One-On-One With The New Dunlop (Apollo) - Tire Review Magazine

One-On-One With The New Dunlop (Apollo)

(Douglasdale, South Africa/S.A. Treads) Speculation surrounding the 100% acquisition of Dunlop Tyres SA by Indian-based Apollo Tyres continues to circulate. What prompted this important development and how will it change the face of this popular South African tyre manufacturer and its loyal dealer network?

Clearly, there were questions that demanded answers. Once the official deal was concluded on April 27, we were at liberty to pursue an exclusive interview with the powers-that-be, so we flew down to Dunlop’s headquarters in Durban where we met with CE Mike Hankinson, MD Pierre Dreyer and Joint Managing Director and CEO of Apollo, Neeraj Kanwar.

The marketplace is agog with the news of Dunlop’s recent purchase by Apollo. Neeraj, perhaps you could start us off by outlining your long-term global vision and strategy and explaining how this acquisition fits in with Apollo’s global vision?

(NK) Apollo’s global vision is to become a $2 billion company by the year 2010. We are aiming to achieve this by identifying and capitalizing on manufacturing and marketing opportunities throughout the world. We are also in the process of securing distribution networks across the world to showcase current and future products.

In the long-term, our strategy is to become a key technology provider to our customers and become entirely self-reliant in terms of technology. Our acquisition of Dunlop SA falls well in line with our vision to extend our presence beyond the Indian market and become a global player.

Dunlop was considered a good fit for us. The Indian and South African markets are extremely active and dynamic and both parties are looking to collaborate on technology, research and development. More importantly perhaps, we are looking to pool and combine our skills and expertise to the long-term benefits of both companies. Once the unique synergies between our respective companies have been identified, we will come up with a global research and development plan that will focus on providing our customers with the best possible product.

(MH) Added to that, both companies share a similar culture, modus operandi and decision making model and this is critically important to the mix.

(NK) Apollo officially acquired Dunlop on April 27 and what has been surprising to see in this short space of time are the number of dialogues and negotiations that have already struck up between our respective people. Key personnel are in discussions over technology, marketing and other aspects of the business, with no prompting from us. This demonstrates the synergies in our cultures, which we believe will add and enhance the whole Apollo Group, Dunlop included.

(MH) And while there is informal interaction taking place between our respective parties which is greatly encouraged, we also have a formal programme in place to facilitate uniformity and understanding of processes and to ensure mutual advantages are capitalized upon.

How will this venture affect Dunlop’s autonomy? Traditionally, Dunlop’s ability to make quick decisions and react speedily to market trends and dynamics was perceived as a particular strength. Is this likely to change?

(NK) Dunlop SA will continue to operate as an independent entity, run by Mike and Pierre who will remain responsible for all decision-making. Apollo will play no role in this – we are not looking to take over the day-to-day running of the business. If anything, we believe our partnership will see both companies becoming even more dynamic as we forge our collective mark on the global arena.

What about the Dunlop name – will it continue?

(MH) Of course. We would not contemplate discarding a name that is so important in the marketplace.

Was this venture a way for Dunlop to address globalization needs?

(PD) Indeed. Before this venture we were a little isolated, particularly as we required certain services and levels of expertise that our commercial banking partners were not able to provide. We now believe we have greater depth in our people, coupled with enormous talent and potential.

If we may direct the attention to you Mike and Pierre for a moment – why Apollo?

(MH) For one, as I mentioned earlier, even though we are located on different continents, the cultures of the two companies are very similar.

(PD) For some time we had been concerned over the suitable replacement of Ethos Commercial Bank – our dominant shareholders. We arrived at the decision that we would prefer to tie up with like-minded people. People that understand the tyre business, its problems and opportunities. Apollo fits that profile.

Mike and I have been interfacing with several international tyre makers who displayed suitable interest in becoming involved with us. Had we hooked up with one of the top five or even 10 manufacturers, much of our global niche profit opportunities we developed and initiated over the years would evaporate, as would many of the brands, associated with these initiatives.

Apart from sharing the same entrepreneurial culture, i.e. no rules, let’s be innovative and pursue global opportunities together, a tie up with Apollo would ensure the preservation of our unique international opportunities and the continuance and furtherance of many of our entrepreneurial activities.

What about your respective roles within Dunlop, Mike and Pierre? Will you continue in your current positions? What about succession planning? Is the intention to introduce Apollo personnel to key positions?

(MH) All senior managers have committed and signed to stay on into the future.

As to the second part of your question – to accurately predict who will be running Dunlop five or 10 years from now is a little more difficult. This is equally true of our competitors in the market. Nobody knows! The world is becoming a smaller place with people constantly moving across borders.

