Yokohama Tire Corp. President Discusses the Turbulent Tire Market

The economic downturn in 2008 and 2009 caused severe repercussions within the tire industry, including a major slowdown in production. That, in turn, led to a problematic fill rate situation in the year that followed.
Fast-forward to 2010 when the industry actually did see signs of improvement — most critically, an increase in customer demand. Companies experienced a better, stronger year. However, with the relief from one pressure came new challenges from several others that replaced it. There was now of course, and continues to be, the pressure to get supply to adequate levels. Then, there are the skyrocketing costs of raw materials, labor issues, legislative and regulatory battles, as well as fierce competition.

Things may look clouded still, but not to Takao Oishi, president and CEO of Yokohama Tire Corp. (YTC). Under Oishi’s guidance, Yokohama has successfully navigated through the tough times and is poised for a promising future. In this Q&A, Oishi offers an industry overview, from a president’s perspective.

Yokohama has turned the corner in the economic downturn. How are things going?

Takao Oishi: Thanks to everyone’s hard work and effort at YTC, we’ve been doing very well and are still continuing to grow. Like all companies in our industry, 2009 was a rough year, but 2010 was a big improvement for us overall. We’re still struggling, though, with issues that are affecting everyone in the industry, such as the escalating costs of raw materials and fill rate problems.

What trends do you see in the marketplace?  Do you see an increase in the off-the-road tire market? Commercial? Consumer?

Oishi: Our research indicates the commercial segment is growing a little faster than the consumer segment at this time. There are more commercial trucks on the road carrying more goods — a very good sign for the economy indeed and the commercial tire market. Additionally, the commercial segment is becoming more environmentally aware with initiatives such as the EPA’s SmartWay program. This opens new opportunities as an ever increasing number of fleets require SmartWay-verified tires that are fuel efficient and last longer, which Yokohama already has. We not only save fleets money, but protect the environment as well. We believe being green is an important part of our business.

Do you think we can expect improvements for the tire industry overall in 2011?

Oishi: Yes, 2011 will be slightly stronger than 2010, but all tire manufacturers — including Yokohama and its competitors will face the same problem on supply, as well as the rising costs of raw materials. Remember, the industry really suffered economically in 2008 and 2009. Most companies didn’t invest largely in their factories. Production was cut dramatically. Now that the economy is turning around, all of us are doing our best to catch up quickly. How fast anyone does this will be key to their success.  

What are the biggest challenges facing the industry?

Oishi: The rising cost of materials is a major challenge because you can’t prevent it. This makes it tough on everyone, especially the tire makers. As a manufacturer, you have to be very sensitive to the raw material price fluctuations. When raw material prices go down, we can earn money. When they go up, we can’t. We are forced to adopt price increases but the rates they take on never fully offset the increase in raw materials. That’s why we have to be an efficiently run company. We’re looking at every angle on how to optimize operations. This will continue to be a primary focus for us now and as we approach our 100th anniversary in 2017.

Does quality beat price?

Oishi: We know that some people will only buy on price, but overall, we believe quality does beat price. Not only do we beat them on the quality, we also beat them on servicing after the sale. Those things are important to consumers. Let’s not forget to add performance, ride comfort, handling and tread life. It all adds up. In the end, our tires prove their value every day. That’s why these copycat companies don’t threaten us. They may be a little headache, but nothing more. I’m not worried about them.

What does concern you?  

Oishi: I don’t worry too much, especially about the competition because we make a great product under the name of Yokohama and it’s supported by a dealer base that believes in the product and customers that are loyal to the brand. I’m not too concerned about the next five years because if we can get the supply, we’ll grow quite a bit. Obviously, you have to keep your eyes open to all possibilities and challenges, but I believe in staying focused and doing our best in everything we do. That includes technology, quality control and environmental initiatives … everything. If we do that, growth will take care of itself.