Skip to main content
Sister Publication Links
  • Rubber News
  • European Rubber Journal
Subscribe
  • Login
  • Register
  • Subscribe
  • Current Issue
  • BEST PLACES TO WORK
  • News
    • HUMANITARIAN
    • TIRE MAKERS
    • COMMERCIAL TIRE
    • GOVERNMENT & LAW
    • MERGERS & ACQUISITIONS
    • OBITUARIES
    • OPINION
    • MID YEAR REPORT
    • SERVICE ZONE
  • ADAS
  • Data
    • DATA STORE
  • Custom
    • SPONSORED CONTENT
  • Resources
    • Events
    • DIRECTORY
    • CLASSIFIEDS
    • SHOP FLOOR
    • AWARDS
    • ASK THE EXPERT
    • LIVESTREAMS
    • WEBINARS
    • SEMA LIVESTREAMS
    • RUBBER NEWS EVENTS
    • BALANCING
    • DEMOUNTING
    • SAFETY
    • TIRE REPAIR
    • TPMS
    • TRAINING
    • VEHICLE LIFTING
    • WHEEL TORQUE
    • Best Places to Work
  • ADVERTISE
  • DIGITAL EDITION
MENU
Breadcrumb
  1. Home
  2. News
June 11, 2018 02:00 AM

Yokohama rides 'good' momentum into 2018

Kathy McCarron
  • Tweet
  • Share
  • Share
  • Email
  • More
    Print

    Tire Business talked with Jeff Barna, Yokohama Tire Corp. president and an officer on the Yokohama Rubber Co. board, about his company's initiatives heading into the second half of 2018.

    Q: How would you describe the tire business in the U.S. this year?

    A: One word: surreal. I can't remember being part of any industry with as many dynamic moving parts. It probably should be mentioned that most of those moving parts have implications.

    But overall, it's very exciting when you consider the major acquisitions, the consolidations, competitors partnering to create JVs, there's a continuation of massive financial commitments for U.S.-based manufacturing — you name it. Throw in a little espionage or a scandal or two, and you'd have the makings of best-selling thriller.

    For most manufacturers, it's been a tough 120 days. We're hearing a lot from our dealers about market softness, and I think that corresponds with some of the USTMA shipment data. The good news for Yokohama is that demand for our product remains strong, and we continue to introduce new products in core categories. We finished off 2017 with good momentum, and that momentum has continued for our company into 2018.

    Q: The thriving economy and low unemployment aren't helping tire companies?

    A: That's the biggest surprise I think for me in 2018 is the overall market softness, especially in consumer replacement and commercial replacement. When you look at all the positive macroeconomic indicators, along with the bullishness on leading indicators throughout the balance of 2018, it's the ultimate head-scratcher. We were confused. I don't think we're alone in respect to why there is such softness at retail or sell-out.

    Q: Where do you see the market heading the rest of the year?

    A: We believe it will continue to be a challenging competitive marketplace as it seems to be every year but maybe more so in 2018. Given the strength of the economy, seasonality, we expect an uptick in demand across all sectors, or at least that's what I think everyone's hoping for. Personally, I'm not so sure that we'll see a hockey stick reaction to reflect increased sales in the back half of 2018, but I hope I'm wrong.

    In short, we're preparing for an uphill climb for the balance of the year and would welcome any unforeseen tailwinds. It should also be mentioned that with all of these seismic changes in the manufacturing and distribution landscape, I'm not so sure that we've seen the end of these major customer/manufacturer moves.

    Q: Any trends you are seeing in the marketplace or anticipating in the near future?

    A: We continue to see increasing demand across several light truck categories. This is in part predicated on OE trends — for example, recent announcements from Ford where they decided that they'll kill off their production of sedans, that combined with a strong economy which is driving demand for larger vehicles.

    We also see stronger tire manufacturing investments in what I would call embedded technology, like tire monitoring sensors that can create a quicker feedback loop to those in the value chain, everywhere from distributors to retailers to consumers. And these sensors can track wear performance and quality, which I think is a nice safety add for the consumer.

    Q: What is your company doing to address these trends?

    A: We're hitting the light truck market very hard. By the time 2019 is concluded, we will see the strongest offerings in LTR products that Yokohama has brought forth to the market, maybe in its history.

    Additionally, we've got new, exciting products in the ultra high performance sector and, unfortunately, I can't tip our hat on the technology piece because much of that is proprietary.

    Q: With the push toward CUVs, SUVs and light trucks, is that going to impact UHP demand negatively?

    A: It might. The greatest unknown and potential adverse effect on UHP is the emergence of autonomous vehicles (AVs) and what that will mean to just driving and the U.S. population or any population for that matter. So if there is any one phenomena that is presenting risk to UHP, it's probably the emergence of AVs.

    Q: Is Yokohama on the bandwagon for developing tires for AVs?

