2008 Year End - Tire Industry News

Bridgestone sees profits fall

Tokyo, Japan - Bridgestone Corp. saw its net profits fall substantially on lower sales volumes for its first nine months of the year, while higher prices offset the reduced volumes, leading to sales levels on par with a year ago.

The company reported net sales for the nine months ended Sept. 30 at $24.1 billion, up about 1 percent from a year ago, based on the Sept. 30 exchange rate. Operating income decreased by 27 percent for the nine months compared to 2007 to $1.15 billion, and net income dropped 40 percent to $477 million.

For the nine-month period, Bridgestone said volatility in markets had been a defining characteristic, with signs of a slow-down in Japan and in Europe, while North America slowed significantly.

Nokian to cut production at HQ plant

Nokia, Finland - Nokian Tyres P.L.C. is planning to cut production at its headquarters’ plant in Nokia temporarily, likely resulting in the layoff of the plant’s 1,000 employees for about three weeks starting in mid-December.

Nokian said the production adjustments reflect the global financial crisis. In addition, Nokian is upgrading technology for car and van tire production at the plant, which eventually could lead to the elimination of about 70 jobs.

The layoffs are scheduled to begin Dec. 21 and last through Jan. 11.

Additionally, Nokian said it might have to furlough 100 employees in its heavy tires area for seven to eight months, starting in January. Already Nokian has switched production from forestry tires to harbor, mining, agricultural and industrial machinery tires in the face of low demand for forestry tires.

Nokian employs 1,000 at the 104-year-old headquarters plant, where it makes passenger, light truck, farm, earthmover and industrial tires.

Nokian said it will start negotiations related to these matters with the appropriate employee representatives, according to Finnish law.

The cutbacks reflect statements made in the firm’s third quarter financial report: “In Russia and the CIS countries, the economy and new car sales growth have slowed down considerably. In the Nordic countries, demand is expected to remain at last year’s level. The winter tire stocks of Central European tire distributors are exceptionally high, and manufacture in the automobile and tire industry has been restricted from the summer onwards. The manufacture of industrial machinery and equipment is expected to continue to decrease.

Goodyear profits fall despite record sales

Akron, USA - Goodyear’s net income from continuing operations tumbled to $31 million from $159 million in the third quarter, despite record sales.

The company’s third quarter revenues of $5.2 billion increased 2 percent from the corresponding period last year. The tire maker cited improved pricing, a richer product mix and strength in international markets—which offset lower volume, especially in North America and Europe—as the chief reasons for the increase.

In addition, Goodyear said, sales were impacted by the 2007 divestiture of the company’s tire mounting business, which contributed sales of $145 million in last year’s third quarter.

Goodyear actually had net income of $668 million in the 2007 third quarter from all operations, but that included a gain of $517 million on the sale of its former Engineered Products business.

The 2008 quarter was impacted by net rationalization charges and accelerated depreciation of $46 million, a loss on settlement of postretirement health care obligations in connection with the establishment of a Voluntary Employees’ Beneficiary Association of $13 million, expenses related to hurricanes Gustav and Ike of $7 million, discrete net tax charges related primarily to German operations of $6 million, charges related to the exit of its Moroccan business of $5 million and a gain on asset sales of $2 million, the company said.

Revenue per tire, excluding the impact of foreign currency translation, increased 8 percent over the 2007 quarter, which the firm said reflected global gains in pricing and product mix generated by its strategy to focus on high-value-added tires.

Goodyear said it made significant progress during the period on its four-point plan to cut more than $2 billion from the tire maker’s operations by 2009. The firm has trimmed about $1.6 billion so far.

Hankook posts net loss despite sales record

Seoul, South Korea - Hankook Tire Co. Ltd. posted a loss of $10.5 million in the third quarter despite record sales.

The firm, which had profits of $27.5 million in the same quarter last year, had an 18.6-percent rise in sales for the quarter to $1.06 million. Higher costs and fluctuating currencies caused operating profits to slide 45.2 percent, to $39.8 million.

The South Korean company reported a 47.9-percent decline in net profits to $57.8 million on an 18.3-percent rise in sales to $1.4 billion for the nine-month period.

The tire maker credited its ultra-high-performance tire business for boosting sales, noting it was the third consecutive quarter of sales exceeding $1 billion.

Hankook said the tire industry as a whole is still experiencing escalating raw material costs that have jumped about 34.8 percent since a year ago.

The UHP business accounted for $103.4 million of sales, up 40 percent from a year ago. In North America, Hankook increased sales 37 percent while sales in Europe grew 14 percent. Sales jumped 55 percent in the combined markets of Latin America, Asia Pacific, Africa and the Middle East, and 158 percent in Russia and other emerging Eastern European markets.

Hankook attributed its double-digit growth to investing about 5 percent of revenue into research and development and building brand identity through the original equipment market and so-called “smart marketing” that the company said returned multiple benefits.

