Hankook Tire Co. Ltd. has postponed plans to construct a sixth tire factory due to the slowdown in original equipment and replacement tire demand.
Greg Pae, president of Hankook Tire America Corp., told Tire Business at Hankook's dealer meeting in Los Cabos that its South Korean parent company had decided that the timing wasn't right for another tire factory.
He said about 25 percent of Hankook Tire's business is from OE customers, and slumping U.S. car sales coupled with record raw material costs have impacted the parent company's profit margins.
In January, Hankook Tire of South Korea said it saw its 2008 operating earnings halved to $103.6 million and recurring profit had dropped 98 percent to $3.1 million. Global sales rose 5.1 percent to $3.7 billion.
When asked about Hankook Tire America's profitability in 2008, Mr. Pae said the Wayne, N.J.-based tire marketer's business model is simple and its costs are lower compared with the parent firm's and therefore its profitability wasn't affected in the same way as its parent.
The company had said at last year's dealer meeting that a location for a sixth plant had been chosen but never announced anything later in the year.
Hankook has factories in Keumsan and Daejeon, South Korea; Jiangsu and Jiaxing, China; and in Dunaujvaros, Hungary.
In Los Cabos, Mr. Pae said it was difficult to say when the plan for the proposed factory would be revisited, but he hoped that economic conditions would improve in two years.
Hankook Tire Co. Ltd. still is ramping up production and expects to build 78 million tires in 2009, up 5 million or 6.8 percent over last year. Mr. Pae said global demand for tires is increasing even as U.S. demand is down.
As Ford Motor Co. and General Motors Corp. are retooling their vehicle production to smaller cars, Hankook sees opportunities. Mr. Pae noted those two Detroit auto makers are asking Hankook to participate in more projects with them, meaning they view Hankook