All we can say is that we will find the best people for the job and in all likelihood, they will be South Africans. The advantages of appointing local people that are familiar with the marketplace and business ethos of the country to key positions cannot be disputed.

(NK) Again let me stress that our aim as Apollo is to add value to the customer. With this in mind, we will remain committed to looking at the interests of this business as a stand-alone entity.

Neeraj, could we touch on Apollo’s connection to Michelin?

(NK) In 2003, Apollo and Michelin discussed the possibility of a joint venture to produce truck tyre radials in India. Our prediction was that the truck radial market would grow by an estimated 10% by 2005, which as it turned out, was optimistic. Only 1 to 2% of the Indian truck tyre market is radialised. Due to this, both boards thought it best to call off the joint venture and deploy resources into respective priority areas. As of now Michelin continues to hold a 14.9% equity stake in Apollo, without any other implications.

Is that likely to continue?

(NK) That remains their option.

Given what has transpired, is the intention for Apollo to benefit from Dunlop’s radialisation success?

(NK) Most definitely. One of the key strengths of the acquisition was Dunlop’s proven radial product range. We are still striving to mature to this level in India, the intention being that we will ultimately manufacture the same products in India. Added to that, Dunlop boasts a huge range of OTR tyres. Due to a global shortage there is an enormous demand for these tyres, so this was yet another major strength we identified within Dunlop.

(MH) That said Apollo also has a huge stable of products in India that could be introduced into South Africa and other countries. The intellectual ability within Apollo by way of qualified engineers, people with doctorates and so on, is vast in comparison. The same can be said for its technical support base. In short, this is not a one-way traffic scenario. There are benefits to be had for both parties.

We were under the impression Apollo only manufactured tyres for the cross-ply market?

(NK) Not at all. Apollo was the first Indian tyre company to introduce radial tyres to the market and now manufactures a wide range of radial passenger tyres – up to 18-inch together with a range of SUV tyres which would ably supplement Dunlop’s existing product range in South Africa.

The perception that we only manufacture cross-ply tyres could originate from the fact that 70% of the Indian tyre market is commercial. Of this only about 2% (bus and tourist sector) is radialised.

Last year Apollo began investing in truck radial and we should see radial truck tyre production at our plant coming to fruition by 2007. In the meantime, both technology teams in India and South Africa are working on developing a suitable truck radial for the Indian market. Currently Apollo manufactures plus, minus 8,000 passenger radial, LDV radial and SUV tyres per day.

Staying with cross-ply tyres for a moment, are you looking to explore opportunities that may exist to move Apollo product into the rest of Africa?

(PD) Some opportunities have already been identified and our export teams are working with Apollo on this as we speak. Countries such as Kenya, Egypt and the Sudan are in reasonably close proximity to India, so the opportunity to add a suite of products to those countries without incurring additional costs certainly exists.

From where will the two companies source their technology?

(PD) We have been very fortunate to have some of the industry’s best independent specialists from both Europe and the U.S., assist us in our technology development requirements. As a company we are looking to be independent and self-sufficient in our R&D capabilities and these individuals have been of enormous value. We currently have a dedicated FEA cell, have ties ups with the Leipzig Institute of Polymer Sciences, with tyre testing facilities in the U.K. and the U.S. and collaborations with the best Indian institutes on design, product development and research initiatives.

Keep in mind Dunlop is fortunate to have a wealth of qualified people in South Africa. What Dunlop and Apollo needed was access to top end technology and innovation and we are most excited to have achieved this.

The next step is to set up Centres of Excellence throughout the world – a passenger tyre facility in India and an international truck and earthmover facility in Durban.

What benefits do you see for your DAD network?

(PD) In pursuit of our business goals, we have made a conscious effort to develop products and services that appeal to independently owned tyre business. We will continue to serve and assist our growing dealer base (DADs) across South Africa any way we can. Our tie up to Apollo can only enhance their businesses further.

How will the acquisition affect current export markets – if at all?

(MH) The acquisition will not affect current export markets at all – other than the possible increase in business due to our ability to now offer Apollo products to interested customers.

What of your affiliation with Cooper Tires? Will you continue to import Cooper product into SA?

(MH) We will continue to import tyres from Cooper – they are very comfortable with the Apollo transaction.

Lastly gentlemen, what advantages can consumers hope to derive from your new venture?

(PD) Access to new technology will enable us to make better products. Our brand new silica compound for the high performance sector – 16-, 17- and 18-inch – will soon be released. The introduction of silica in truck and earthmover tyres for better rolling resistance, greater resistance to cutting and chipping, improved mileage and a more environmentally friendly tyre, is a Dunlop initiative begun three years ago and will continue into the future.

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