Yokohama revises expectations at US tire plant

Tokyo — Yokohama Rubber Co. Ltd. has scaled back production expectations for its US truck tire factory in West Point, Mississippi, due to a combination of facility- and personnel-related issues.

The $300 million (€270 million) plant, which opened in 2015 with a nameplate capacity of 1 million medium truck tires a year, was on track to produce only about half of that in 2018, Yokohama said in a stock exchange filing in late 2018.

In the same document, Yokohama rescaled the plant's production target by 2021 to 843,000 tires.

In the 2018 third quarter report, Yokohama took a $102 million "asset impairment charge" against its earnings to account for a "reassessment" of the profitability of and business outlook for the plant.

In the document, Yokohama cited a number of reasons for the plant's performance, including:

‘Teething problems of "modern and efficient" production machines’;

Delayed ramp-up in process capability and

Personnel hiring behind plan, in part due to high turnover rate; and

Insufficient education and training due to the turnover rate.

"Achieving profitability at the subsidiary has taken longer than management anticipated when production began there,” said a Yokohama statement.

In the filing, Yokohama noted that the plant has operated at less than half of its projected output levels since it opened.

The issues have contributed to operating losses totalling $164 million compiled by the firm's North American operations over the past four years.

"We continue to aggressively address the challenges of running a brand new facility and increasing production output," YRC said in November.

"The facility has all the necessary elements for success… and we will continue to invest in our technology, our people and our production capabilities to meet our goals."

The company also noted that engineers from its plant in Mie, Japan — which has the same type of tire-building machines — are engaged in training personnel at West Point.

Prior to taking the asset impairment charge last year, Yokohama dismissed 29 employees at the plant because they did not meet "pre-employment requirements."