Expansions timely for Bridgestone

NASHVILLE — A small investment could translate into big dividends for the world's No. 2 tire maker.

Bridgestone Corp. recently completed small capacity additions at several plants in North America — just in time to help meet burgeoning demand for products that serve the last-mile delivery, consumer and agricultural markets, according to Scott Damon, Bridgestone America Inc.'s group president, operations, and the newly minted chief operating officer.

"We've been on a journey in North and South America of adding small capacity gains, so all of our consumer plants in North America have finished basically adding more capability around high-rim-diameter and technology stacks that drive differentiated performance," Mr. Damon told Tire Business.

The investments include:

• Adding 32,000 square feet of manufacturing space to accommodate new equipment at the tire maker's radial truck/bus tire plant in Warren County, Tenn. The expansion, a three-year investment of $40 million, increased plant capacity by 275 tires per day, bringing daily production to 9,400 tires per day.

• Adding warehouse space at its passenger/light truck tire plants in Aiken County, South Carolina • Adding 3,000 tires of capacity per day at its 38-year-old P/LT plant in Cuernavaca, Mexico. The $100 million investment included additional manufacturing space to accommodate new tire assembly machines, material-handling systems, curing presses and associated equipment.

And Mr. Damon said the tire maker — ranked second globally with $24.3 billion in tire sales in 2019 — will consider other options to meet growing demand.

"We will continue to look at our footprint and our supply chain both in consumer in commercial post pandemic to see proximity to customer base, how the supply chain strategy will move, and we'll look at that accordingly," Mr. Damon said. "That's constantly going to be under study for us."

Mr. Damon reports that Bridgestone, like other tire makers, has seen strong demand continue in the TBR segment, fueled by last-mile delivery vehicles, but also in other segments, including consumer replacement, agriculture and retreading.

In fact, he said, ag sales have been its strongest since 2014.

"We continually see that growing, where it has been somewhat of a declining market based on the demand," he said. "It's changed dramatically."

Business slowed, he said, in 2014 as new competitors from India entered the market, "so the supply and the capacity versus demand was keeping it from not growing as much as it could. It's really booming. That's a positive sign for all the agricultural suppliers."

The growth of retreading is another positive sign, buoyed, he said, by an increasing focus globally on sustainability.

"There's a lot of tailwinds around sustainability," he said. "You're going to see Bridgestone play this broader role where the tire is still an integral part of it in a world that probably is going to move more fleet managed. It's going to have a higher element of retreading — retreading in markets that we don't traditionally think about, because you have a tailwind.

"You're going to see adjacencies there with this tailwind, and how it touches these end-of-life tire platforms where you're basically trying to get to a world that is carbon neutral and really 100% reusable materials in a tire. That's a broad vision, but I would say that entire circular economy touches those three platforms, and I think we want to be very aggressive there."

Supply issues continue to be challenging. With 22 manufacturing facilities in North and South America alone, each affected by shutdowns, furloughs and other difficulties related to the COVID-19 pandemic, Bridgestone has been trying to keep up with the increased demand across most segments.

"Everyone has been trying to rebalance inventory against the demand, but the demand is just outpacing the inventory position, which certainly has been an industry issue, so I would say supply will continue to be tight as we've seen this ramp-up coming out of Q2, Q3 last year to where we are right today," Mr. Damon said.

"I expect it to continue, though, capacity is continually inching up across every manufacturer including Bridgestone."

The shutdown was the largest in the company's history.

Of course, that isn't the only challenge manufacturers face. Shortages in raw materials and container ships, labor issues and natural disasters such as the recent shutdown of the Suez Canal each has contributed to supply chain difficulties and rising prices.

"We're basically trying to manage our supply chain from our Asia manufacturing, our Europe manufacturing and South America, and given that the capacity has not quite caught up to the demand, that certainly is affecting inventory positions," Mr. Damon said. "We're trying to optimize that as best we can from customer satisfaction, customer preference.

"It's something we're monitoring from a finished-good side, and certainly from a raw-material side. It's a daily grind, not only on the container issue, which not only is tire-industry-related, but everyone importing into this market. But the raw materials are very volatile, from chemicals to natural rubber to other sources that you're continually managing."

With OE business down as auto makers struggle with a shortage of semiconductors, Mr. Damon said Bridgestone will need to balance that in the second half against the appropriate consumer replacement supply. New vehicle inventory in the U.S., he said, is at 34 days, less than half of what it normally is.

"What all of us will do, including Bridgestone, is basically pivot your manufacturing point to make more replacement (tires) where you have the available amount of time to do so," he said.

Consumers are demanding premium brands, he said, particularly tires with rim diameters 18 inches and above.

"You're seeing people wanting to pay more for the premium brands," he said. "That's going to continue to be strong, that high-rim-diameter, high-value-added mix of consumer should continue to be strong. So that's going to be a positive pleasant surprise that even in a world post-pandemic where you maybe think consumers are constraining income, it hasn't resulted in that, and we expect that to continue to be strong."

Another good news post-pandemic: Dealers will become even more relevant to the market as the electric vehicle market grows.

"(Dealers) are going to play an integral role in the service network that is going to be worried about range, recharging and of course the tire/wheel corner of that vehicle platform," Mr. Damon said. "If you're a tire service provider that's great news. What you sell is more relevant.

"You're going to be more relevant in the vehicle ecosystem, and you're probably going to have a service element that doesn't exist today, especially when you see a network that will have so many new entrants in vehicle production."