Not long ago, Japan was second to Canada in passenger tire exports to the United States. Now it is a distant second to China, with South Korea third and Canada fourth.
Although Japan has survived this rapid repositioning seemingly intact, its exports to the U.S. have dropped steadily since 2005. In 2008, the world’s easternmost country will ship 14.1 million passenger tires to the U.S., 4.7% fewer than in 2007. In contrast, China will export 41.7 million passenger tires to the U.S., a 23.3% increase!
The opening of Toyo Tire & Rubber Co. Ltd.’s plant in White, Ga., in 2006 accounts for some of the decrease. The Nitto brand, which is sold predominantly in the U.S., accounts for about half of the plant’s production. Toyo high performance and SUV tires account for the other half.
Three of the four major Japanese tire manufacturers have consumer tire plants in North America. In addition to Toyo, Bridgestone Corp. has six (two in Mexico) and Yokohama Rubber Co. Ltd. has one. Sumitomo Rubber Industries Ltd. produces Sumitomo and Falken brand tires in Asia.
Modern Tire Dealer was invited by Nitto Tire U.S.A. Inc. to Japan earlier this year. From Tokyo to Osaka, a lot is happening in the Land of the Rising Sun.
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Autobacs ‘tire’ dealerships
The average independent tire dealer in the U.S. carries 11.3 brands. The Super Autobacs store in the center of Tokyo has eight: the Bridgestone, Dunlop, Falken, Toyo, Goodyear, Michelin and Yokohama major brands, plus the Maxgrade private brand, manufactured by Sumitomo.
Autobacs Seven Co. Ltd. runs a chain of 523 company-owned and franchised stores in Japan. Seventy-five are Super Autobacs outlets. In addition to tires, wheels, oil, batteries, vehicle accessories and mobile electronics, the one-stop “super” shops also offer new and used domestic and imported vehicles.
Annual revenue for the Tokyo store, the largest in Japan, is $20 million. Tire sales account for close to 30% of sales. Car audio-visual and navigation products represent 25% of the business, installation another 15%.
“This shop... has motorcycles. Others don’t,” said Hiroshige Onoda, assistant manager for the chain’s PR & IR & InfoCenter Group. “This is like a special shop... not all stores can handle everything.”
Of the 150 employees, 50 are technicians. Country-wide, 3,000 Autobacs technicians are certified to perform vehicle inspections.
There is no surprise when it comes to tire pricing, which is prominently displayed both outside and inside the building. Here are some examples:
Least expensive, 155/65R13
Autobacs/private brand: $47.26
Falken Ziex ZE912: $63.25
Dunlop Eco EC201: $66.17
Most expensive, 245/40R18
Yokohama Advan Sport: $496.29
Michelin Primacy HP: $444.71
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Here are some of the per-tire prices for what the Japanese call “pit” services: wheel balancing, $9.73 (it’s higher for 19- through 21-inch tires); tire disposal, $2.78; tire valve, $9.73; nitrogen, $2.78. “Nitrogen is becoming more popular,” said Onoda.
Autobacs is the largest automotive accessories chain in Japan, closely followed by another 500-plus store chain, Yellow Hat Ltd.
Onoda also counts car dealerships, car accessory shops and tuning shops as stiff competitors.
The Tokyo store is open from 11 a.m. to 9 p.m. seven days a week. It advertises in newspapers; through both e-mail and direct mail; and on television and radio. It also takes advantage of the parent company’s motorsports sponsorships.
Outside Japan, Autobacs runs close to 120 stores, including 90 in the U.S. In 2007, the company acquired Strauss Discount Auto’s 91 retail auto parts stores in New York, New Jersey and Pennsylvania; 88 are still open. They sell Cooper, Kenda, Kumho and Dean tires. In addition, there are two Super Autobacs outlets in California.
“We are working on a plan for global expansion,” said Onoda. “Right now, word from on top is ‘Focus on the domestic (Japanese) market.’”
