Cooper expects near $450M sales from China projects

By Namrita Chow

CHENGSHAN, China-Cooper Tire & Rubber Co. has two distinct business strategies in place in China-building tyres for export and building a presence in China-and both appear to be playing out as planned, the firm's top executive in China said recently.

Cooper's activities in China-domestic China sales in 2007 were more than $400 million and Cooper exports a significant number of tyres-are expected to grow as much as 30 percent this year, according to Allen Tsaur, vice president and general manager, Asian Operations for Cooper Tire.

“I speak Chinese and have lived in the (U.S.) for 20 years,” Tsaur said, noting he believes the key to being successful in China is the ability to understand techniques and methods in North America coupled with understanding the market in China, the workers' mindset and the way joint venture partners think.

A native of Taiwan, Tsaur joined Cooper in January 2007 after several years with Eastman Kodak Co.'s Asian operations.

He was promoted to his current position in early December, replacing the retiring Ron Shield. Prior to that he was general manager of China operations.

Liak Sze Koi has succeeded Tsaur as general manager.

Cooper has two production sites in China, both joint ventures, although it has operational control of Cooper Chengshan (Shandong) Tire Co. Ltd. in Rongcheng City, China, which makes passenger and truck tyres for both domestic and export markets.

The truck tyre plant, Cooper's only captive truck tyre capacity worldwide, began shipping Roadmaster truck tyres to North America early in 2007 and launched in June 2007 a Dean-brand truck tyre designed exclusively with the Chinese trucker in mind. That customer tends to overload the vehicle and drives slowly on imperfect roads.

The plant, in a suburb of Wehei City, Shandong Province, also exports tyres to the Middle East, Africa and South America. The annual output is 250,000 metric tons of finished product, the company said.

Cooper's second venture, Cooper Kenda Tire (Kunshan) Co. Ltd., is a 50-50 partnership with Taiwan's Kenda Rubber Industrial Co.

Located on a greenfield site in Kunshan a couple of hours by road from Shanghai, the facility is a dedicated passenger car tyre export manufacturing base. Construction on the 1.2 million-sq.-ft. plant is complete. The plant has an annual capacity of more than 5 million passenger tyres, Tsaur said.

“It's rolling. It will keep expanding for years. In fact, every week you can see the surge increase in productivity,” he said.

Shipments from the Kunshan plant began in October 2007. By mid-2008, the plant will be operating at a pace equal to 3 million passenger tyres a year, he said.

The Kunshan plant is dedicated to supplying North America and Europe for its first five years. After that, the plant will begin supplying the domestic market as well, he added.

To sell in China's domestic market is a completely different ball game than North America, Tsaur said.

In North America, national distributors and/or key dealers can supply a large portion of the market. In China there is no distributor that covers the length and breadth of China, he said.

At most, there are 10 key distributors in China covering 20 percent of the country.

In February 2007 Cooper began its Cooper Retail Program. Five hundred Cooper network stores have been opened since, primarily in what Tsaur called “Tier 2” cities because that's where the growth is.

Cooper network stores are not franchises. Instead, they are considered “signage” stores-a designation that means the retail outlets follow certain service standards.

The Cooper retail network consists of three types of stores: Cooper Performance Center; Cooper Replacement Center; and Cooper Corner.

All three carry the same Cooper signage.

In 2007, Cooper Tire's sales in China grew by more than 30 percent.

“We are ahead of the market, very exciting,” Tsaur said.

In 2008, the company is expected to grow another 30 percent in China.

“Cooper knows what it takes to succeed. (We've) got to have a sizable business to succeed. Market is big, so better be big,” he said.

“Even though the market is growing rapidly, Cooper remains focussed on what it can do best, truck tyres, UHP tyres and 4x4 tyres,” Tsaur added.

Cooper Tire's name in Chinese is Gu Bo, which means “solid platinum”-a name Cooper expects will reflect the company's stance in China.

From Tire Business (A Crain publication)