AKRON-Though there is general agreement within the tire industry that China has monumental market potential, many Western tire makers are hesitant to enter the country. With a population of 1.2 billion, a growing automotive industry and average wages around 50 cents an hour, China offers a number of attractive incentives to manufacturers.
Many tire makers, however, are taking a wait-and-see attitude, fearful of overstated projections and government intervention. Others maintain that Far Eastern countries such as Thailand and Malaysia present similar potential with far less risk.
Second-guessing the opportunity in China, however, may cause many firms to miss ``the gravy train,'' according to Jay Rothstein, president of JRI International, which assists companies in forming joint ventures in China.
Analyst Harry Millis, of Fundamental Research Inc. in Cleveland, agrees.
``Without question, within 10 to 15 years it will be one of the major markets in the world,'' he said. ``You had better be in there in the next three to five years. Otherwise you'll be shut out.''
Not willing to follow the feeding frenzy in China are tire makers like Kumho & Co. Inc.
``I don't think it's the right time,'' said ``Whitey'' Yoon, marketing manager for Kumho U.S.A. Inc. ``When they realize the business sense that Western technology is where it's at, then it will be the right time.''
It's difficult to make money on a joint venture in China because of the lack of control, ac-cording to Mr. Yoon.
Kenneth J. Macdonald, vice president of Tire Technologies Inc., sees tremendous opportunity for small companies to expand rapidly in the Chinese market at a very attractive price. However, tire manufacturers like Cooper Tire & Rubber Co. and Toyo Tire & Rubber Co. Ltd. have expressed no intention of entering China's tire market.
``There's nothing at this point,'' said Earl Knoper, senior vice president of sales and marketing for Toyo Tire U.S.A. Corp., the U.S. arm of the Japanese tire manufacturer. ``Apparently, there are other parts of the world, like Malaysia, that are seen as low-cost production opportunities.''
Denman Tire Corp. and Canada's United Tire & Rubber Co. Ltd. have chosen to tap China's low-cost labor through imports.
Denman currently imports a couple thousand giant, 7-ton off-the-road tires a year from China, said Jim Pearl, executive vice president of sales and marketing.
``We found that with the price that we're paying (including shipping and tariffs), we can still be competitive in the marketplace,'' he said.
Charles R. Wright, the firm's president and CEO, said Denman has no plans either to export to China or establish a joint venture in the region. ``It's just not a market we've pursued. We've spent more time marketing and developing partnerships in Mexico.''
Entering China in recent years through the conservative route-supplying technology and equipment without capital investment-are Western tire makers like Pirelli Tyre Holding N.V., BTR Dunlop International Technical Ltd. and Avon Tyres Ltd.
Of these manufacturers, Pirelli has been the most active. Since the early 1980s, the firm has completed deals worth an estimated $150 million. Pirelli has additional projects totaling $100 million on the drawing board.
In April, Goodyear set the standard for joint ventures when it formed Goodyear Dalian, its partnership with Dalian Rubber General Factory to produce 1.4 million Goodyear-brand tires annually.
The firm was the first major Western tire maker to enter into a manufacturing joint venture in China. More importantly, it erased the myth that Chinese tire firms will not give up majority control, Mr. Millis said. The tire analyst looks for Goodyear to form additional pacts with Chinese firms in the near future.
Groupe Michelin and Yokohama Rubber Co. Ltd. are reviewing inquiries for pacts with unnamed Chinese tire makers, while Bridgestone Corp. is developing its sales channels in the region.
Charles Sherkin, president of Canada's United Tire & Rubber Co. Ltd., said the success of any tire manufacturer entering China ``boils down to how well it weighs the risk-vs.-reward factor.''