CEO, Hankook Tire Shares Global Vision of Tire Industry at “Crossroads”
- Asian Tire Manufactures to benefit most from current industry conditions
- Brand value, technological innovation and global management structure key for tire manufactures’ success
- Hankook Tire targets 9.4% (tire sales only) operating margin
SEOUL, KOREA (February 8, 2006) - The impact of Asian tire manufacturers on the global tire industry will continue to increase, but it will be the manufacturers who address brand value and differentiation, technological innovation, and global management structures that will prosper, according to Cho Choong Hwan, CEO, Hankook Tire, one of the leading global tire manufacturers.
As Hankook Tire achieved a one month export sales record, passing 100 million USD for the first time in its history, Mr. Cho, in a company-wide memo, shared his global vision for the tire industry and the challenges of fierce competition in the year ahead. He said, “2007 is a crossroads for the tire industry. We are emerging from a period of oversupply, sluggish consumption and a sudden rise in raw material costs. There are huge opportunities, however, for well positioned and competitive tire manufacturers as natural rubber prices are stabilizing, consumption in Europe is beginning to recover and we’re seeing considerable growth from the BRICs markets.”
In 2006, the average purchase price of natural rubber was 1,930 USD per ton, rising by 52 % from a year earlier. Hankook Tire is expecting natural rubber prices to stabilize between 1,800 USD and 1,900 USD. Mr. Cho explained that this raw material price increase was due to supply demands that coincided with the seven to eight year cultivation cycle of the rubber plant. The purchase prices of carbon black and synthetic rubber went up 27 % and 6 % last year and are expected to experience steady increases pegged to changing oil prices.
Recent competitive conditions within the tire industry have seen the considerable growth of production in developing nations both from traditional manufacturers and emerging players from the BRICs nations, according to Mr. Cho. Although demand is still growing in these markets, the rate of production is outstripping demand seeing a rise in overseas exports, particularly from China.
“The increased choice of tires is good news for dealers as there is a greater range of cost options for their customers and an increasing supply of competitively priced premium tires from established manufacturers like Hankook Tire who are leveraging production facilities in these emerging markets. What is essential is that our dealers and customers can recognize the premium quality and technological innovation of our brand over emerging competitors.”
Hankook Tire plans to continue to invest 4% to 6% of revenue in marketing. The move reflects the increased global brand building efforts of the company and its focus on ensuring customer value. The company has also reinforced its commitment to its Quality Assurance Network, increasing its focus on delivering enhanced customer care.
Speaking about the opportunities within the industry, Mr. Cho continued, “It will be the Asian tire manufacturers who have the most to gain, Korean and emerging Chinese companies in particular. Quality and reputation of product, technology, and global management structure and production facilities will be the key differentiator in becoming a true tier one global leader. The rise in Asian tire brands and their quality will in the end benefit the most important people: the customers.”
In the North American market, President Greg Pae has laid out a plan for 2007 falling neatly in step with the global goals of Mr. Cho. “Our total new tire sales volume for 2006 in U.S surpassed $613 million,” said Pae, “That’s an increase of 22 percent over previous year.” “I believe that the quality of our product is far superior to our competitors. Our biggest challenge in the North American market is to persuade consumers and dealers to try our tires for themselves and learn what the Hankook name means.”
To that end, Pae is taking steps to “value-up” the brand through an extended marketing campaign based around the “Dare to Compare” attitude. New advertising, a soon to be unveiled mobile marketing exhibition, ride and drive events, dealer training, and a continued commitment to motorsports are all steps that will differentiate Hankook from it’s competitors. “With the added efforts of our stellar sales force, and the cutting-edge technology that continues to come from our Akron R&D Center, Hankook Tire North America will be a major player on a global scale in 2007,” concluded Pae.
Hankook Tire, which grew from 11th ranked manufacturer in 2001 to 8th in 2006, is targeting 9.4% (tire sales only) in operating margin, through growing sales of its ultra high performance tires and stabilizing rubber prices. The company will focus on establishing global management systems which will raise organizational, processing and personnel capabilities to globally recognized standards and ensure greater levels of customer service and product quality. It will also continue to invest 5% of revenue in R&D at centers located in Korea, China, Germany, Japan and the US. Operations at its 5th, 500 million Euro production facilities in Hungary will begin later this year to meet overwhelming demand from its European customer base and establish the company as a truly global manufacturer. Hankook Tire is targeting global sales of 3.6 billion USD (tire sales only) in 2007.