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September 13, 2004 02:00 AM

Deals boost Michelin in Pacific Rim

Bruce Davis
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    Group Michelin has struck two deals in Asia-buying a 10-percent share of Indonesia's P.T. Gajah Tunggal Tbk and agreeing to license its Pax run-flat tire/wheel system technology to Toyo Tire & Rubber Co. Ltd.-to strengthen its presence throughout the Pacific Rim.

    Michelin's deal with Gajah Tunggal includes off-take production of Michelin associated brand car tires and distribution of selected Michelin and BFGoodrich car and light truck tires in Indonesia. Michelin paid $23.8 million for the 10-percent stake.

    Gajah Tunggal, one of the largest tire makers in Southeast Asia with plants in Indonesia and China, expects the cooperation to strengthen its manufacturing base. The manufacturing agreement calls for Gajah Tunggal to make a ``selected range'' of Michelin associated brands, including high-speed-rated tires, at its plant near Jakarta for various markets served by Michelin. The manufacturing deal includes some technical input related to the off-take production but excludes Michelin-brand tires.

    The agreement to distribute Michelin and BFG tires will enhance the companies' distribution and market positions in Indonesia, the firms said in a prepared statement.

    Michelin does not have a sales/distribution company in Indonesia, one of the most populous countries in the world. It is shooting for a 5-percent share of the Indonesian replacement market.

    Michelin does have a subsidiary company in Singapore for the ASEAN (Association of South East Asian Nations) market and a manufacturing venture in Thailand. Michelin derives about 10 percent of its global sales from business in Asia.

    The deal with Toyo will bring Toyo's Japanese sales and service network into the mix in anticipation of Japanese car makers' adopting the Pax system in the near future.

    Toyo, the world's 10th largest tire maker, becomes the fourth Pax licensee, after Goodyear, Pirelli S.p.A. and Sumitomo Rubber Industries Ltd. Michelin also is discussing a Pax license with South Korea's Hankook Tire Co. Inc., in which Michelin holds a 10-percent equity stake.

    Under the deal, Toyo gains rights to produce and market Pax systems for passenger cars and light trucks in OE and replacement tire markets in Japan.

    Toyo has been developing its own run-flat tire, based on a reinforced-sidewall system, but said in a statement ``the competitive superiority of the support-ring-type Pax system makes it a standard for future run-flat technology.''

    ``The agreement enables Toyo to acquire the most advanced run-flat technology and so gain a significant competitive advantage,'' added Toru Matsuo, Toyo's vice president.

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