Cooper Tire & Rubber Co. called the 2003 launch of its Zeon 2XS ultra-high performance tire an ``evolution'' of its business, but the event arguably served as the starting point for the tire maker's efforts to update both its image and products.
Three years on, though, some dealers told Tire Business they're no longer sure what the future holds for Cooper. The Findlay-based company has posted deepening losses and faces more uncertainty in the aftermath of the Aug. 3 resignation of its CEO, chairman and president, Thomas Dattilo, who led many of these changes.
``They tried to create a new image and really just failed and just increased their costs,'' said Steve Craven, owner of Craven Tire & Auto in Fairfax, Va. ``If they had focused on controlling costs and producing a value, high-tech product, I think they would have succeeded tremendously.''
The Zeon launch marked a pivotal point for Cooper. Though he acknowledged Cooper was playing ``catch-up ball,'' Carl Casalbore, then-vice president for retail sales and HP tire development, said, ``Within two to three years we will be innovators in a number if not all these fields.'' (He is now an executive with Continental Tire North America Inc.)
Cooper even toyed with its conservative image in marketing materials for the new tire, asking: ``Is this the same Cooper Tire we've known all these years?''
The following year, Cooper officials introduced an effort to push all Cooper brand products to premium status. The company unveiled a ``multi-million dollar'' ad plan with the tagline, ``Don't Give Up a Thing.''
``We're going to treat that (Cooper) brand like a precious jewel,'' said Pat Brown, then-vice president of advertising and currently vice president of global branding and communications. ``...We are going to make this a premium brand that it truly is today.''
Things moved fast from there. Later in 2004, the firm sold its Cooper-Standard Automotive business for $1.17 billion and planned to invest the proceeds overseas, particularly in China. Soon after, Cooper began a deal to buy 51 percent of Shandong Chengshan Tire Co. Ltd., which was completed earlier this year for $79.6 million. The firm also bought an 11-percent share of Kumho Tire Co. Inc. to ``explore synergies.''
Cooper already had formed a joint venture with Kenda Rubber Industrial Co. Ltd. to build a plant in China that is slated to be on stream by year-end 2006 or early 2007 with output of 1 million to 2 million tires.
At the 2004 Specialty Equipment Market Association (SEMA) Show, Cooper introduced a ``hip'' new logo-the first such change in 50 years-and iPod-like ads meant to appeal to a younger generation.
``We think these spots will launch a new image for our company and our brand,'' Mr. Dattilo said at the time.
The company also in 2004 signed on as the official tire supplier for the new A1 Grand Prix international racing series for three years. Cooper used this year's race in Shanghai to launch its brand in China as ``KuPo.''
Asked by Tire Business at the U.S. race in March in Salinas, Calif., which of Cooper's recent changes were the most important, Mr. Dattilo replied: ``Everything together. You can't take one out and separate it, it's a whole approach. It's from beginning to end of being a company with the right technology, a company quick to market, a new company on the cutting edge of things with a new logo and new approach.''
As Cooper pursued these changes, however, market forces weren't being very cooperative and dealers and analysts had their own concerns about the effectiveness of the transformation.
Raw material prices started their much-publicized, relentless march upward, and North American replacement tire demand has since taken its own steps downward. Just this year, Goodyear said it would slash its private label tire production by a third, or 8 million units.
Cooper's stake in private labels, however, is so high that it could scarcely afford to do the same.
``Cooper is so strong in private brands, but how they're going to continue to make private brands as strong as they do in this country at the pricing levels, I don't know, because there's a lot of Chinese and Korean stuff being dumped pretty cheap into the country,'' said Larry Lesieur, operations manager at wholesaler Maynard & Lesieur Inc. in Nashua, N.H.
Those imports are indeed a significant concern for Cooper on many fronts, others told Tire Business.
``The quality of the imports has increased over recent years, so the distributors and the dealers have an easier time using that product, believing or trusting it, and that puts a little pressure on Cooper as well,'' said Tony Cristello, an analyst with BB&T Capital Markets in Richmond, Va.
Barry Steinberg, president of Direct Tire & Auto Service in Watertown, Mass., added that lower-cost imports actually are turning the once-lucrative high-performance segment into practically a commodity as they had to broadline initially. He recalled a recent customer who ordered ``extremely'' expensive custom wheels for his BMW. When Direct Tire tried to sell him equally premium tires, he suddenly balked at the price and opted for an inexpensive offshore brand.
