KOBE, Japan (Jan. 10, 2003) — Sumitomo Rubber Industries Ltd. will absorb fully its Ohtsu Tire & Rubber Co. Ltd. subsidiary this year as part of corporate restructuring that also calls for creating autonomous sports and industrial products business companies.
Sumitomo said it is reorganizing to achieve “managerial efficiencies and…optimum management set-up” to allow each business to be profitable on its own. Consolidating Ohtsu Tire into its corporate structure, for example, will simplify operations by eliminating overlapping functions.
The restructuring moves are expected to be completed by July. Sumitomo said it expects the restructuring to yield cost savings of at least $37.5 million, or more than the two firms have experienced in the two years since it increased its ownership of Ohtsu to majority.
Among the changes will be the creation of separate sales companies to handle domestic replacement and export sales of the companies' primary brands, Dunlop (in Asia) and Falken, Sumitomo said. The company also handles sales of Goodyear-brand tires in Japan.
The moves are not expected to have any effect on the operations of its Falken Tire Corp. subsidiary in Rancho Cucamonga, Calif., Sumitomo said.
The sports and industrial product businesses will be renamed SRI Sport Ltd. and SRI Hi-Brid Ltd.; in fiscal 2001, these businesses accounted for nearly 27 percent of Sumitomo Rubber's $3.3 billion in annual sales. Sumitomo will continue to own them wholly.
Sumitomo has been the majority owner of Ohtsu since November 2000, paying approximately $25 million at that time for a block of shares equal to 9.9 percent of Ohtsu's outstanding stock. Sumitomo previously had owned 41.1 percent of Ohtsu and had been Ohtsu's technical assistance partner for decades. In addition, Ohtsu has made Dunlop-brand tires for Sumitomo for years.
Separately, Sumitomo lowered its financial outlook for fiscal 2002 somewhat. The company said recently it expects a group profit of between $50 million and $58 million, down slightly from the August forecast of $66 million.