Takao Oishi, president and CEO of Yokohama Tire Corp., recently addressed several tire industry issues, including the skyrocketing costs of raw materials, supply levels, and a recovering economy.
"Like all companies in our industry, 2009 was a rough year, but 2010 was a big improvement for Yokohama overall," he said. "We’re still struggling, though, with issues that are affecting everyone in the industry, such as the escalating costs of raw materials and fill rate problems."
After production cuts due to reduced demand in 2009, last year’s sudden increase in demand cause fill rate issues for Yokohama and other tiremakers. Oishi said to alleviate this problem, YTC is pushing its parent company and its Salem plant to “increase production as much as possible and as quickly as possible.” The company has invested $13 million to expand production at the Salem plant, as well as investing in plants in Thailand and the Philippines to increase production and help bolster supply in the U.S.
“2011 will be slightly stronger than 2010, but all tire manufacturers will face the same problem on supply, as well as the rising costs of raw materials,” according to Oishi. “Remember, the industry really suffered economically in 2008 and 2009. Most companies didn’t invest largely in their factories. Production was cut dramatically. Now that the economy is turning around, all of us are doing our best to catch up quickly. How fast anyone does this will be key to their success.”
Addressing the issue of rising raw materials costs, he said, “It’s a major challenge because you can’t prevent it. This makes it tough on everyone, especially the tiremakers. As a manufacturer, you have to be very sensitive to the raw material price fluctuations. When raw material prices go down, we can earn money. When they go up, we can’t. We are forced to adopt price increases but the rates they take on never fully offset the increase in raw materials. That’s why we have to be an efficiently-run company. We’re looking at every angle on how to optimize operations.”
While Oishi voiced optimism about the industry in 2011, he said external factors still create added challenges. These include is the currency exchange rate and the continued weakening of the U.S. dollar; and the forecasted decrease in the U.S. GDP, making it tough for tiremakers to increase their market share further.
Other trends include a growing commercial tire segment that is becoming more “environmentally- aware.”
“Our research indicates the commercial segment is growing a little faster than the consumer segment at this time,” Oishi said. “There are more commercial trucks on the road carrying more goods – a very good sign for the economy indeed and the commercial tire market.
“Additionally, the commercial segment is becoming more environmentally-aware with initiatives such as the EPA’s SmartWay program. This opens new opportunities as an ever-increasing number of fleets require SmartWay-verified tires that are fuel efficient and last longer.”
