Mid-Year Report: Yokohama cautiously optimistic as factories restart

A second wave of COVID-19 — along with additional manufacturing shutdowns — could impact the industry in the second half, according to Stan Chandgie, vice president of consumer sales at Yokohama Corp. of North America. Mr. Chandgie also said that Yokohama's "Advantage" consumer associate dealer program, as well as the rollout of its all-season Geolandar CV G058, have been well received in the industry.

Q How would you describe business thus far in 2020?

A Well, we've obviously never seen anything like 2020. Factories have been idled; vehicle, truck and equipment manufacturers have suspended operations; and the tire market has clearly suffered. The first half of April represented the darkest days our industry has faced in the modern era.

On the bright side, we have definitely seen signs of recovery throughout the month of May as stay-at-home orders have been lifted and manufacturing has resumed.

Q What are some of the key changes the company has made in order to keep employees and customers safe during the COVID-19 pandemic?

A We've had to make decisions in waves, first and foremost to keep our employees and customers safe, second to stay operational and prepare for the future and finally to re-emerge positioned for future success.

We started restricting some travel in early March, which was expanded later in the month, along with instituting a remote work policy for our corporate staff. We also made the difficult decision to suspend production at our plants in the U.S. so that we could create a safer environment for our manufacturing team members.

At this point, our plants have resumed production and office staff has returned, albeit to a different, more controlled environment with an emphasis on health and safety.

Q Can you provide an update on your North American plants? Are they producing at capacity?

A Our plants in North America are up, running and fully operational.

Q Do you expect any supply difficulties in the second half of the year?

A From an ability to produce standpoint, no. We were well-positioned pre-pandemic, which allowed us to work through gaps in production as manufacturing was strategically suspended on a global scale. As production has come back online, we have been able to quickly recover and are projecting strong fill rates for our customers throughout the remainder of the year.

What we cannot predict however, is the impact of a second wave of the virus and how governments will respond around the world. The possibility of additional manufacturing shutdowns remains a very real threat, but actions that are currently under way should mitigate any interruption in supply.

Q Yokohama had an active 2019, rolling out myriad products. What did you learn from that, and how does that shape the North American operations moving forward?

A I don't know if "learned" is the right word, but we certainly confirmed what we already knew, which is that the thirst for new products in the industry is high.

2019 was certainly a big year for us in terms of the quantity of new products launched, but the quality is what we're proud of. We released a combination of pure replacement products, and products that were incremental to our existing offering.

Moving forward, that won't change. We're committed to managing product life cycles as well as attacking new areas of opportunity.

Q How are the enhancements rolled out in your Advantage consumer associate dealer program faring? Has that been received well?

A The changes were really well received in the market by both our distributors and our associate dealer partners. Our Advantage program was one of the first of its kind in the industry and, although they say imitation is the highest form of flattery, in this instance it also bred quite a bit of competition.

So, we felt the adjustments were needed to put our program back on top. This not only recognizes our long-time partners, but also provides them with a valuable tool moving forward.

Q What are some of the pleasant surprises you are seeing in the industry?

A It's been great to see how active and philanthropic the industry has been during this difficult time. First, the USTMA and TIA were very active in some of the initial lobbying to allow manufacturers and dealers alike to be classified as essential businesses, as stay-at-home orders put some very tight constraints on the economy. Other, less organized, less proactive industries did not fare as well.

Then, even as strains on businesses became more evident, several of our peers and customers initiated charitable efforts from manufacturing masks to donating to food banks.

At Yokohama, we partnered with the St. Christopher's Truckers Relief Fund (SCF) that works to help truckers and their families during difficult times. This was a way for us to recognize other essential workers that kept freight moving and goods flowing through the shutdown.

Q Where do you see the industry markets heading during the second half of 2020?

A This is still really difficult to predict.The latest consumer replacement tire forecasts have the market down 15% vs. last year, but a pretty significant second-half recovery is needed to even reach that forecasted year-over-year deficit. It probably goes without saying, but the tire industry's performance will be closely linked with that of the economy.

As government restrictions are relaxed, we expect more miles to be driven by consumers as Americans get back to work. We expect heavy incentives for new car buyers in the second half, and the possibility of additional government stimuli could provide some surges in consumer spending in the coming months. We've seen signs of life throughout the month of May which is encouraging, but there is still a long way to go.

Q Yokohama recently released the Geolandar CV G058, an all-season product made for CUVs, SUVs and minivans. How is that product being received? Does that segment have growth potential?

A The product itself has been received quite well. It offers a significant improvement in performance over its highly successful predecessor, the Geolandar G055, and it is well positioned for success. We made the decision to move ahead with the launch, mid-pandemic, on April 1 so that we would be poised to take advantage of the recovery.

As far as the category itself is concerned, yes, there is plenty of sustainable growth in one of the fastest-growing, and now largest, segments for consumer tires. It's an important place for us to be and we're ready to serve our customers.