Q&A With Yokohama Tire Corporation’s Sr. Vice President Dan King

Six months of 2011 have sailed by, and for Dan King, Yokohama Tire Corp. (YTC) senior vice president of sales and marketing, the journey has been defined by varying currents, which at times has included navigating through choppy waters. The company has had to deal with ramifications from the March 11 earthquake and tsunami that devastated parts of Japan, home to Yokohama’s parent company, The Yokohama Rubber Co. Ltd. (YRC). The earthquake, along with a shortage of raw materials, has exacerbated an already tough global fill-rate problem. Despite all, King says Yokohama’s mark of continuous growth is on course, with 2011 showing to be a strong year and the outlook on the future even stronger.

Question: Can you give an update on how the Japanese earthquake and tsunami affected YRC? Also, how has it affected YTC in the U.S.?

Dan King: We all know it was devastating to the country and people of Japan, and it has impacted all the people at YRC to some degree. We’ve been lucky: most of our employees in Japan and their extended family members were not seriously hurt.  We did lose some facilities and witnessed some downtime with a number of our Japanese plants and testing facilities. Not surprisingly, we experienced a shortage of raw materials and products. We tried to minimize the impact in North America – where the demand is so high. It did have an effect, though, especially within our commercial tire division where we received less inventory than we anticipated. However, we were able to work through it and move forward. We were very fortunate within our consumer tire division as well, as a large portion of demand from there is filled in our plant in Salem, Virginia, which we are currently expanding and will be finished in September.

Question: Do you see any long-term effects? 

King: No, we don’t see any issues based on where our plants are in the region. The raw material shortage will last a bit longer, but we don’t see that as a long-term situation.

Question: Supply shortages seem to be an industry-wide problem. Do you see that situation for Yokohama improving in the next six months?  

King: The OE segment remains in high demand. With respect to the replacement market — though it is showing a slight leveling off this year — the segment is expected to see industry growth next year, in 2013 and 2014. We expect to see worldwide growth as well, especially in China, India and Brazil. It’s going to have an impact on the industry’s capacities, and we are addressing that with the Salem expansion and a major expansion in the Philippines. We’re looking at other parts of the world, as well. 

Question: Is the presence of cheaper tires from China and other countries still a factor?

King: There are a lot of brands in the U.S. It’s a large and growing market, so a lot of manufacturers want to have a presence here. However, the raw material cost increases have been significant, and those impact every manufacturer, including the Chinese.  They’ve had to re-evaluate how they price in the U.S. There have also been issues with duties — the Chinese and Thailand tariffs. Those have had an impact on pricing in the U.S., as well. 

Question:  How are things going on the commercial side?

King:  We feel there’s still a gap between supply and demand on the commercial tires, probably to a greater degree than the consumer. The demand on the OE commercial side is well above expectations. The replacement side was extremely strong, but has leveled off a little. Our demand versus our ability to supply now is a much bigger gap than we’re comfortable with, so we are trying to get as much product as we can flowing through. Any product that hits the dock goes to our warehouse and is immediately moved to the customer.

Question: As the highest-ranking American executive at YTC, what are some of your long-term visions for the company?

King: We’re working on an aggressive transition in the coming years. When it comes to how we service our accounts, we want to push our company forward in major steps, not small ones. As I mentioned before, one of the things we pride ourselves on is being the best supplier. If we’re the best supplier to our accounts, then they know we’re an efficient partner and they can make good margins off Yokohama products. They’ll have confidence in our product and will to want to sell it. That’s what our focus is. We have always been known for our products and we want to continue to push the envelope with new technologies. We expect to develop some of the best tires in the world.