Bridgestone fully recovered from cyber breach

NASHVILLE, Tenn. — Four months after fending off an attack on its cyber network, Bridgestone Americas Inc. has made a full recovery.

And in the process, the U.S. unit of Bridgestone Corp., the world's No. 2 tire maker, has emerged stronger, more agile and more resilient, as it continues to shore up its cyber infrastructure.

"We're fully operational post cyber," Scott Damon, chief operating officer of Bridgestone Americas, told Tire Business in an exclusive interview.

"We're pretty much where we were (before the breach), and we did it within a week's timeframe."

It was early in the morning of Feb. 27 when Bridgestone's key internal systems were breached.

The cyberattack shut down computers at certain manufacturing and retreading facilities in North America and Latin America. Workers were sent home early from several manufacturing shifts Feb. 27-28, including those in Des Moines, Iowa, and in La Vergne, Tenn.

Other plants affected included the truck/bus tire factory in Warren County, Tenn., and passenger/light truck tire plants in Aiken County, S.C., and Joliette, Quebec. Bridgestone Americas operates more than 50 production facilities and employs around 55,000 in Canada, Central America, Latin America and the Caribbean.

"We've been lucky," Damon said. "There's been very limited customer or personal data breached."

Damon said Bridgestone continues to work with its legal department, law enforcement and third-party advisers to investigate what it termed a ransomware attack. He declined to identify a perpetrator.

"You learn a lot at the middle of that," he said, noting that cyber criminals pose as actors running a business.

"They were being opportunistic. We see how they operate, and we learn a lot in the middle of this," Damon said. "And our organization has proven resilient in recovering from it."

The cyber breach prompted the tire maker into a process it calls "leapfrog" — jump away from one capital expenditure and instead address another: in this case bolster cyber systems that were planned to be upgraded eventually and put off other expenses.

"... We are basically ripping a Band-Aid off to leapfrog one decision, because there is no better time than now than to change it," Damon said.

"The (systems) were breached, they were old, and they are things you were already planning to change. It's not worth rebuilding in certain areas, so you just leapfrog it."

Despite the cyber attack, Damon described business as "quite good" in the first quarter, particularly the commercial truck market and retreading.

The Tokyo-based tire maker reported double-digit sales and earnings increases in its most recent financials. Adjusted operating profit for the quarter increased 19.2% to $869 million on 23.5% higher sales of $7.67 billion, while net income was up 3.4% to $563 million.

Every operating region across the globe posted double-digit revenue increases, led by 26% growth in the Americas and Europe/Middle East/India/Africa segment, to $3.36 billion and $1.77 billion, respectively.

"OTR and ag both are extremely strong," he said, pointing out that the trillion-dollar Infrastructure Investment and Jobs Act — signed by President Biden last November to improve roads and bridges — has yet to bear substantial fruit for the tire industry.

"Global mining is certainly strong. Construction aggregate demand has increased over the past two years," Damon said. "It's just the supply chain trying to keep pace with demand."

Ah, the supply chain. Since the proliferation of COVID-19 in March 2020, all parts of the supply chain, from a reduced workforce, to freighter costs, port availability, material shortages and all facets of getting product from the factory to the end-user, have been a challenge.

Damon reports that Bridgestone is seeing some "relative" improvement on the container side.

"Certainly the (moderating) of restrictions in China have helped that a little bit, but I would say other parts of the supply chain are not. The at-risk material supply is as bad as it's ever been, though the containers from the West Coast are slightly improving."

The scarcity of carbon black and natural gas, exacerbated by the war in Ukraine, is as challenging as ever, he said, driving unpredictability in the market.

Damon said carbon-black supply has become strained as countries impose sanctions on imports from Russia, a major oil and carbon-black producer.

That, coupled with tighter pollutant restrictions on carbon-black production recently implemented by the Environmental Protection Agency, is "affecting carbon black across global tire manufacturing."

The war has had a profound effect as well. Bridgestone's passenger tire plant in Ulyanovsk, Russia, has been idled since mid-March, when the tire maker froze new capital investment at the facility and halted exports of tires to Russia.

Damon said there is no timetable for it to reopen as Bridgestone management assesses the risks of every scenario.

"In terms of transportation input, fuel input all the things that affect our structural costs and customers costs, are being driven by" the war, Damon said.

"A good example is you can expect natural-gas input costs to be 2 1/2 times higher than they were last year," he said. "Heating your home, anywhere you use natural gas, you're seeing an impact. We're all seeing the diesel impact on transportation and all that is flowing back to consumers and inflationary pressures they see on end price."

Bridgestone, like all other tire makers, continues to increase prices. The company is raising prices July 1 on consumer tires sold in the U.S. and Canada by up to 10%, the third increase in 2022.

But consumers, he said, remain undeterred, at least for the time being.

"We're certainly seeing a red-hot economy that, despite the price increases and inflation, demand still remains quite strong," he said. "It is a pleasant surprise."

So what does that mean for the second half of 2022 and beyond?

Damon said even with the original equipment market soft, Bridgestone expects to meet its meet its original goals.

Among tire launches planned in 2022 are a run-flat Driveguard; a WeatherPeak touring tire; a UHP summer tire, the Potenza RE-71RS; and continuing development of products made specifically for electric vehicles.

Damon said he sees no signs of the commercial market slowing down, based on the explosion of e-commerce and last-mile delivery products.

"Tire demand will continue to be strong there and we'll have challenges post-COVID to fill that demand," he said. "When does that normalize? Even in a recessionary or slower economy, we will probably see us weather that longer."