FINDLAY, Ohio (July 22, 2004) — Cooper Tire & Rubber Co. anticipates having to raise tire prices again this year to keep pace with rising raw material prices, Thomas A. Dattilo, chairman, president and CEO, told analysts today during a conference call.
In addition, the firm is working overtime to relieve what Mr. Dattilo called a “stressed” supply situation. Demand is up for Cooper's products, but the company is struggling to fill all its orders. Capacity is somewhat constrained at the moment as the firm works to reconfigure its domestic capacity and get its international supply contracts working 100 percent.
“We could sell more tires if we had them,” Mr. Dattilo said.
At this time the firm is not disclosing details of a pending price increase. Cooper has raised prices twice in the past year: up to 5 percent on all its flag, associate and private brand tires on June 1 and by 2 to 4 percent last Aug. 1.
In disclosing Cooper's intention on prices, Mr. Dattilo cited not only rising costs of petrochemical-based products like synthetic rubber, carbon black and chemicals, but also the costs of steel products, which have been rising because of international tariff situations.
Cooper anticipates it will pay $20 million to $25 million more this year for raw materials than a year ago.
Mr. Dattilo cited several reasons for Cooper's lower-than-standard fill rate this year:
* Expansion/modernization projects at its U.S. plants are under way, cutting into available capacity until they're finished;
* The company has increased the number of SKUs considerably of late, increasing the complexity of scheduling manufacturing;
* Higher demand for performance and P-metric light truck tires means more changeovers in production and these tires require longer curing times, cutting into manufacturing efficiency; and
* The contracted supply of tires from China's Hangzhou Zhongce Rubber Co. Ltd. thus far is below expectations.
Mr. Dattilo said progress on Cooper's passenger tire manufacturing joint venture in China with KendaRubber Industrial Co. Ltd is “slightly behind schedule." The venture is expected to start production in early 2006, a few months behind the start-up announced originally.
In addition, the first shipments of medium truck radials form Hangzhou Zhongce “are in transit,” Mr. Dattilo said. Eventually, Cooper hopes to source up to 350,000 truck radials a year from this venture.