SALEM, Va.—When Yasuo Tominaga came to America just a few months ago, he brought with him an edict to Yokohama Tire Corp. from its overseas parent: learn to fly solo or else. In January Mr. Tominaga replaced Eika Yamagata as Yokohama Tire president and proceeded to meet with top company and union officials in February to discuss the urgency of turning around the firm.
Since 1992 Yokohama Tire has lost more than $100 million, yet parent company Yokohama Rubber Co. Ltd. has continued to pour money into the business.
Yokohama Rubber has invested $200 million to $300 million in new equipment and facility upgrades at the Salem plant since 1990, said Dan Hunter, Yokohama Tire's vice president of marketing.
This investment figure doesn't include ``millions of dollars'' Yokohama Rubber spent to acquire the Salem operation and educate its employees, he said.
Tokyo-based Yokohama Rubber knows having a presence in North America is the key to surviving in the fiercely competitive tire market, said Jim Hawk, Yokohama Tire plant manager.
Meanwhile, the parent knows there comes a time when it must ``cut loose'' its own, according to Saul Ludwig, a managing director with McDonald & Co. Securities Inc. ``When you lose a lot of money for a long period of time, you have to worry about how long this can go on,'' he said.
Whether Yokohama Tire is ready or not, it's getting nudged from the nest. Only time will tell if Yokohama Rubber is cutting loose its U.S. unit or cutting its losses, Mr. Ludwig said.
Yokohama Rubber and Mr. Tominaga have set 1998 as the year for Yokohama Tire to turn a profit.
If the subsidiary fails, it probably can forget about looking to its parent for financial help, Mr. Hawk said.
``Mr. Tominaga said that if we were not profitable by 1998, the parent company would have to reconsider its options and support of the American subsidiary,'' Mr. Hunter said.
If its parent stops helping Yokohama Tire, the U.S. unit will suffer sorely, Mr. Hawk said.
``As it is right now, they give us a tremendous amount of financial assistance,'' Mr. Hawk said. ``We also rely on them to share a lot of technology.''
Yokohama Rubber is serious about turning around the Salem operation and expanding its foothold in North America, Mr. Hunter said. But the picture in Salem isn't all rosy. Yokohama Tire has been scaling back its operations since summer, when one of its major customers, Costco Companies Inc., the Issaquah, Wash.-based warehouse club chain, began phasing out its purchase of tires made by Yokohama Tire. Costco reportedly purchased about 25 percent of the 7.2 million tires Yokohama Tire produced in 1995.
Yokohama Tire has since laid off about 140 workers and curtailed production an additional 15 days via short-term shutdowns. The Salem plant employs 700 hourly workers and 157 salaried employees. The unit can make 21,000 tires a day but currently operates at just above 80-percent capacity, Mr. Hawk said.
Despite losing Costco and receiving a two-year turnaround warning, Mr. Hunter maintains Yokohama Tire is on its way up, not down. ``Our business has been very strong,'' he said. ``It's a very competitive market out there. I think for the marketplace, we're doing a good job.''