    A: Yes, we're on the bandwagon. It's a big bandwagon so I think it's important to try to carve out, if at all possible, a niche or two within the context of what that will mean. A great deal of investment capital is being earmarked for development projects relating to AVs. So, yes, we intend to be a significant player when this particular market does rise up and confront us all.

    Q: What tire sectors are looking strong right now?

    Barna

    A The sector in particular that is outperforming our expectations is our OTR sector. Historically, Yokohama has been known as a strong player on the bias-ply side of OTR, but not really recognized as a significant player within the context of radial supply.

    However, we're seeing a really unprecedented lift in the demand of our radial products that I'm assuming the market in general and some of our peer competitors are seeing as well. And again, we think that momentum will carry forward throughout 2019 as long as the aforementioned economic factors and indicators show growth.

    Mining, construction and port have consistently been growing, the demand has been growing at double digit rates for us as a company.

    Q: Are bias-ply OTR tires still in demand?

    A: Very much so. But to be fair, I think that demand is a byproduct of just how well established in the market we have been with bias OTR products. Yokohama has had an elite reputation in respect to quality and durability and performance, so that's literally the foundation or the bedrock of Yokohama OTR.

    The fact that we're seeing historically strong buyers of bias now transitioning their orders to radial is a very promising sign, since that's been an area of focus is to rebalance our bias vs. our radial production.

    Q: What tire sectors seem to be struggling this year?

    A: Consumer passenger retail and sell-through are soft and I've seen conventional passenger car tires being off by as much as 5 percent, in the light truck segment off as much as 10 percent. Additionally the shipment data suggests that commercial replacement tires are down year over year.

    But this is being offset a little bit by commercial original equipment. The economy remains strong, and that sector is generally closely aligned with the overall economic trends. This is one reason why we're seeing growth in new equipment sales, which will ultimately result in an increase in replacement tire sales.

    Again, we do expect the market to turn around in the second half and continue to fuel some economic growth, but to what extent is unknown.

    Q: Has Yokohama been impacted by increased tariffs or the threat thereof?

    A: Not really. Yokohama Tire Corp., or at least the U.S. entity, does not import any TBS or consumer tires from China so we've never been directly affected by the implementation of tariffs. Of course, we see low-cost imports rise and fall with tariffs or the reduction in tariffs, but the demand for our product has remained consistent throughout this period.

    It's funny but the threat of tariffs is actually worse because it creates an element of the unknown. We often see dealers fill up inventory space in an effort to hedge against impending tariffs. In short bursts, this probably affects us more than anything else.

    We had a very strong 2017 in TBS and I would say to some degree that the go or no-go on tariffs probably did positively affect our business, in so much as customers loaded heavily and then stopped buying and actually found themselves loaded heavily on China-produced products, which in turn led them to an overstock inventory position — meaning that they weren't buying any further from China for an extended period of time.

    At that point, at that juncture, we seemed to see a pick up of our orders because customers could source domestically and we were in a position to fill orders quickly and in smaller quantities.

    Q: Did the federal tax cuts affect your business?

    A: To some degree, yes. First of all, we're really quite private about where and how we invest, but I can say this appears to be a great opportunity to invest back into our business in the way of people, process and systems. For those who know me, I'm a big culture advocate, so there is a priority list of things I want to tackle in the way of elevating us as a performance-oriented culture.

    I operate on a very strong commitment, if not a passion, toward people in creating an engaged environment, and I've always felt it was core to the companies that I worked for that highly engaged people can help create a winning organization.

    Yokohama Rubber Co. Ltd. photo

    Yokohama Rubber Co. Ltd. operates a passenger/LT tire plant in Salem, Va.

    So whether it's more people to balance a heavy workload or just investing more strategically and scientifically in people to help bring them to the realization that they can make greater contributions because they want to, not because they have to, is a very powerful place to be.

    I've been on this journey with Yokohama for the past 15 months. I believe that very good progress has been made, but there is still a long way to go.

    Q: What are your plans for the R&D facility in Concord, N.C.?

    A: The permanent location will be in Cornelius, N.C. The Concord, N.C., facility was always positioned to be a temporary location until we could find a permanent home for our North American R&D center. This location will focus on developing tires for the North American market exclusively.

    As we approach our move-in date later this year (Q3), we'll release all the details related to the R&D center, its capabilities and staffing.

    Q: Do you foresee tire price increases in the second half?

    A: If manufacturers continue to remain unrecovered, then yes, we would expect to see an increase. We've seen some spot increases in certain segments so far this year but we've also seen some pretty bleak financial reports from major manufacturers.

    Long-term, I don't see how those types of results are sustainable…. We took a small price increase to the market for our TBS business in January and followed with a 6-percent price increase on OTR products effective April 1.

    Q: How do you think raw material prices will fare in the second half?

    A: I think for the most part it seems to be stable, if not leveling off. Again, I have the luxury of being able to read and review competitor earnings reports, and we still continue to see manufacturers referencing their inability to recover on rising raw materials.

