By Miles Moore, Crain ERJ staff (R&PN)
Fullerton, California -- The massive earthquake, ensuing tsunami and worst nuclear disaster since Chernobyl that hit Japan in March didn't spare Yokohama Rubber Co. Ltd. But all in all, it could have been worse for the Japanese tyre and rubber company.
Actually, Yokohama is going strong worldwide despite the unprecedented natural disaster at home, according to Dan King, senior vice president of sales and marketing for Yokohama Tire Corp., the firm's US arm.
â€œWe've been very lucky,â€ King said. â€œWe lost some operations internal to Japan, but all our plants are up and running.â€
Because Japan's infrastructure isn't functioning normally, there are some issues with raw material supplies, especially steel cord, he said. Shipments of certain tyres from Japan, particularly commercial tyres, have been curtailed.
The earthquake damaged Yokohama's test facilities, but they are back in operation, King said.
A hose and sealing products plant in Ibaraki prefecture sustained damage and initially was closed, and operations at five other facilities were suspended for a time.
â€œIt's been devastating to the country and the people of Japan,â€ King said. â€œBut it's been great to see the outpouring of concern and sympathy from the people in the USâ€
Orders for Yokohama tyres are brisk in both the original equipment and replacement markets, in turn putting pressure on fill rates, King said.
â€œOur demand is really strong, and we appreciate that,â€ he said. â€œWe think there will be fill-rate issues throughout 2011 and possibly 2012 because of strong OE demand-in the US alone it's up 12 percent over last year.â€
On the other hand, Yokohama is working hard around the world to eliminate fill-rate problems, according to King. The company will complete the expansion at its Salem, Va., facility in September, and capacity increases at factories in other countries are in place now, he said, although a new plant in the Philippines won't be ready until 2013.
Yokohama is committed to manufacturing tyres in the US, according to King.
â€œWe've had a lot of success with our US factory,â€ he said. â€œIt's close to the market and cost-effective.â€
While labor costs in the US remain much higher than most other places in the world, global increases in transportation costs balance that out, according to King.
â€œWe like the idea of more US manufacturing because of the efficiency,â€ he said. â€œWe will be evaluating the possibility of more production in the US in the future.â€
As with every other tyre manufacturer, Yokohama finds the price and supply of raw materials a problem worldwide.
â€œThere's some controversy as to how 2011 will play out,â€ King said. â€œMany people are projecting a rise in prices through 2011. If we see a plateau this year, it will be just that-a leveling off, not a decrease.â€
Raw materials are scarce now, with demand increasing from China, India, Brazil and other rapidly developing countries, he said.
â€œIt's a major concern,â€ he said. â€œAs we manufacture in the US, we are trying to minimise the effects. I've been with Yokohama more than 22 years, and these are the strongest price increases I've ever seen.â€
Yokohama hasn't been able to pass on the increased prices of raw materials to customers, though soon it will be forced to do so if prices continue to rise, according to King. The company is trying to work with its dealers to mitigate the effects of price increases when they happen.
â€œMany consumers don't want to hear this, but they're getting a tremendous value for what the tyre industry provides,â€ he said. â€œThere's quite a lot of engineering that goes into a tyre. It's one of the most important parts of a car, if not the most important.
â€œBut the economy is still in a transitional position,â€ he said. â€œI don't know where it's going in the US, though there are some good signs.â€
Yokohama also is enthusiastic about its continuing research and development into eco-friendly tyres, according to King. The company pioneered the use of orange oil as a replacement for petroleum in mass-market tyres, he said, and it is committed to advancing that technology.
â€œWe've come out with unique, class-leading eco-tyres, and we're really excited about the next level,â€ King said. Yokohama's new eco-tyre will make its debut late this year or early next.
One thing Yokohama isn't doing, however, is making a wholesale adjustment of the tyre sizes it offers, according to King.
â€œSome sizes are in more demand than others, and we are trying to maximise our production where our customers feel the need the most,â€ he said. â€œBut we're not cutting any sizes or lines.â€
Even with the downsizing of vehicles for fuel economy, the market is still trending toward larger-diameter tyres, according to King.
â€œWe're seeing 16-inch tyres on compact cars and 17-inch on midsize vehicles, so actual diameter is still high,â€ he said. â€œWe're projecting strong growth in 16-, 17-, 18- and even 19-inch tyres, far above 14- and 15-inch.â€
From Rubber & Plastics News (A Crain publication)