Hankook promises US dealers: Supply will get better

By Sigmund J. Mikolajczyk

Paradise Island, Bahamas -- Dealers attending Hankook Tire America Corp.'s annual meeting were told their supply concerns will improve.

It To help quell the ongoing supply controversy, a slide put up on a screen boasted: “Stock levels and fill rates will get better!”

Hankook President Greg Pae told about 75 dealers-representing the Wayne, New Jersey-based tyre marketer's retail, commercial and wholesale customers -- that the company is coming off a “challenging” but record-setting year, yet a disappointing one in that “we were not able to meet your needs.” Hankook's 2007 US sales topped $751 million, an increase of 9.5 percent over the previous year.

Expressing his “gratitude and congratulations” to dealers for their part in driving the company's sales to new heights, Pae promised that “Hankook will invest like never before” in areas including manufacturing, proprietary technologies and the development of new sizes and products. He predicted that with Hankook Tire Co. Ltd.'s newest factory, near Dunajvaros, Hungary, online and slated to produce 5 million units this year, Hankook's global output is expected to exceed 73 million tyres this year-two years ahead of schedule.

That was good news to dealers, many of whom left last year's dealer meeting griping that they didn't have adequate supply. Hankook has been struggling to keep up with increased demand and the numbers of tyres the company is cranking out continues to grow, according to Bill Finn, senior vice president.

Meanwhile, the tyre maker is scouting locations for a sixth plant, though no timetable was given for that project.

Supply was such a top-of-mind topic at this year's meeting, held at Cove Atlantis resort on Paradise Island, that Hankook executives began the gathering where the 2007 meeting in Rancho Mirage, California, ended: By addressing what the company is doing to quench that thirst for more tyres. Last year, at a tough question-and-answer session, they got an earful of complaints about distribution and supply.

In part to give dealers more of a voice in how the tyre maker meets their needs, Hankook officials said the company is establishing a dealer council. After answering a number of questions from the audience, Bill Bainbridge, director of brand communications, noted that the many unanswered questions from dealers would be the focus of the council's first meeting, which is expected to take place in time for the “spring selling season.”

Mr. Finn also said the company is opening up more distribution points to increase service to dealers. Dan Wheeler, director of dealer programs, announced that Hankook is adding a 200,000-sq.-ft (18 600 m²). distribution centre in Chicago that will pump up the firm's total US warehouse space to 1.5 million square feet (140 000 m²).

To answer dealers' concerns that Hankook's growing presence in original equipment (OE) fitments must be cutting into its ability to provide them with the products they need, Mr. Finn called OE “a blessing and a curse.” Mr. Pae said the company will maintain an OE ratio of 25 percent to supply, pointing out surveys have shown that a majority of consumers typically prefer to replace their vehicles' OE tyres with what came on them.

Wheeler reassured dealers that, as Pae said, “We need a balance, but we will not, with our OE business, sacrifice our replacement business.”

That was good news to Alpio Barbara, president of Redwood General Tire in Redwood City, California. He said what pleases him most about doing business with Hankook is “their product is exceptional. It's a great product. They've tried to get us what we need, but have had some logistics problems they're trying to solve.

“I'm proud of their product.”

His one-outlet dealership, which is celebrating its 50th anniversary this year, had its best year ever in 2007, posting about $10 million in sales. Though it carries all major brands, Mr. Barbara said Redwood General Tire has been promoting Hankook every chance it gets to its customers, including donating Hankook tyres as prizes to a variety of events. And consumers' interest level in the brand has continued to grow, he added.

From Tire Business (A Crain publication)