Published on February 18, 2014

Hankook U.S. production to start in 2016

(Tire Business sketch by Leo Michael)
Seung Hwa Suh, Hankook Tire Co. Ltd. vice chairman and CEO, oversaw negotiations that led to the South Korean tire maker's selecting Clarksville, Tenn. as the site for its first U.S. tire plant, an $800 million passenger and light truck tire factory due on stream by 2016.

MONTEGO BAY, Jamaica (Feb. 18, 2014) — Hankook Tire Co. Ltd. expects to break ground later this year on its U.S. passenger and light truck tire plant in Clarksville, Tenn., according to Byeong Jin Lee, president of Hankook Tire America Corp.

Speaking to tire dealers gathered for Hankook's Partners Day in Jamaica, Feb. 18, and in an interview with Tire Business, Mr. Lee said the company is waiting for groundwork to be completed at the site before beginning construction on the Clarksville plant.

Once construction has commenced, it should take about 18 months to complete, with tire production to begin at the $800 million project sometime in 2016.

Hankook expects to have initial annual capacity of 6 million tires at the facility, which will rise to 11 million to 12 million units after the second phase of the plant is completed.

The plant will be highly automated to produce high-quality products, Mr. Lee said. It will be the company's most updated factory, "with the new technology, and the new machine and the new process."

The plant also is a large-scale facility, he said, which is the approach Hankook uses in building factories. Hankook knows how to run large-scale factories, achieving economies of scale but also flexibility of operation. It is one of the company's secrets, he said.

Improving service to its dealer customers is one reason for constructing the plant in North America, Mr. Lee said. Another is that it sends a message that Hankook is serious about and making a strong commitment to the North American market.

Shawn Denlein, Hankook Tire America's senior vice president of sales, in an overview of Hankook's strategy and vision, said the company wants to increase sales to $14.3 billion by 2020 from $6.45 billion in 2013. This is up from $1.5 billion in 2000.

Asked whether Hankook might consider some type of an alliance with another tire maker to help it reach its sales goals, Mr. Lee said not at this moment.

"I can not say definitely no, but we are not considering that way, that is not our strategy."

To get there will require the company to boost sales 12.2 percent year over year, Mr. Denlein said, adding, "We won't get there unless you help us and we help you," he told dealers at the meeting.

Hankook's goal s to become the fifth largest tire maker in the world by 2018, from No. 7 today.

Adding capacity in the U.S. is part of the strategy, but Hankook also intends to expand production at its seven other plants around the world in Korea, Hungary, China and Indonesia, which just opened last year.

By 2020, plans call for Hankook's total tire manufacturing capacity to increase to 135.9 million units annually from 93.7 million units today.

Beyond the new U.S. factory, Hankook also is looking at possibly adding production capacity in Russia, South America and EMEA (Europe, Middle East and Africa), Mr. Lee said. But no timetable has been set.

"Our vision is to be a global company", he said, adding that Hankook could not be that without a factory in the U.S.

To become the No. 5 tire maker, Hankook also must have strong product quality and a strong brand image to reach its goals, the executives said.

"We keep improving our quality, keep investing our money, more than 5 percent of our revenue in the R&D to improve the quality," Mr. Lee said. "No. 2 is to improve the brand awareness and the brand image. That's what we will keep doing."

Hankook also is trying to be more efficient. "We always are trying to improve our efficiency of the operation," he said.

Hankook operates five technical centers, in Germany, China, Korea, Japan and the U.S. with 1,000 researchers in technical and R&D out of total employment of 20,000.

The company has 65 offices in 28 countries.

In 2014, Mr. Lee said Hankook will increase its marketing budget substantially, without giving specific figures.

The company will continue having signage at 25 out of 28 Major League Baseball stadiums, Mr, Denlein said, including four permanent signs in 2014. The company hopes to gain more exposure in spots where viewership is high, such as the baseball playoffs.

The company also will continue to use billboard advertising and is in the process of creating a television commercial targeted at the U.S. market, which should be ready for airing in 2015.

In the new product area, Hankook will introduce four passenger and SUV tires in 2014. Mr. Denlein said Hankook's mix of tires is improving and moving into the 17 inch and higher segment.

This shows that Hankook has the ability to produce such tires, "and that we also are following and leading the market," he said. "So when we are coming out with new products our coverage is very good."

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