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August 07, 2013 02:00 AM

Apollo's Cooper bid part of 'de-risk' strategy

Tire Business Staff
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    Apolo Tyres Ltd. photo
    Apollo Tyres Chairman Onkar Kanwar.

    KOCHI, India (Aug. 7, 2013) — Apollo Tyres Ltd.'s $2.5 billion bid to acquire Cooper Tire & Rubber Co. is integral to the company's strategy to "de-risk" its approach to deal with an increasingly global marketplace, Apollo Chairman Onkar Kanwar told shareholders at the firm's annual general meeting this week in Kochi. 

    "We have tried to 'de-risk' for your benefit," Mr. Kanwar said, "by broadening our revenue and profit streams from diverse geographies and different product categories. Your company will have equal exposure to the developed and profitable markets as also to the emerging high growth markets, a combination that very few other companies can lay claim to."

    "To quote only one example, even 1-percent growth in the U.S. tire market calls for the addition of a new manufacturing plant every year to meet the increased demands." — Apollo Tyres Chairman Onkar Kanwar

    Mr. Kanwar called the changing marketplace a "multi-polar world" with the U.S., Europe, China, India and Latin America all "important constituents in the new global economic order.

    "We at Apollo have put in place a strategy that recognizes this reality and ensures that we do not have overdependence on any one geography or product category."

    In outlining Apollo's new approach, Mr. Kanwar referred to "profound changes" that are taking place.

    "The so-called emerging economies are facing new challenges, with growth in markets like India and China slowing down appreciably, while Brazil, South Africa and Russia are going through a number of social changes to add complexity to their economic difficulties.

    "On the other hand," he continued, "the so-called troubled markets like Europe are where Apollo has enjoyed its best profitability for the last few years. The United States is in a phase of resurgence, with growth coming back after the last few years of fiscal corrections."

    Referring specifically to the U.S., Mr. Kanwar called the expanding shale oil and gas exploration industry a "huge boon" to U.S. manufacturing, which should help drive strong economic growth. The recent spate of tire company investments in U.S. manufacturing is testament to the economic potential.

    "To quote only one example, even 1-percent growth in the U.S. tire market calls for the addition of a new manufacturing plant every year to meet the increased demands," he noted.

    Addressing shareholders's concerns about Apollo's direction, Mr. Kanwar said:

    "Challenges will keep coming our way, but I want to assure you that we have the skills, the knowledge, the attitudes and above all the resolve to take on any challenge and overcome it.

    "Commodity prices will fluctuate, as will demand. However, the initiatives that we have been putting in place will ride out these short-term issues. We have invested in brands, in technologies and in markets to ensure that Apollo becomes stronger by the day, and able to take on bigger and bigger challenges."

    Mr. Kanwar opened his presentation at the general meeting with a quote from American entrepreneur and motivational speaker Jim Rohn—"If you are not willing to risk the usual, you will have to settle for the ordinary" —and told shareholders Apollo "has always lived by this maxim.

    "We have always strived to create new paths, and once these paths become widely trod upon we set out on newer ones yet again."

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