SANTA ANA, Calif. — With schools back in session throughout most of the country — either remotely or in person, depending on your region and educational institution — it seems appropriate that Yokohama Tire Corp. has learned some valuable lessons in the current and post-COVID 19 pandemic era.
The Santa Ana-based subsidiary of Japan's Yokohama Rubber Co. Ltd. has used those lessons successfully to navigate the unchartered waters of today's economic climate.
"Overall we feel pretty good about where we ended up," Jeff Barna, president of Yokohama's U.S. unit, said in an exclusive interview with Tire Business.
"There have been a tremendous amount of lessons learned over the course of time. Those lessons learned feed into a better experience for the entire team, being able to manage under such adversity and uncertainty."
Some of those lessons, according to Mr. Barna, include:
• Patience and agility in the face of a heightened amount of decision-making.
While successful companies demonstrate agility and resourcefulness, the pandemic required that Yokohoma take this to a new level, Mr. Barna said.
"It's all about realizing a decision made on Monday might have seemed like a no-brainer, but by Wednesday, it ends up carrying implications that you didn't foresee 48 hours prior, requiring you to revisit decisions to make sure you're aligned with what you are trying to accomplish," Mr. Barna said, "whether that's maintaining the safety and well-being of your employees; ensuring there's ultimately going to be enough stock for your customers; preserving production schedules; whatever the case might be.
"The lessons learned are about maintaining focus and making sure from leadership standpoint you are promoting a highly agile operating environment."
"During periods of crisis like this, there's no such thing as over-communicating," Mr. Barna said. "Just being clear and candid and direct with employees. I think if you do that, you can build equity, to the point where if we have to make a tough call, the rationale behind it is understood by the team and the associates."
It was just as critical to communicate regularly with customers, Mr. Barna said, and create policy based on their comfort levels of interaction. That means determining "how they want to be treated both now and into the future."
• Provide a sense of organizational calmness.
Mr. Barna said it was crucial for the leadership team to maintain comportment.
"I rarely see great decisions being made while in panic mode," Mr. Barna said. "Keeping the organization centered, focused, doing the best of our ability to keep it distraction-free, I think has really been important during the last five months when trying to run a business here in the tire industry."
Mr. Barna said the team exuded a sense of calmness with "an extraordinary sense of self-awareness, whereby if we made a bad call, we were able to be honest about that and course-correct quickly. The foundation of all that was based on our people-first agenda."
YRC ranks comfortably as the world's No. 8 tire maker according to Tire Business' latest Global Tire Report (Page 18), with tire-related sales of $4.8 billion in 2019.
Those numbers no doubt will drop in 2020 — in its most recent financial report, YRC reported an operating loss of nearly $19 million on 20.7% lower sales of $1.54 billion in the global tire segment in the six months ended June 30 . Each of its North American factories were shut down for various periods during the start of the pandemic.
"All (plant shutdown) decisions were very intentional, and they were typically supported by sincere efforts to protect employees, sanitize the work stations and ensure the best possible operating environment you could," Mr. Barna said.
Perhaps the most important lesson the tire maker learned was navigating through the temporary shutdowns — "micro" events of COVID outbreaks at plants that followed once production had resumed.
According to Mr. Barna, those unpublicized shutdowns lasted from two to five days.
"That's what really has caught the industry off guard," Mr. Barna said. "The companies that were able to successfully navigate through those flareups are ones that are arguably in better inventory position today."
Mr. Barna said Yokohama entered the initial pandemic period in a strong inventory position in all divisions: OTR, TBR, consumer replacement and OE. The fact that the tire maker was able to navigate successfully through those "micro" events only helped to maintain the supply chain.
Mr. Barna said Yokohama's OE limited OE platform in North America was a silver lining, especially compared to major competitors.
"Our reliance is more on aftermarket replacement tires," Mr. Barna said. "We feel that the pain incurred by tire companies was probably lesser to Yokohama than others that are more heavily vested in OE."
Like many of those competitors, Yokohama implemented numerous cost-saving measures during the pandemic, including furloughs, salary reductions and bonus deferrals.
The understanding among the employee was, he said, "there was shared sacrifice to be made, but once we came out of this, the big picture was that we would be able to retain everything that was organizationally sound about the company pre-COVID."
Business has been strong, Mr. Barna said, even as different regions of the country grapple with a resurgence of the virus.
"We're more than delighted with the demand of product within the TBR segment," Mr. Barna said. "Business has been consistently strong, even during the low points of COVID, the April-May period. Consumer replacement is coming back very strong."
The commercial business continues to fare well as freight moves, while demand in the light truck segment has remained strong.
While OTR remains "a littler softer than anticipated," he said, the company continues to be smarter about expenses.
"It's been one way we can honestly say we've been protecting our profitability even with the downturn in some areas on sales levels," Mr. Barna said. "Overall, we are very highly aligned with what the parent company's expectations are."
He attributes the market resurgence to three factors: stimulus money; an increase in miles driven; and many markets opening.
A promising sign, he said, is the uptick in auto service.
"That signifies a good deal of pent up work repair work and demand," Mr. Barna said. "People naturally are going to default to making sure their car runs first, and then secondarily will address tire needs. Overall the repair segment of our industry, whether it's general mechanical repair or tires, the service bays seem pretty full right now."
He expects that trend to continue, at least in the short- to intermediate-term, as consumers avoid airline travel and the risks of traveling in close proximity with strangers.
"People are going to default to hopping in a car, like the '60s and '70s with their families and finding destinations and having on-the-road adventures," he said. "I believe in the short and intermediate term, it bodes well for the tire industry."
The pandemic had little to no bearing on Yokohama's research and development plans. Products that were scheduled for an update in 2020 have gone forward — among them, the March launch of the Geolandar CV G058 all-season for crossovers, smaller SUVs and minivans as the successor to the G055.
Early next year, expect the launch of several specialty applications. "In spite of pandemic constraints that are inherent with COVID," Mr. Barna said, "we've stayed pretty true to product release and launch schedules."
Mr. Barna said it's important for dealers to understand the tire maker is "deeply committed to them." He said the company has no plans to sell its product direct to consumers, as other tire makers do.
"Our focus has been and will continue to be to deliver value-added programs that separate our company as a thought partner and growth vehicle brand," Mr. Barna said. "We also want them to know we continue to maintain intense focus on the here and now."
He said the company understand that dealers worry about such variables as making payroll, the impact of trade wars, market compression, rising expenses, worker safety and employee turnover.
"We simply don't want to be the type of company that creates unnecessary disruption or unnecessary competition for them," he said. "Our mantra, at Yokohama is, we'll do our job so they can do their job."
That job means building quality tires while ensuring each decision or message it sends to the market supports its channel partners "in a way that can afford them incremental sales potential and better margins than our competitors."
It is easy for a tire maker to "get sideways," Mr. Barna said, in the face of a pandemic, election uncertainty, tariffs, supply shortages, the economy and price increases. That, he promised, won't happen at Yokohama.
"The key really becomes, how do you evolve into and remain the type of company that embraces such adversity?" he said. "It's important to stay grounded and highly committed to a strong strategy and by doing so, ensuring there is team alignment on organizational priorities."
The disruptions and changing headwinds, he said, provide opportunity.
"What I like most about Yokohama today," he said, "is we have a bring-it-on mentality, and that is truly empowering."