ENSCHEDE, Netherlands—Dutch tire maker Vredestein Banden N.V., hoping to rebuild its presence in North America, has launched a line of ``designer'' performance tires bearing the name of famed Italian car stylist Giugiaro. Vredestein, absent from the North American marketplace from 1991 to 1997 due to pressing financial concerns at home in The Netherlands, debuted the new ``Sportrac'' tire in Europe in February and began exporting it to North America in May.
The new V-rated, mid-range performance tire is a key part of the company's strategy to make the Vredestein name more upscale, said Rob Oudshoorn, the company's managing director.
In the next few years, Mr. Oudshoorn said, it will be easier to gain sales at high margins in North America, where there is little or no history of the Vredestein name, than it would be in Europe, where the company is trying to raise the brand's image from a lower market perception.
The company will continue to produce the same number of tires each year—around 4 million—but aims to add more value per unit, and the use of the Giugiaro name is seen as especially important within the passenger tire sector.
Sales of Vredestein tires in the U.S., Canada and Puerto Rico are handled by Vredestein Tires U.S.A. in Metuchen, N.J., which operates warehousing in Pottstown, Pa., Denver, Minneapolis and the Boston and Montreal areas, as well as a ``quasi-facility'' in Dayton, Ohio, said Al Smoke, head of the U.S. operation.
The V-rated Sportrac carries the name Giugiaro in big, bold letters around the sidewall, and the Giugiaro design house has helped strongly in formulating the packaging and advertising and in bringing the message to consumers and dealers.
Much of this work was carried out by Giugiaro's product design subsidiary, ItalDesign, as opposed to the car design unit that bears the name of Giorgietto Giugiaro, the founder of the company.
In a year or so, Vredestein will introduce a W-rated tire based on the same carcass design, which is also expected to carry the Giugiaro name, and that will be followed by larger W-rated sizes, as well as Z-rated and run-flat versions on a new carcass. These also are likely to bear the Giugiaro name prominently on the sidewall.
Mr. Oudshoorn said the key aspect of the tire was not the tread pattern, nor the sidewall pattern, but the name on the sidewall. ``For us, from the very start onwards, it was very important that we could use the Giugiaro brand name on our tire,'' he said at the press launch of the tire earlier this year.
Mr. Oudshoorn said Vredestein always has been good at designing attractive and striking sidewalls and tread patterns, so the main reason for bringing in a famous design house was not so much to get an attractive design, as to get the name on the sidewall, and to have it available as a marketing aid.
Mr. Oudshoorn added that Vredestein could have launched a new V-rated tire without the Giugiaro name, but then it would have been exactly that, ``just another V-rated tire.''
Mr. Smoke said while the Giugiaro name is not well known to the average consumer, it does carry weight with knowledgable performance and luxury car owners, and should provide Vredestein at least a second glance from these key buyers.
``It (the Giugiaro name) lends an awful lot of credibility and credence to the product, to the quality of the product,'' Mr. Smoke said.
The new tire currently is available in 45- to 65-series sizes to fit 15- and 16-inch rims; 17-inch sizes are due early next year.
Once all the sizes are available, Mr. Smoke said he expects to sell about 20,000 Sportrac units annually in North America.
Worldwide, Vredestein originally had projected annual sales of 100,000 to 200,000 Sportracs, but already has surpassed that level and been forced to add another production shift, Mr. Smoke said.
Vredestein Tires U.S.A. currently has 22 regional dealers and plans to expand to 40, Mr. Smoke said, with an emphasis on adding new distributors on the West Coast and in the southeast.
Besides the Sportrac line, Vredestein markets the Snotrac and Wintrac winter tires, the Quatrac all-season, and the T-trac and Protrac summer tires in North America.
Worldwide, half of Vredestein's sales are winter tires, but that market segment is at the mercy of the weather, he pointed out.
The Sportrac project was managed by teams from both companies, who agreed that the most critical part of the design is in the noise performance of the tread pattern, and this is a highly technical area. Giugiaro's initial designs used large tread blocks to create a striking visual impression, but the resulting tires were too noisy.
Eventually, the two design teams compromised on a directional pattern that is striking, but bears all the hallmarks of modern computer design techniques: a range of similar pitches randomly arranged around the circumference, with the two halves of the tread displaced from each other.
The Giugiaro team was particularly keen to ensure that the sidewall remains black throughout the tire's lifetime, so the company is using a special polymer from Exxon Chemicals Co. to maintain the color.
Mr. Oudshoorn said Vredestein is evolving into a company led by marketing, rather than by engineers.
In original equipment, he said, it is very important to deliver leading-edge technology, ``but to the normal consumer, it is the marketing which counts.''
He added that marketing is not just about asking what the consumers want, but also about anticipating what the consumers might want in the future.
In particular, he said, branding is becoming more and more important in the consumer goods market, but the tire industry has been very slow to adopt such branding ideas. He added that he would not be surprised to see a color-coded tire with the name ``Benetton'' on the side, for example.
However, he thought such innovations would come from smaller companies, rather than from the large, global companies, where it takes a long time to get a decision made and then implemented.
Mr. Oudshoorn confirmed that Vredestein does not want to sell more tires—its single factory in Enschede, Netherlands, is full, and the company is selling everything it can make. However, to make more profit, the company sees the need to add more value to each unit sold.
This is the reasoning behind the switch to higher performance tires and specialist niche tires, hence the Guigiaro link-up.
He said the total investment in the Giugiaro project had been modest, and firmly expected it to repay itself many times over in higher sales revenues to the company.
He added that Vredestein's factory is struggling to build up enough stock to meet expected demand, and said some dealers might not be able to get all the Sportracs they want.
Mr. Oudshoorn said business was exceptionally good at present, and that ``last year was an absolute record, in terms of sales and profit.''
Vredestein's sales hit $280.5 million last year, up 4.3 percent over 1997—and net earnings jumped 46 percent to $11.2 million. Tires represent three-fourths of the company's sales, with footwear, rubber reclaim, and sealing systems accounting for the rest.
Besides the emphasis on higher-value tires, another reason for Vredestein's continued success is the flexibility of its tire plant in Enschede, Mr. Oudshoorn said.
The manufacturing systems have been specially chosen to make short runs of different types and sizes of tires. Last winter, for example, the company was able to identify a shortage of winter tires in Europe and respond to it immediately.
The multinationals, Mr. Oudshoorn said, already had switched their production over to summer tires, but stocks of winter tires were exhausted, so Vredestein was able to sell 20,000 to 30,000 more tires than it had expected, all at high margins.
Another aspect of the strategy is to replace tire designs at shorter intervals. When a tire is first introduced, he said, it is relatively easy to get a good margin, but as the tire ages, and competitors come in with new models, the margins quickly erode. Mr. Oudshoorn said the life of a tire model might be four to six years, but higher-value products have much shorter lives than commodity products.
For a completely new tire, he estimated the development time at two years, followed by a further year of testing.
Mr. Oudshoorn said he expects Vredestein to remain independent for the foreseeable future, adding that the main shareholders recently turned down offers to buy control of the company.
Asked about consolidation in the tire industry, he said, ``Let the big ones get bigger! It is only good for us....I feel that in all aspects of a company—production, development etc.—you can do things in a smaller company that the bigger ones cannot.''
Tire Business Staff Reporter Chris Collins contributed to this story.