In this Q&A, Markus Bogner, president of Falken Tyre Europe GmbH discusses the effects of the Covid-19 pandemic on business:
ERJ: How would you describe business thus far in 2020?
Markus Bogner: We could never have predicted quite how things would change in such a short space of time. Looking at our half year results, I believe that we have done much better than others. Of course, all tire makers have experienced the impact but I think the efforts made by our staff, the processes and contingencies (stock management, communication and the welfare of our staff), improved Falken’s position.
ERJ: What are some of the key changes the company has made in response to the Covid-19 crisis?
MB: Coronavirus significantly impacted how we run our business and look after our staff. Fortunately, Falken’s parent company, Sumitomo Rubber Industries Ltd. (SRI), carried sufficient stock levels and a flexible manufacturing strategy, meaning we could support demand and minimise disruption. Due to local government policy, production in China was stopped for ten days in the early stages of the outbreak. Our factory in South Africa was also temporarily shut due to government orders but overall, we did not have the issues other brands experienced.
From a distribution perspective, we have been able to continue with only minor disruptions. Being public facing, our dealers have of course all been affected by the lockdowns, but many have been able to operate in accordance with social distancing rules in their respective areas.
As a company, Falken felt a huge responsibility to help flatten the curve as have our staff through our actions. SRI’s holding company has also donated Yuan2 million (€250,000) to the China Charity General Assembly in support of coronavirus programmes and instigated other programmes such as donating gloves to the Japanese government. On a local level we supplied tires to local charities in Germany, one example being supplying the stand-by vehicles of the DRK-Hochtaunus. Falken donated tires to the ambulance service, that were fitted to around 40 vehicles and trailers at the Point-S' "Reifen Eyring" branch in Hochheim.
The Falken staff have been remarkable. We were quickly able to set up remote working, stress test the IT systems and be ready for when we all worked remotely. Now, we have more people returning to the office in a controlled manner. It has worked very well thanks to the efforts of all our staff.
ERJ: What positives have you seen at your company and in the wider tire industry over recent months?
MB: We started to see positive changes in late May/June as the tire dealers in Germany, Austria and Poland reopened. Sales were good, better than expected and some markets such as Poland were doing very well. That was important as these are important markets for us.
Another positive has been the relationship with our customers. We have received praise for the support we have given them and the fact that we were accessible during those critical first few weeks. Having quick communication is vital during times of heightened uncertainty and it was appreciated by our partners.
But as the fifth largest tire manufacturer in the world, our parent company SRI is in a strong position and its reassuring to have its support. That’s a very positive aspect for Falken.
ERJ: What kind of trends are you seeing in the marketplace and how have your company adjusted its product portfolio in response?
MB: From a product point of view, we are seeing growing demand for energy-efficient tires and more requests for specific tires suitable for EVs and hybrids. These are both areas Falken has good experience in, including for example, the A-A rated tires we have produced in the past for Toyota.
The SUV parc is fuelling demand for XL versions of our UHP tires such as the FK510. We see this as an important segment for Falken and recent OEM wins with Porsche and Audi underline what a good job Falken is doing for that sector.
Falken has also invested heavily off-road sector with releases in Europe this year. It is another segment where we have enjoyed OE success too. We now have OE fit with Mercedes and Jeep in the past 12 months for our WildPeak tire.
We think the current situation with the pandemic is an opportunity for our dealers. With consumers keeping an eye on costs now, we believe our tire sellers could seize more sales from premium competitors, offering similar performance without the higher prices.
This is particularly true for high-performance tires and independent tests such as the consumer motoring magazines have shown time and again, we can deliver comparable performance and wear characteristics at a more attractive price.
ERJ: Where do you see the industry markets heading by the yearend?
MB: I believe it’s still early to predict what will happen. We are reassured that people are starting to travel again and we are seeing used car sales, have in some markets, bounced back strongly. We saw that the UK only made 5000 cars in May and sales were down over 39% in June there and a similar 32.3% year-over-year drop here in Germany. I think we must continue to be prepared.
ERJ: What are the key developments and/or metrics to watch for over the coming months?
MB: We will all be looking at how the car industry responds and ultimately, what happens to volumes. Falken is increasingly supplying OEMs and like all suppliers, we will be watching to see how they will encourage demand. It will be equally interesting if the transition to EV/hybrids accelerates post Covid-19. In some regions, sales of plug-in hybrids are soaring and the transition to alternative powertrains that would impact the type of tires we sell to OE and aftermarket.
ERJ: Thank you very much