RIVIERA MAYA, Mexico—Hankook Tire America Corp. and its parent, Hankook Tire Co. Ltd., have aggressive goals to grow in the coming years based on three basic pillars: strategic globalization, technology innovation and what they're calling “brand value up.”
This effort includes boosting sales by double digits annually in the U.S., growing the number of retail points of sale as well as enhancing Hankook's brand presence. These initiatives should help South Korea-based Hankook become the fifth largest tire maker in the world by 2018 from No. 7 today, the company said, moving ahead of Pirelli & C. S.p.A. and Sumitomo Rubber Industries Ltd.
Hankook also plans to beef up its R&D technology globally by hiring 300 to 400 researchers at its Technodome technical center, which is under construction near Daejeon, South Korea, and scheduled to open in 2016.
In addition, Hankook plans to introduce two tires in the U.S. this year—the grand touring Kinergy GT H436 in May, which will replace the H426, and later this year the Winter I'cept evo2 (W320), which will replace the W310. Hankook will continue to offer the H426 in OE sizes.
Plans also call for developing a dealer council in the near future.
Hankook Tire America executives discussed these aims, plans and strategies in an interview with Tire Business and at a business meeting during the tire maker's 2015 Partner's Day, attended by about 150 key tire dealers, distributors and spouses Feb. 10 in Riviera Maya.
For its part, Hankook Tire America will focus on leveraging the additional capacity from its Clarksville, Tenn., tire plant, which is under construction and expected to be producing 5.5 million consumer tires annually by 2016-2017. A second phase, scheduled to occur in 2018-2019, will double output to 11 million units.
The site also has room for two additional expansions, said Shawn Denlein, senior vice president of sales, during the Partner's Day meeting.
The $800 million Clarksville plant, which will service the U.S., Canadian and Mexican markets, sits on 469 acres, and is expected to create 1,800 jobs by 2018.
The new plant will provide production “for everyone in this room,” Mr. Denlein said. Having a domestic plant “makes things easier, easier to do business,” he said. “We don't have to compete for production (from other Hankook plants), because production is here and servicing this particular market.”
A local plant also offers something else, he said: “When you have a plant, it says that you're here and you're dedicating yourself to the North American market.”
The addition of the Clarksville facility is part of what Mr. Denlein described as strategic globalization. “This is what is most impressive for me about Hankook,” he said.
Strategic globalization is about achieving economies of scale, he explained, and it's important to accomplish that because branding and production are costly and “it's all about being cost efficient.”
With economies of scale it's also important to have risk management, Mr. Denlein added. “Balanced growth is extremely important in our industry today. If you are too strong in one area of the country, in the world, and not strong in another, you have completely imbalanced growth. And that's really what makes Hankook very different in that capacity.”
To illustrate this, he displayed a chart providing Hankook's company sales in different regions of the world—Europe generates 28.8 percent of Hankook's sales, China 21.7 percent, the Americas 20.8 percent, South Korea 18.4 percent and the Middle East, Africa and Asia Pacific 10.3 percent.
Breaking this down further by country, Mr. Denlein noted that in Germany the company's market share for replacement tire sales is well over 10 percent, second only to Continental.
Hankook's share of its home market in Korea, he continued, is 41 percent, Nexen's is 22.9 percent, Kumho's 27 percent and others at 9 percent In China, Hankook's market share is 14 percent, compared with Giti Tire's 11.1 percent, 9.3 percent for Cheng Shin/Maxxis and 8.6 percent for Michelin, with all others at 58 percent.
Worldwide, Hankook operates seven tire plants producing 95 million units, not including the Tennessee plant under construction. Hankook intends to increase tire production to 120 million units over the next few years, including capacity from Clarksville when it comes onstream, Mr. Denlein said.
Another part of Hankook's growth strategy involves investing in technology and innovation. “This is an important part of our next step to being a top-tier brand,” he said.
Hankook spends roughly 5 percent of its overall revenue ($6.4 billion in 2014) on R&D, “which is huge in terms of our size compared to our competitors,” Mr. Denlein said. About 10 percent of Hankook's workforce, or more than 1,000 people, work in R&D.
The tire maker operates technical centers in China, Europe and the U.S., in Uniontown, Ohio, near Akron. The U.S. facility focuses on original equipment issues, including tire noise, rolling resistance and comfort.
Hankook's new Technodome R&D center in South Korea will focus, in part, on green technologies, what OE customers want, as well as current and futuristic projects, Mr. Denlein said.
The eco-friendly Technodome will have 90 laboratories focused on compounds, products, educational facilities and lounges. It will serve as the company's main research facility, supported by the other regional centers around the world.
In beefing up its technology efforts, the firm wants to move its Hankook brand to a top tier tire line over the next few years.
Historically the company has been considered “a very fast follower” in terms of technology, “but in the future we will be first to market and that's the goal,” Mr. Denlein said. “Because in order to be a top tier supplier, in that top tier you have to be first to market. But you just can't say it, you have to do it.”
Cesar Aquino, purchasing director for Tire Rack Inc. who attended the Partner's Day meeting, was impressed with what he heard about Hankook's plans for R&D. “Not every tire company devotes the resources to R&D that Hankook does,” he told Tire Business. “Five percent of sales goes to R&D.
“That, in raw numbers, is a lot of money.”
Mr. Aquino also singled out Hankook's plans to add up to 400 technical employees in Korea. “That's a 40-percent increase of people in R&D,” he said.
Today, Hankook places its brand in the high-value, second tier category, just below the premium, or Tier I category. The company's new Laufenn line—introduced last November and set to become available March 1 in a staggered launch—will be positioned in the value segment above economy.
“Our goal is to move Hankook to a top tier brand...based on the perception in the marketplace and all the activities we're doing,” Mr. Denlein said.
OE fitments on some of the world's top vehicles in recent years have helped propel Hankook's image higher in the marketplace, he said. In the future, Hankook expects to see increased fitments on more Japanese vehicles, including Hondas and Nissans, as well as on more premium vehicles.
“We see this as a very good success for us because the American consumer associates a Japanese vehicle with quality, high value in terms of resale, dependability, and if they see a Hankook tire on there we believe there is going to be an association,” Mr. Denlein said.
Hankook also looks to increase its brand-aided awareness above 60 percent—a goal over the next two years—from 54 percent today.
Increasing awareness of Hankook among consumers is an important part of the company's growth strategy.
“The more educated the consumer is and aware of the brand,” Mr. Denlein said, “the more overall business that we should see.”
The company's marketing efforts consist of sports marketing, TV, radio, PR and exhibition. “The idea is to get a lot of people seeing Hankook...instead of spending all of our money in one area,” Mr. Denlein said.
For television, Hankook will develop a commercial to coincide with the opening in 2016 of the Clarksville plant—a commercial that will connect more with the American consumer.
The company also will consider other areas of motorsports to enter in the U.S. following a successful year in drift racing, Mr. Denlein said.
As for Major League Baseball, Hankook will continue to advertise on the stadium outfield walls of a majority of teams. “If we pick the right teams, it works,” Mr. Denlein said, especially if they make the post-season playoffs, providing additional coverage.
In social media, Hankook has 175,000 Facebook fans. Not a large number, Mr. Denlein admitted, but it is in the top three in the tire industry in terms of engagement, a key metric.
Hankook also is discussing whether to return with a booth at the annual Specialty Equipment Market Association (SEMA) Show in Las Vegas, after stepping out last year.
Hankook has done a good job with branding, competing with the Michelins and the Goodyears, Mr. Aquino said. “I like that they are really focused on brand awareness.”
To reach this reporter: [email protected]; 330-865-6131.