A yen for yen
All four of the major Japanese tire manufacturers posted record sales in their most recent fiscal years. Bridgestone is the largest and most profitable of the foursome.
Bridgestone recorded close to $30 billion in sales in 2007 based on the year-end exchange rate; global tire sales represented 81.3% of that, or $24.6 billion. The company predicts a sales increase in yen of nearly 1% in 2008.
Its profit-to-sales ratio of 3.9% was slightly better than Yokohama’s 3.8%. Sumitomo was a close third at 3.4%. Toyo, the smallest of the four companies, had a ratio of 1.7% for its fiscal year ended March 31, 2008.
Yokohama recorded sales of $5.5 billion for its 2008 fiscal year ended March 31. Tires represented 76.1% of sales, or $4.2 billion. For its 2009 fiscal year, Yokohama forecasts a sales increase in yen of almost 2.5%.
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Sumitomo recorded sales of nearly $5.1 billion in 2007, with the vast majority, 84.3%, coming from tire sales. (Sumitomo actually had greater sales in yen than Yokohama, but the exchange rate on March 31, 2008, compared to Dec. 31, 2007, favored Yokohama.)
Sumitomo’s sales in Japan accounted for 86% of its total. That compares to 70.2% for Yokohama, 52.7% for Toyo and 40.4% for Bridgestone.
Based on its first-half financial results, Sumitomo’s sales are up 12% compared to last year.
Toyo had sales of $3.5 billion, with tires representing 70.6%, or $2.5 billion, of that. For its fiscal year ending March 31, 2009, Toyo estimates its sales will be up in yen 2.1%.
In order to compete against its larger competitors, Toyo relies heavily on tire simulation technology developed with the help of its own supercomputer.
“We think computer simulation technology is important for a small company like us,” said Susumu Nishihata, general manager of the tire research and development division for Toyo.
“It’s the key to get innovative ideas and do everything (quickly).”
Green initiatives going forward
Japanese tire manufacturers may be at the forefront of our industry’s “green” movement.
Concerns for the environment are ingrained in their business ideals, and affect everything from their tire compound development to how they control energy consumption during the manufacturing process.
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As part of its “Grand Design 100” initiative, Yokohama wants to make all its products eco-friendly by 2017. In his keynote speech at The Tire Society’s annual conference last year, Yokohama CEO Tadanobu Nagumo said greenhouse gas emissions are causing global warming and must be dealt with.
“This is a problem we all have to address in the entire international community,” he said.
Yokohama uses recycled synthetic rubber in its tire production. Its DNA dB Super E-Spec features “Super Nano Power Rubber,” which combines citrus oil with natural rubber.
To reduce CO2 emissions, Sumitomo utilizes a new tire production system that takes approximately 35% less energy to operate compared to conventional systems.
It also has installed cogeneration systems in all of its Japanese tire factories.
Ninety-seven percent of the new Enasave 97 eco-tire from Sumitomo is made from non-petroleum based materials. “With increased petroleum-free, natural materials, we can reduce CO2 emissions when we produce, use and dispose (of) Enasave 97,” according to the company.
Bridgestone has a “fundamental environmental policy” that it follows when developing tires. Six “indicators” are considered: prevention of global warming, resource conservation, use of natural resources, recycling, noise reduction and enhanced safety.
Toyo also has lofty goals. “We want to be number one in terms of the eco-friendliest tires,” said Kenji Nakakura, Toyo’s CEO and president. “We’re putting a lot of pressure on our engineers regarding this.”
That includes launching a “Green Product” certification system this year, with the goal of having all its rubber products certified in 2016.
The company also supports laws against the use of lead weights in order to reduce lead pollution. At the very least, improving tire uniformity through innovative manufacturing technology will help reduce the need for balancing weight.
An environmental emphasis alone will not be enough. “It has to be ecology with economy,” added Nakakura.