While he said Cooper was right-if a little late-to enter the high-performance tire segment, Mr. Steinberg said the focus always should have been primarily on its bread-and-butter broadline business.
``It just costs so much money to enter that market, it is now at a point they're not competitively priced,'' he said.
Mr. Craven also said Cooper should refocus intensely on broadline to return to stability and claimed the campaign to market Cooper as a premium brand has not yielded positive results.
``When they tried to go into this premium brand image, it just wasn't going to work,'' Mr. Craven told Tire Business. ``They just raised the price of the product over the last two years. It's to the point where, for us, a customer could, for $5 to $10 more, go into a Dunlop.''
Factor in that the Cooper brand isn't well known in his market, and it became a hard sell. Craven Tire is still technically a Cooper dealer, but Mr. Craven said he hasn't bought any Cooper products since Jan. 1 because of pricing and supply problems.
He added that the personality of Cooper-a third-tier, value producer with folksy traits dealers had long appreciated-seemed to diminish in recent years.
``Mr. Dattilo tried to take it out of that,'' he said. ``In other words, he tried to be a big player instead of just focusing on keeping the dealers happy and making the company profitable.''
But not everyone agrees with that.
John Farkas, president and owner of Interstate Tire Distributor Inc. in Commerce, Calif., said he fully backs Cooper's strategy. While he hopes Cooper gets back into the black soon, he said he thinks the firm's current troubles are more a problem of timing than incorrect strategy.
``Timing, like anything else, is essential in our business,'' he told Tire Business. ``You can get caught in a time cycle that will affect you negatively and I think Cooper got caught in that time cycle.''
Mr. Farkas explained that Cooper realized it had to be in performance products, yet ramping up that production cost it capacity in other segments. Then rising raw material costs hit, causing still more trouble.
``When you put all these things together, it caused the stock to deteriorate,'' he said. ``And I guess the board felt maybe it was time for a change (in management).''
The effort to take Cooper premium also was a necessary move, Mr. Farkas said. He doesn't envision the Cooper brand competing against Bridgestone, Michelin or Goodyear, but he said it could compete well against Firestone, Dunlop and Toyo, among others.
``I would hate to see them going backwards now,'' he added. ``Broadline is very important, there's no question about it, but broadline is a shrinking market and will continue to shrink as the high performance (H-rated and above) product lines will continue to dominate.
``...Getting rid of where they've gone with high performance at this particular stage and trying to go back to broadline where broadline would occupy the majority of their product line, I think would be a mistake.''
In written responses to questions from Tire Business, interim Cooper CEO Byron Pond said he plans to continue the tire maker's premium marketing strategy.
``The brand was undervalued in years past, and we have worked very hard to achieve the recognition of `major brand status,''' he said. ``The majority of dealers are positioning Cooper as a major brand and enjoying the profits. Those who aren't are missing out on a great opportunity.''
Mr. Pond also indicated the firm's strategy of moving beyond broadline will continue unchanged.
``Demand for broadline tires has declined rapidly in the past few years and that decline will continue,'' Mr. Pond told Tire Business. ``At Cooper we are committed to having the right offering of top quality products in all light vehicle segments: performance, broadline, SUV, light truck as well as commercial truck tires. Our dealers understand the market dynamics and they know that we are doing the right things with our products and brand positioning.''
On the financial front, Mr. Cristello said Cooper mainly needs to improve its inefficient production or be better able to offset that challenge with increased revenue.
``They certainly will have to become more aggressive in sourcing product from overseas and attempt to adjust the higher operating costs that they have here in North America,'' the analyst said. ``They're just at a competitive disadvantage now.''
Mr. Cristello added that he believes Cooper needs to close a plant in North America, noting ``it's not a question of if, it's a question of when.''
Mr. Pond told analysts earlier this month that there is some excess capacity.
``In terms of rationalizing production here in the U.S., we're always looking at capacities, but we haven't really made any decision yet as to how we're going to handle that,'' he said.
``It's going to be a fair amount of time before (the) Cooper-Kenda (joint venture) is making substantial contributions in terms of units produced.''
Mr. Lesieur wonders how these challenging problems will be addressed.
``I don't know who they can bring in to solve the industry's problem,'' he said. ``It's not just Cooper.''