Taiwan's Kenda Rubber Ind. Co. Ltd., known to dealers in North America principally as a supplier of industrial and specialty tires, is moving slowly but steadily into the passenger and light truck tire arena, where it sees greater growth and profit potential.
That strategy, which includes building a joint venture tire plant in China with Cooper Tire & Rubber Co., could push the company to $500 million in annual sales globally over the next five years. That would be nearly double its current sales volume, said Jimmy Yang, president of American Kenda Rubber Ind. Co. Ltd. based in Reynoldsburg and vice chairman of the parent firm in Taiwan.
``So the future of growth for Kenda lies on its participation into radial passenger, light truck and possibly medium truck tires,'' Mr. Yang said. ``And the emerging growth of the Chinese market makes this trend much, much more likely.''
Yuan-Lin, Taiwan-based Kenda began producing radial passenger and light truck tires two and a half years ago at its factory in Kunshan, China-an effort that led to its forging a relationship with Findlay, Ohio-based Cooper Tire.
``Kenda felt it needed to find an outside partner to provide technical expertise,'' Mr. Yang said, since it had no experience in radial passenger tire manufacturing at that time.
``In discussions with different tire manufacturers, Kenda felt Cooper was the most ideal company to work with due to its culture and size.''
That relationship has evolved from Kenda's building bias-ply light truck tires for Cooper starting in 1997, to supplying the firm with inner tubes, to forging an off-take agreement in 2000 to make Avon-brand passenger radials for Cooper.
Through these arrangements, Kenda and Cooper gained experience and cooperation to enhance their relationship, Mr. Yang said in an interview at his Reynoldsburg office. It also led to a full-scale joint venture between the two firms.
Kenda and Cooper are awaiting Chinese government approval to jointly build a $200 million passenger and light truck tire plant in Kunshan, near Kenda's factory.
While the project has been delayed due to reforms enacted May 1 to slow China's overheated economy, Mr. Yang doesn't anticipate any difficulty in securing government approval.
``We should know before the end of the year,'' he said.
Cooper and Kenda have submitted a letter of intent to buy 140 acres of land in Kunshan for the 1 million-sq.-ft. factory, Mr. Yang said. Once the business license is granted, ground-breaking could happen early next year.
The 50-50 joint venture plant, which will take three to five years to complete, will have annual production capacity of 10 million passenger and light truck tires and employ 2,000 workers.
The plant will use more of Cooper's ``state-of-the-art'' tire manufacturing technology, some of Kenda's, and tap into Kenda's understanding of Chinese industry as well as its management, sales and marketing expertise, Mr. Yang said.
The first tires should start rolling off the production line in early 2006, he said, with all of the output in the first five years going to Cooper.
At that point, each company will begin sharing half of the plant's output or 5 million tires each.
For Kenda, the additional 5 million tires ``easily'' will generate $100 million in additional sales for the company, Mr. Yang said. ``That gives Kenda an instant 40-percent growth over what it is today.''
Kenda posted revenues of $273 million in 2003, including $65 million in sales in North America, the company's largest export market.
While the new joint venture ramps up, Kenda will boost passenger and light truck tire capacity at its own factory in Kunshan from its current 3 million units annually to 4.5 million units next year, 6 million units in 2006 and 7 million units in 2007. At that point, the company will begin taking its share of production from the joint venture plant.
As its passenger and light truck tire production capacity grows, Mr. Yang said the tire maker plans to add distributors in North America, but only as supply is available. ``It does no good to have more distributors and have no tires for them.''
The company also will stick to its strategy of shipping directly to distributors from its tire plants, rather than redistributing tires from its two warehouses in Reynoldsburg and Rancho Cucamonga, Calif., which is less cost-effective.
Mr. Yang sees a great opportunity for Kenda, particularly in China. The key, he said, is the newness of the Chinese market in comparison to others in the world.
Major tire brands, such as Goodyear, Michelin and Continental, still are relatively unknown in China, he said, while Kenda has been selling bicycle, motorcycle and scooter tires there for 10 years. ``So I've got a head start.''
``When people (in China) talk about tires, they already have a good degree of understanding and trust for the brand of Kenda,'' Mr. Yang said. ``So compared to those brands like Goodyear, Michelin and Continental, Kenda is not that far behind in the Chinese market, which gives Kenda a better opportunity to penetrate and grow its market share.''
Kenda is making car and light truck tires at its Kunshan plant in sizes ranging from 12 to 16 inches in diameter in S-, T-, H- and some V-speed ratings, with aspect ratios to 50-series.
While passenger and light truck tires offer the greatest opportunities for growth, Kenda is not neglecting its traditional product areas of specialty and industrial tires.
Besides Kunshan and the planned joint venture factory, Kenda operates four other tire plants producing specialty, industrial and two-wheeler tires-two in Taiwan, one in China and one in Vietnam.
``Kenda will continue to give a good amount of attention to its specialty tire growth, while it grows into radial automotive and light truck tires,'' Mr. Yang said.
Of the firm's $273 million in annual sales, 40 percent comes from the manufacture and sale of bicycle tires, 30 percent from motorcycle and scooter tires, 20 percent from industrial tires, including lawn and garden and trailer tires, and 10 percent from automotive tires.
``Kenda has grown and secured a high reputation through customer service, quality of product and aggressive marketing,'' Mr. Yang said.
The company, he noted, sponsored two out of three American mountain bike racers in the recently concluded Summer Olympics in Athens, Greece.
And the Kenda name got an unexpected marketing boost last year when American professional golfer Ben Curtis, whom Kenda sponsors, won the British Open.
``Just like Ben Curtis, we think our company is a rising star,'' he said.