Kumho vows to clear up financial mess, focus on dealer profitability

ERJ staff report (TB)

By Sigmund J. Mikolajczyk, Tire Business staff

Palm Desert, California - It was the proverbial “elephant in the room,” and the head of Kumho Tire Co. Ltd. made quick work of dispelling any lingering concerns the company's customers might have about its financial stability going forward.

Addressing the tyre maker's dealers at the annual meeting of Kumho Tire U.S.A. Inc., held at a rain-drenched resort in Palm Desert, J.H. Kim, president and CEO of South Korea-based parent Kumho Tire Co. admitted “we have experienced some very unprecedented challenges” and the new year “will no doubt bring other problems and issues to be dealt with.” He was alluding to recent news of Kumho Asianic Group's financial struggles, which led to a work-out plan with the South Korean government.

“I want to make one thing very clear,” Mr. Kim told dealers. “Kumho is here to stay.” The company has produced a workable plan to address its problems-which did not affect the operation of its Rancho Cucamonga, Calif.-based Kumho Tire U.S.A. unit-and that plan “does not involve courts or government handouts,” he said. It is being enacted “without any detriment to our customers. We have sufficient supplies for all our customers.”

Mr. Kim noted that Kumho is, in fact, operating at optimal level-practically 100-percent production capacity-“to have adequate product for all our business partners.”

Several executives of Kumho's US operation told Tire Business that Mr. Kim's very presence at the dealer meeting is a testament to his increased hands-on involvement in the company as it emerges from its financial setback as well as his vote of confidence in the US unit.

Armand Allaire, as the new man on the block for Kumho Tire U.S.A.-he recently hired on as national vice president of sales after an executive stint at Toyo Tires USA-told customers at the meeting, “I have a responsibility for your results.” Noting a “near-perfect storm” that began for the company last year, he cited a strike by Kumho tyre plant workers in Korea, Kumho Asianic's financial difficulties, and tariffs enacted by President Obama on Chinese-made passenger and light truck tyres as reasons that made 2009 a very tough year for the company. “Yet we delivered well over 8 million units into the US to our customers,” he added.

In response to the tyre tariffs, he said Kumho has been moving moulds to its plants outside China, especially to its relatively new factory in Vietnam. But he also reminded customers that “Kumho carries the bulk of that tariff. We did not pass it on to you.”

Responding to the parent firm's financial difficulties, Mr. Allaire said Kumho Tire has “taken appropriate, proper and ethical” measures and “no one has been left holding the bag-if they're owed money, they got paid.

“All our supply pipelines are intact” and, he said, “…we're healthy, we have made changes and are moving forward.”

While vowing an open-door policy for customers-“any time you have any questions, feel free to ask me”-Mr. Allaire, who has sold tyres in the retail, commercial and off-road arenas, said several times that his personal philosophy is to “under-promise but over-deliver. But…I will exceed expectations. I don't settle for less.”

Going point by point over what Kumho hopes to accomplish in 2010, Mr. Allaire said the company will standardise its business programs and actions for its management team and the Kumho brand, and will continue to focus not only on its own but on its customers' profitability, as well. He also professed improvements to the management of the firm's supply chain and logistics system, telling dealers the tyre maker will “provide increased value to your business by establishing a 'Kumho Kulture.'

“We will provide you with all the benefits that will make you successful, but that will take a change of culture and will take time.”

As Kumho marks the 50th anniversary of its founding in South Korea in 1960, Rick Brennan, vice president of marketing for Kumho Tire U.S.A., called it the “youngest tyre company in the world's top 10. We may be the youngest but not the least capable…. We build a tyre as good as anybody and in some cases better.”

Pronouncing the industry's trend toward selling “bling” tyres-exotic sizes to fit a wide variety of vehicles from small cars to Hummers-over, or at least in a deep state of hibernation, Mr. Brennan urged dealers to focus on the replacements for OE tyres, which is where the market has headed. The economic recession has taken its toll on the bling fitments, he said, as customers without unlimited capital struggle to keep the basics on their vehicles and are searching for low-cost tyres.

As an economic recovery takes shape, “the good news is things will be pretty bright for the tyre industry” over the next few years, he said, but since it's working from a deficit position, the “tyre industry will recover-but slowly.”

Mr. Brennan told dealers that “for us to change the things we need to change within our company, we need to change some things with you. To be better is our mission for 2010.”

Consumers today are more open to eco-friendly products, he noted, and that can create an opening for Kumho, which is rolling out several “green” tyres that promise better rolling resistance and fuel economy for drivers looking for better gas mileage.

On that front, several new passenger, light truck and medium commercial tyres were unveiled at the dealer meeting. Those included the eco SOLUS KL21 all-season tyre for CUVs, SUVs and minivans; the eco SOLUS HM, a premium high-mileage “environmentally responsible” tyre called “the first in a family of passenger and light truck tyres that are formulated to be less impactful on the environment while delivering exceptional performance” with a 100,000-mile treadwear warranty; and the ecowing KH30, a high-performance all-season tyre available in H and V speed ratings.

In a separate interview with Tire Business that addressed a number of topics, Kenneth K. Lee, coordinator of sales for Kumho Tire U.S.A., said construction of a tyre plant in Georgia, which was put on hold a year ago, is still pending. A contract with the local government calls for the plant to be up and running by 2013 and Kumho fully intends to meet that deadline. Mr. Brennan added that since the company supplies tyres to Hyundai Motor Co., which operates a car plant in the South, many of the tyres that eventually will be made at Kumho's Georgia plant will be destined for Hyundai.

To contact Tire Business Managing Editor Sigmund J. Mikolajczyk: smikolajczyk@crain.com; 330-865-6130.

From Tire Business (A Crain publication)