Falken targeting CUV segment for opportunities, growth

VENCE, France — With sales of crossover utility vehicles (CUVs) surging in North America, Sumitomo Rubber North America Inc. (SRNA) is evolving its Falken-brand tire lineup to serve customers in this segment more effectively.

The aim is to get a step ahead of the competition and offer tires targeted at a market segment that to date, according to Falken, is underserved by the tire industry.

"It's a new market segment. Everyone knows that CUVs are exploding," Rick Brennan, SRNA's vice president, strategic planning, said in an interview with Tire Business and during a presentation at the 2019 Falken Tires Dealer Invitational April 28-30 on the French Riviera.

Car owners are moving to the CUV-type platform, he explained, and car companies are following suit by curtailing passenger car production in favor of CUVs, SUVs and light trucks. But auto makers have yet to segment the CUV vehicle market as they have done with passenger cars, such as for high performance, off-road use, etc.

That has left an opening, he said, for Falken to introduce a tire targeted at the estimated 17% of CUV owners who drive mainly on paved roads but who are likely to go off-road at some point during their vehicle ownership and who want a more aggressive, rugged-looking tire.

Mr. Brennan and other Falken executives talked about the opportunities in the CUV segment and introduced three products and several tire size additions at a business meeting and during private conversations with the 36 key tire dealers and distributors attending the trip.

They also spoke about the company's recent growth in original equipment fitments in the U.S. and addressed supply issues and challenges the company is facing at its lone U.S. tire plant, in Tonawanda, N.Y., near Buffalo. Parent company Sumitomo Rubber Industries Ltd. (SRI) acquired the former ammunitions plant, the oldest tire factory in the U.S., in 2016 when the joint venture between SRI and Goodyear ended after a decade.

The Tonawanda plant is "really important" to Sumitomo and Falken, Mr. Brennan said, "because we're adding OE, and we are growing in this marketplace. And right now, we have to order the tires three months in advance before we sell them. And not everyone is really good at looking down the road three months on what you need to have in stock to fill every need.

"So having that Buffalo plant here to make stuff, we can make it more when we need it, and we can supply the market with what it needs without having to have four or five months of inventory."

Sumitomo is investing roughly $80 million in the plant to increase manufacturing capacity to 15,000 tires per day by 2020, Richard Smallwood, CEO and president of SRNA, said during a hearing last year before the U.S. Department of Commerce on the Trump Administration's proposed tariffs on imported auto and auto parts.

It eventually plans to more than double U.S. production in the coming years. In doing so, it is striving to increase the ability of the plant to make more tire sizes and types, a complexity the facility and its workers never have had to do previously.

A year ago, the factory was making 33 sizes of passenger and light truck tires and eight SKUs of truck/bus radials, Mr. Brennan said. Today, the plant has the ability to make 137 SKUs in passenger and light truck tires and 27 SKUs in TBR.

In addition it produces motorcycle tires, making it the only factory in the U.S. to manufacture passenger, light truck, truck/bus and motorcycle tires in one location.

While progress has been made in expanding capacity and the range of tires the plant can produce, the factory has not achieved its production goals, and "that's killed us this year — absolutely killed us," Mr. Smallwood said. "It hurt us on the PLT side and the truck side. So the Buffalo challenge has to be really solved for us to get the supply."

Mr. Smallwood, who also is an executive officer of SRI and Falken, said the company has two of its best global production people stationed full-time at the Buffalo factory. In addition, 35 ex-pat advisers from around the world are in the plant training and working on all the issues.

"So we are making a huge manpower investment trying to get that plant going," he said.

Besides producing replacement tires for the U.S. market, the Buffalo plant is playing an important role in Falken's growing OE business. In 2015, Falken had "zero" OE tire fitments on U.S. vehicles, Mr. Brennan said. Four years later, that number has grown to 39 with "fitments of some real premium stuff."

While reviewing the company's accomplishments in the four years since the Goodyear JV ended, Mr. Smallwood said, "We went after OE, and we went after it big. We've done very well getting premium fitments."

The challenge in OE, he said, is that company doesn't have the capacity to supply the auto makers with what they want.

"So we have actually had to stop some of the OE because, if we give all the OE all what they want, who else doesn't get product? You guys are going to be really unhappy."

The capacity issue also has Falken holding back on signing new distribution, Mr. Smallwood said. "We need to make our current dealers happy before we do anything else," he said.

Despite the supply issues and problems in ramping up the Buffalo plant, Falken has achieved replacement market shares of 3% for passenger, 2.9% in light truck and 1.4% for medium truck tires in the U.S., Mr. Brennan said.

Mr. Smallwood said the company's growth will come from new products.

For 2019 those products include the Wildpeak A/T Trail, an on-/off-road CUV tire; the Wildpeak H/T HT02, targeted at light trucks and pickups; and the Ziex ZE960 performance passenger tire.

Falken is targeting the Wildpeak A/T Trail at CUV owners who want adventure, Mr. Brennan said. These are people who use their CUVs off-road and are replacing SUVs with CUVs, "but they still want that rugged feel. And the consumer research we have done shows about 17 percent of the current CUV owners would really love to have something that makes it feel more rugged, even if they never go off road."

