Interview: Yokohama official details plans in US

Santa Ana, California — The share of Yokohama Tire Corp.’s tires for sale in North America that are sourced from offshore is rising, but that likely will shift back once the firm begins truck and bus tire production at the factory under construction in Mississippi.

A little more than half of the tires currently are produced domestically, from its plant in Salem, Virginia., along with its share of the GTY Tire Co. joint venture it shares with Continental Tires the Americas LLC in Mount Vernon, Ill., said Jeremy Kahrs, senior director of supply chain, logistics and corporate planning for Yokohama Corp. of North America.

The foreign tires shipped for sale in North America come from different plants in Japan, the Philippines, Thailand and even a small quantity from Vietnam. The uptick in foreign sourcing mainly is because a large percentage of tires from the Philippines facility are shipped into the US.

“We made a large investment in the Philippines a couple of years ago and have an ongoing expansion there, so the Philippines plant is on the path from ramping up from 7 million units a year a couple of years ago and will eventually be 17 million,” he said.

But Yokohama expects to begin making tires at its West Point, Mississippi, plant later this year, so the pendulum should start going back toward domestic output, Kahrs said. The first phase is for truck/bus production, but he added that Yokohama has said all along that it intends to have multiple future phases that could bring more commercial output and possibly consumer tire manufacturing, depending on market needs.

“We have to look at global growth because our factories supply Yokohama globally,” Kahrs said. “In order to coordinate that global capacity and decide where to invest in additional capacity, that requires global coordination.”

For 2014, North America accounted for $535.6 million (€487.61 million) of Yokohama Rubber Co. Ltd’s $5.91 billion in sales, according to the parent company’s annual report.

Impact of China tariffs

Kahrs said there are two trains of thought when it comes to what likely will be another round of tariffs on consumer tires imported from China. Some firms learned they can’t be so dependent on low-cost supply from China, so they have beefed up capacity in other low-cost manufacturing countries.

“So there’s an expectation that while there will be an impact, maybe it’s not as significant as prior years,” he said.

Yokohama officials believe the firm is in a good position to take advantage of an opportunity. “We have our production in Virginia, in which we do produce some products that would compete with those imports,” Kahrs said.

“There is a short lead time to get those to market if there is any disruption in supply.”

In addition, a lot of the added capacity in the Philippines is shipped to the US, and the duties from there, he said, are relatively low.

OE accounts update

Before moving to the California headquarters, Kahrs was in charge of Yokohama’s original equipment office in Detroit for about five years. He said the company historically was capacity limited, so the OE sales team was limited in how aggressive they could be in chasing OE fitments.

But with more product arriving from the Philippines and the upcoming plant in Mississippi, Yokohama will be more aggressive in chasing OE accounts. One of its mainstays in recent years has been fitments on the Chrysler minivan.

He noted that Yokohama’s OE business in North America has been a mix of some really large volume fitments, supported by a lot of low-volume, “prestigious fitments.”

Sales company in Mexico

Yokohama is pleased with the progress it has made in Mexico since it set up a sales company there in 2013, Kahrs said.

“It’s a large market that Yokohama had not attacked directly in the past,” he said.

“We always had gone in there with some type of trade partners or local representation. I think the organization that we’ve put in place — roughly 20 people — are all very qualified, and what we see month after month is the number of points of sale is just growing very quickly.”

Initially, it supplied products to Mexico from its California distribution center, but he said Yokohama now has two distribution centers in Mexico and is importing products directly from offshore plants along with sourcing from the US.

OTR market update

While the overall market was relatively flat last year, Yokohama ran ahead of the market, according to Tim Easter, director of OTR sales. There was a supply shortage in 2012 that led to a surplus of inventory in 2013 caused by a downturn in the mining market.

He doesn’t expect big growth in 2015. “We’re going to focus on product development and concentrate on areas of growth, such as the steel industry, the pot and rail yards,” Easter said.

“We’ve seen strong growth in the port service and in the construction side of the business, from road construction to housing, to anything related to the use of smaller-type equipment that takes predominately radial products and a lot of 25-inch type sizes.”

He said the copper mining industry could rebound in 2014 on expectations of increased prices, while gold remains uncertain. “We expect the coal mining industry to continue to move underground due to the high cost of surface mining.”

(Image source: Rubber & Plastics News)