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February 02, 2004 01:00 AM

Kumho looking to boost capacity

Vera Fedchenko
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    Kumho Tire U.S.A. Inc. is targeting 11.5 percent sales growth this year, to $340 million.

    That promising outlook comes on the heels of an 8-percent sales slip last year when the firm had trouble getting sufficient units from parent Kumho Tire Co. Inc., which had put a priority on building business in China.

    To accomplish its 2004 goal, Fontana, Calif.-based Kumho Tire U.S.A. is relying on additional production capacity overseas, new promotions and its dealers, Kumho executives told Tire Business in a recent interview.

    Kumho's sales of $305 million in the U.S. last year were impacted by demand in China, which diverted passenger tire exports to the U.S. from Kumho's plant in Nanjing, China, according to David Hudrlik, Kumho Tire U.S.A.'s vice president of sales. Kumho also posted sales of slightly more than $38 million in Canada and about $14.7 million in Mexico, he said.

    ``Last year we wanted to maintain the same level of sales but the drop occurred, the majority of which was in the passenger tire segment,'' Mr. Hudrlik explained. ``Because of the boom in China, our factory there was not able to support U.S. sales as much as it had in the past.''

    Mr. Hudrlik said he doesn't expect any imports to come from the Nanjing plant in 2004 despite the fact the tire maker is adding capacity there. However, a new, highly automated, modular factory in Pyeongtaek, South Korea, is freeing up capacity at other Kumho tire plants for replacement export and opening up additional supply to the U.S.

    ``We have the demand,'' he said. ``The issue is supply.''

    The 2 million-tire-per-year Automated Production Unit (APU) plant opened in October and already is at 100-percent capacity, Mr. Hudrlik said. It will supply original equipment tires to nearby Hyundai Motor Co. and Kia Motors Corp. facilities.

    Meanwhile, parent Kumho Tire Co. Inc. is planning to double capacity at Nanjing by 2007 to 10 million units, although Mr. Hudrlik said the majority of Chinese production-including additional capacity-will stay in China.

    Looking back, ahead

    Because of capacity constraints, Kumho's growth dropped off last year, Mr. Hudrlik admitted. The company's passenger tire market share in the U.S. dropped to 2.7 percent in 2003 from 3 percent in 2002, he said. Compared with the industry's 1.5-percent increase in passenger tire shipments for the year, Kumho lost 20 percent, most of which occurred in the entry-level P-metric segment.

    Kumho's light truck tire shipments remained flat in 2003 while the industry overall slumped 3.5 percent. Medium truck radial tire shipments for the tire maker rose 1.4 percent compared with the industry's 3-percent growth.

    However, Mr. Hudrlik pointed out that in comparison with industry shipments from 2000-2003, Kumho's passenger tire shipments surged by 43 percent while the industry was down 7.5 percent. For light truck tire shipments, Kumho saw a 25-percent jump vs. the industry's 7 percent decline; and the company's medium truck tire radial shipments soared 85 percent while the industry remained flat.

    For 2004, Mr. Hudrlik said Kumho is confident it has enough capacity to increase its sales ``across-the-board'' as the addition of the Pyeongtaek plant should free up capacity at Kumho's other factories, resulting in 2 million units for replacement export.

    ``We'll be able to support our dealers now with some additional broadline products a little bit more than we were last year,'' he said.

    Taking inventory of the past year, Kumho found the launch of its motorsports program to be a ``huge success,'' according to Mr. Hudrlik. The tire maker had introduced a motorsports truck in June, which traveled to 12 select sites for dealer ride-and-drive events. One such event became a consumer ride-and-drive with BMW A.G.'s Mini Coopers at the parking lot of a 700,000-sq.-ft. IKEA home furnishings store in Chicago. It drew 650 participants.

    As a result, Kumho will hold at least 24 ride-and-drive events this year with its motorsports truck and Mini Coopers, a Kumho spokesman said.

    In response to dealer requests for more training, Kumho appointed Jeff Korsvik, who was a regional sale representative, to a newly created dealer communications position. He will handle training dealers, Kumho sales representatives and all internal customers within Kumho, Mr. Hudrlik said. Mr. Korsvik also will be partly responsible for managing the ride-and-drive program.

    Kumho in 2004 wants to be more responsive to tire dealers' needs, and as a result, the tire maker has switched all of its distribution centers to dedicated carriers, Mr. Hudrlik said. The opening of its Chicago distribution center last year put Kumho in a position to make that switch, and the company aims to have 20 dedicated trucks in all. Where those carriers can't go, Kumho will use common carriers, according to Mr. Hudrlik.

    To enhance communication between the company and its dealers, Kumho will continue issuing a monthly newsletter it started in 2003 called Flash Report, which updates customers on products and marketing and operational news.

    The tire maker also launched its customized software system called Kumho's Operation Business Information System (KOBIS) Jan. 1 worldwide to help each business unit track what's going on within the company.

    ``We'll be able to look at production data and be more informed and able to tell our customers where everything stands as far as their orders (are concerned),'' Mr. Hudrlik said. ``Our plan is to make this Internet-based, but right now we're working on it internally.''

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