The A/T Trail will have a more-rugged appearance and off-road capability. In addition, it will be marked with the industry's Three-Peak Mountain Snowflake symbol for winter performance and carries a 65,000-mile limited treadwear warranty.

Falken has secured an OE fitment for the A/T Trail on the 2020+ Toyota RAV 4 TRD model. That tire, in size 225/60R18 100H, will feature the same sidewall look as the replacement version but will have a different tread design for better rolling resistance and lower noise, Mr. Brennan said. It will be called the Wildpeak Trail 01AA.

The Wildpeak A/T Trail will be available starting in September in 30 sizes, including nine replacement OE sizes. Falken is looking to price the A/T Trail 5% above the Falken Ziex CT60 CUV line, Mr. Brennan said.

Falken is targeting the Wildpeak H/T HT02 squarely at light-truck and pickup-truck owners, Mr. Brennan said. It will replace the HT01 and come with a knobby-looking tread design that "kind of wraps around the shoulder, so when you look at it from the side it kind of looks like a truck."

The tire offers 27% better treadlife, 20% more durability (especially in LT sizes), a 19% improvement in snow traction, 12% better wet performance and a 5% improvement in dry handling versus the HT01, Mr. Brennan said.

Unlike the HT01, Falken will focus the new tire solely on light trucks, with Euro-metric sizes for half-ton and mid-size trucks, and LT sizes for three-quarter and 1-ton trucks and some HD vans. And unlike the HT01, the HT02 will not have any sizes for CUVs.

The tire will have a beefier look with solid outlined black lettering on the outer sidewall and serrated lettering on the inside.

Falken will offer the tire in 38 sizes, with 30 made in the Buffalo plant and eight others at the company's factories in Japan and Thailand. The LT sizes will carry a 50,000-mile treadwear warranty and the Eurometric sizes will have a 70,000-mile warranty.

The HT02 will be available starting in November and come with road-hazard protection and a 30-day ride guarantee on all sizes. Desired pricing will be 5% higher than the HT01, Mr. Brennan said.

Falken said the size offerings will provide 95-percent market coverage for the half-ton and mid-size pickup truck tire market and 97-percent market coverage for the three-quarter- and 1-ton truck tire market.

Ten CUV sizes previously offered in the Wildpeak H/T HT101 will be transitioned to Falken's Ziex CT60 A/S crossover-specific product line and will not be offered in the Wildpeak H/T HT02, Mr. Brennan said.

In addition, the HT02 will feature 10 sizes not offered in the Wild Peak H/T HT01 — LT275/70R18, LT245/75R17, LT235/80R17, LT215/85R16, LT245/70R17, LT265/70R18, LT265/60R20, 285/45R22, 255/70R17 and 255/65R17.

The new Ziex ZE960 is the successor to the ZE950, a mega tire line with more than 105 sizes including touring sizes and those for CUVs. Falken has redesigned the ZE960 with a goal of providing a more-consistent performance throughout the tire's life.

To achieve this performance, Falken has built grooves, which it is calling Flask sipes, into the tread. These grooves actually widen as the tire wears, maintaining good water evacuation. Designers also improved snow traction through the use of a dual-sloped groove.

Overall, the ZE960 has 10% better wet braking and about 15% better wear than the 950, Mr. Brennan said. Wet handling, dry handling, snow traction and rolling resistance also have been improved, he said, while noise, comfort and dry braking are similar to the previous tire.

Falken will offer the ZE960 in 53 sizes, roughly half the number of the outgoing ZE950, starting in September.

"We have been able to enhance the safety aspects of the tire, make it a bit more refined and really focus on sizes where we need this type of tire and speed rating and capability," Mr. Brennan said.

The company will shift former ZE950 sizes not carried over to the ZE960 to other tire models including the CT60 CUV tire and Sincera SN201 A/S all-season and the Sincera SN250 all-season touring tires.

In truck and bus tires Falken is adding four new sizes to its product lineup, Mr. Brennan said, including 255/70R22.5 for the GI-388 and size 11R22.5 for the CI-637 truck tires designed for use on mixed-use trucks.

In addition, Falken will add size 315/80R22.5 20-ply to its RI151 regional steer tire and size 12R.22.5 to its BI850 open-shoulder drive tire.

Shifting to marketing and training, Mr. Brennan said the company last year put 1,396 dealers through its Falken Academy, a two-day classroom and on- and off-road driving experience on the company's tires.

"Seventy to 80% of the purchase decision is really driven by the guy behind the counter, and there is no better way than to get him on your product and tell him about it and let (him) go try it," he said. The goal is to put 2,000 people through the program.

To make the Academy even more beneficial, Falken is continuing to add content. "We'd like to make it a one-stop shop for everything you need for training," Mr. Brennan said. "Hands on and do it in a first-class experience."

The company also is expanding Digital Falken TV, a programming network that features original videos from Falken's on- and off-road racing teams in action, product overviews and training, general automotive shows and news of interest for dealer personnel and retail consumers.

Launched in 2018, the company now has Digital Falken TV in 1,200 dealer and retail tire locations, with the programming turned on an average of 10-plus hours a day in the sites.

"We will add content to this to make it more meaningful and usable for us to promote our product, not only to you but your customers as well," Mr. Brennan told dealers.