Hankook's President Looks Ahead to Rest of 2020
“We are hoping there will be lots of pent-up demand for new tires, so we are building up stocks in regional distribution centers and preparing additional segments and new product launches,” says Sooil Lee, president of Hankook Tire America Corp., as miles driven continue to increase in the U.S.
Hankook has taken a number of steps to ensure a steady supply of tires as demand ticks upward. “We have continued to monitor our SKU system to ensure we can meet market demand, both during and after the COVID-19 pandemic,” says Lee.
“We have maintained regular contact with our dealer and fleet customers to ensure we continue to provide value and inventory levels remain adequate. Additionally, as business begins to pick up again, we expect the lead time between production and sales to be much shorter, so we also are reviewing optimization of production origin and plant management.”
Hankook resumed production at its consumer tire plant in Clarksville, Tenn., in late-May after a two-week shutdown. At full capacity, the plant can manufacture 13,900 units per day, according to MTD research.
'The trading down effect'
While optimistic, Lee harbors no illusions about how the COVID-19 pandemic has impacted the tire industry, commenting that “the entire industry suffered greatly during the first half of the year. The drop was especially seen in the original equipment sector.
“We are closely monitoring supplies to ensure that there is no issue in supplying our OE customers. Part of our annual manufacturing plans include OE tire production, so we are shifting our production schedule in line with the car makers. It currently difficult to predict when the automotive industry will be back to normal.”
Currently, Hankook’s overall volume “is now less than we originally planned – but this is the case for everyone.”
The pandemic hasn’t halted the company’s product development plans, he notes. “We are taking this time to execute many more tests to develop even more competitive products. We also are further diversifying raw material vendors and executing quality control tests to develop new compounds. We believe this is an opportunity to further explore innovative ideas so that we are prepared when things are back to normal.
“Fortunately, none of our product launches have been affected by COVID-19,” he says. “We have also continued to release new sizes to some of our core existing products, such as our Kinergy line, as scheduled, and we plan to continue our dealer and consumer promotions.”
Hankook recently announced that it will supply the 2021 Chevrolet Trailblazer with its all-season Hankook Kinergy (H436) product.
“In the short-term, we expect relatively stronger demand for budget-segment products and growth in all-weather product markets, as we expect consumers will gravitate towards cost-effective, all-season options, rather than seasonal products,” says Lee.
“We are noticing the effect on our sales, as many customers are looking for” Hankook’s Kinergy products.
“Another movement we are seeing is the ‘trading down effect.’ People are going for more value-for-money products. To accommodate this movement, we are actively promoting Hankook’s second brand, Laufenn. In difficult times like these, we must consider end-user value.”
“The COVID-19 crisis was something unexpected,” says Lee, “and many people were unprepared. Quarantine led to online shopping, which emphasized e-commerce and obtaining inventory from distribution centers, and therefore, supply chain enhancement plans were executed and is something that will continue to be reviewed.”
Looking beyond the present situation, Lee says Hankook will continue to invest in artificial intelligence technology and what he calls “next-generation tires,” including products for electric vehicles.
“For now, in the short-term, we will be focusing on normalizing and enhancing the efficiency of our plants,” he notes. “Our mid- to long-term plans include plant expansion and modernization for production innovation, such as monitoring regional sales strategies and smart factory technology applications.
“We are working on increasing U.S. plant production by moving the export supplies and OE portfolio to be manufactured in (Hankook’s) Tennessee plant. This way, we will be able to supply our U.S. customers more efficiently with faster feedback to different requests.”