FRANKFURT, Germany-A funny thing happened in 1995. Most every major tire manufacturer in the world made more money than they had in years. It wasn't forecast to be that way.
Plagued by spiraling raw materials costs, tire makers around the globe warned shareholders, customers, tire dealers and anyone else who would listen that margins would be squeezed by exploding prices for rubber, carbon black, steel cord etc.
Instead, the industry-as illustrated by the results of the dozen largest makers-reported an average operating return on sales of 6.7 percent, the highest in recent memory. Theoretically, this would have been even higher except for returns of under 2 percent by Continental A.G., Yokohama Rubber Co. and Ohtsu Tire & Rubber Co.
On a net basis, the top 12 tire makers averaged a 2.8-percent return on sales, despite two companies-Toyo Tire & Rubber Co. and Kumho Tire Inc.-which finished 1995 in the red, and three more-Sumitomo Rubber Industries Ltd., Yokohama and Ohtsu-that had net earnings/sales ratios of less than 1 percent.
Kumho's fiscal loss was its second consecutive, and company accounts show the loss last year was primarily the result of interest payments and other financing costs, which grew six-fold over 1994 to $15.8 million. These costs were related to the company's borrowings in the past several years to help finance the rapid expansion of its capacities in South Korea and to help launch the company's thrust into China.