Yokohama profits fall, forecast for ´09 cut

Tokyo, Japan - Yokohama Rubber Co. Ltd.’s net income fell off sharply for the first half of the year, prompting company management to revise downward the firm’s fiscal 2009 earnings projection.

The Japanese tire and rubber products maker said its net income slid 95.7 percent in the six months ended Sept. 30 to $5.2 million, on a 1.3-percent rise in sales to $2.42 billion. Operating income dropped 53.7 percent to $52.8 million.

Yokohama Rubber blamed the weakened earnings on the continuing upward trend in raw material prices, the appreciation of the yen and increases in logistics costs and other selling expenses.

The company expects to show a 54.9-percent decline in net profits and 21.5-percent falloff in operating income for the fiscal ending March 31, to about $90 million and $246 million respectively. The net income forecast is nearly 27 percent lower than previously projected.

Yokohama’s Tire Group posted a 2.7-percent gain in sales to $1.83 billion, but operating income fell 64.6 percent to $30.2 million. Sales in North America were down 6.3 percent to $475.3 million, and operating income fell 46.4 percent to $18.6 million.

Toyo predicts loss for fiscal 2009

Tokyo, Japan – Toyo Tire & Rubber Co. Ltd. said it expects to end fiscal 2009 in the red after posting a loss in the second quarter and first half, ended Sept. 20.

For the full year, Toyo’s now forecasting a net loss of nearly $25 million (based on the Sept. 30 yen/dollar exchange rate), a 92.4-percent drop in operating income and 2.3 percent lower sales.

The Japanese tire maker said its six-month net loss reached $20.9 million and operating income plunged 83.4 percent to $11.1 million as increased raw materials costs offset sales gains and other positive factors. Sales edged up 1.8 percent to $1.63 billion. For the half year, Toyo’s raw materials costs were up nearly $100 million over the same period in 2007, while exchange rate changes and higher operating expenses also produced negative effects, Toyo said.

Raw materials costs over those incurred last year are expected to exceed $200 million.

The new forecast is a marked change from Toyo’s most recent projections three months ago, when the firm said it expected fiscal 2009 net income to be about $13 million. Toyo’s net income for the fiscal year ended March 31 was $53.7 million, or 1.7 percent of sales.

The new sales forecast, for $3.3 billion, is nearly 6 percent lower than that projected in mid-August.

Toyo’s tire business segment sales rose 2.1 percent in the first half to $1.16 billion, but operating income fell 83.8 percent to $10.7 million.

Toyo’s business in North America slipped 8 percent during the six months to $495 million, with all of the decline occurring in the second quarter. Full-year North American sales are expected to fall 14.5 percent short of last year, Toyo said.

The tire maker said it anticipates obtaining $110 million in annual cost savings from its recently concluded business alliance with Bridgestone Corp.

Kumho postpones tire plant project

Seoul, South Korea - Kumho Tire Co. Ltd. has postponed further construction of its first U.S. tire plant because of the lagging global economy and faltering U.S. auto industry.

The company broke ground on the $165 million project at a site in Bibb County, Ga., on May 12. Instead of completing the 5.7 million sq.-ft. tire plant by mid-2009, the firm will set a new, undetermined date for the opening, according to the company.

A spokeswoman in South Korea said the firm still is committed to the project.

The facility, to be operated by the South Korean tire maker’s U.S. unit, Kumho Tire USA Inc., was expected to have an initial production capacity of 2.1 million tires. Local media reports said the company anticipated employing about 450.

Cooper reports losses for third quarter, nine months despite record sales

Ohio, USA - Cooper Tire & Rubber Co. reported losses of $55 million for the third quarter and $76 million for the first nine months of 2008, despite posting its highest sales yet.

Sales rose 3.4 percent to $794 million for the quarter and 3.6 percent to $2.2 billion for the longer period.

Record high raw material prices, increasing utility costs and production cutbacks because of raw material shortages created by Gulf Coast hurricanes caused Cooper’s weak financial showing, according to Cooper CEO Roy Armes and other company executives during a Nov. 7 teleconference.

Cooper increased its market share in Canada and Mexico despite decreased tire unit volumes in the U.S., Armes said. Also, the company’s Cooper Kenda Tire joint venture in China ramped up faster than expected, achieving a production milestone of 10,000 tires per day during the third quarter. Cooper’s international tire operations had record sales during the quarter, totaling $285 million, according to the company.

Cooper continues to focus on the long-term goals of its strategic plan, according to Armes.

“The pillars of our plan include establishing a sustainable and cost-competitive supply of tires, profitably growing our business, and enhancing our organizational capabilities to continue providing excellent value and service to our customers,” he said.

Armes also said the company expects to complete its capacity study by mid-January. The investigation could result in the closure of one of its four U.S. tire plants.

By: Rubbernews.com & Global Tire News

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