. Hankook presently supplies tires to more than 30 manufacturers in China, including such foreign giants as Ford and Volkswagen plus a number of domestic manufacturers. However, it especially has its eye on securing further contracts with manufacturers of so-called prestige cars, such as the deal that took place this year naming Hankook to supply OE tires for the Audi A6L and A4.

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Bringing its products closer to high-end automakers was one of the reasons Hankook built a 500 million euro tire plant in Hungary. The plant, which opened this past June, will help it meet demand from its European customer base and continue to establish the company as a truly global manufacturer.

“Being the tire supplier for famous auto manufacturers can positively influence customers,” says Suh. “Our ultimate goal is to make OE customers replacement market customers; the OE supplier market will boost the retail market’s development.”

Future Trends
In order to keep up with global trends, Hankook welcomes the next decade as an opportunity to increase its annual global sales by 9.4% through increased sales of high-end tires and stabilization of the price of rubber.

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The company will continue to invest 5% of its revenue in R&D at centers located in South Korea, China, Germany, Japan and the U.S.

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