    So I think every company is different based on inventory positions and hedging capabilities and other factors. I'm assuming every manufacturer is in a slightly different position.

    So to me, I don't necessarily see any indicator suggesting that raw materials will elevate to levels that will require further pricing action in 2018. Then again, this is the year of the unpredictable, so who knows?

    Q: Going forward, what do you see as the challenges for the industry in the U.S. and Canada?

    A: At a high level I think the industry is still under-appreciated, and I hope that doesn't sound like I'm a whiner or I have a complex. The cost of tires relative to what they are asked to do makes them a tremendous value, and I don't think this is recognized by most.

    It's a challenge for the industry to continue to educate consumers and end-users on the benefits that a well-engineered tire can provide. This may only become exasperated in the next decade as vehicle utilization and ownership could change dramatically as autonomous vehicles continue to become more prevalent.

    In the shorter term, supply in certain segments will be a challenge as we react to changing demand and continue to source from a global supply chain. Winning the battle of supply chain efficiency is one important key to this.

    Q: In light of several manufacturers forming distribution joint ventures recently, is Yokohama looking to do something similar?

    A: No. And maybe that's an absolute "no."…Our business model is devoted to independent regional tire distributors. That's been Yokohama's wheel house for the past 50 years in the U.S. market, and we see no reason to deviate from that at this point in time.

    Q: Is there anything else that you'd like to add?

    A: Yokohama is, I think, the quintessential "steady and slow wins the race" type of company. We're built on historic Japanese principles. The company enjoyed its 100-year anniversary in 2017. YTC, which is the U.S. entity, which is the business that I run, will celebrate 50 years of being in the U.S. market in 2019. The business itself is a contradiction, so to speak, to everything else that is happening in the industry around us.

    There's a lot of posturing, there's a lot of moving pieces as I said earlier, and we really like our business model. We like the customers that we do business with. We have some tremendous new products, dare I say a high watermark of new products, that are hitting the streets within 2018 and 2019. We like who we are and we will continue to run our game plan and be aware of our surroundings but capitalize on opportunities as they present themselves.

    Letter
    to the
    Editor

    Do you have an opinion about this story? Do you have some thoughts you'd like to share with our readers? Tire Business would love to hear from you. Email your letter to Editor Don Detore at [email protected].

    Most Popular
    1
    Icahn-owned Auto Plus files for Chapter 11 protection
    2
    Toyo rolls out new Celsius II all-weather touring tire
    3
    SEMA urges USTR to end section 301 tariffs on Chinese goods
    4
    Buying group ITDG hires Jason Rook as top executive
    5
    Milestar to be official UTV tire of King of Hammers
    SIGN UP FOR NEWSLETTERS
    EMAIL ADDRESS

    Please enter a valid email address.

    Please enter your email address.

    Please verify captcha.

    Please select at least one newsletter to subscribe.

    Newsletter Center

    Staying current is easy with Tire Business delivered straight to your inbox.

    SUBSCRIBE TODAY

    Subscribe to Tire Business

    SUBSCRIBE
    Connect with Us
    • Facebook
    • LinkedIn
    • Twitter
    • Instagram
    • RSS

    Our Mission

    Tire Business is an award-winning publication dedicated to providing the latest news, data and insights into the tire and automotive service industries.

    Reader Services
    • Staff
    • About Us
    • Site Map
    • Industry Sites
    • Order Reprints
    • Customer Service: 877-320-1716
    Partner Sites
    • Rubber News
    • European Rubber Journal
    • Automotive News
    • Plastics News
    • Urethanes Technology
    RESOURCES
    • Advertise
    • Privacy Policy
    • Privacy Request
    • Terms of Service
    • Media Guide
    • Editorial Calendar
    • Classified Rates
    • Digital Edition
    • Careers
    • Ad Choices Ad Choices
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • BEST PLACES TO WORK
    • News
      • HUMANITARIAN
      • TIRE MAKERS
      • COMMERCIAL TIRE
      • GOVERNMENT & LAW
      • MERGERS & ACQUISITIONS
      • OBITUARIES
      • OPINION
      • MID YEAR REPORT
      • SERVICE ZONE
    • ADAS
    • Data
      • DATA STORE
    • Custom
      • SPONSORED CONTENT
    • Resources
      • Events
        • ASK THE EXPERT
        • LIVESTREAMS
        • WEBINARS
        • SEMA LIVESTREAMS
        • RUBBER NEWS EVENTS
      • DIRECTORY
      • CLASSIFIEDS
      • SHOP FLOOR
        • BALANCING
        • DEMOUNTING
        • SAFETY
        • TIRE REPAIR
        • TPMS
        • TRAINING
        • VEHICLE LIFTING
        • WHEEL TORQUE
      • AWARDS
        • Best Places to Work
    • ADVERTISE
    • DIGITAL EDITION