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Lee, Hershberger address Hankook dealers

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They may be the “new kids on the block” at Hankook Tire America Corp., but they still had a lot to say at the annual Hankook Tire Dealer Meeting.

Soo Il Lee, Hankook’s new president, and Todd Hershberger, senior vice president of sales and marketing since August, gave attendees in St. Thomas, United States Virgin Islands, a recap of 2009, and a glimpse into the business environment in 2010.

'Economic recovery may have begun but it will be slow.'

Lee said Hankook’s parent, Hankook Tire Co., achieved sales of more than $3.9 billion in 2009, a record.

“To give this achievement some perspective, this means that Hankook Tire has practically doubled its global sales in just the last five years. This remarkable growth is consistent with our plan to be one of the world’s top five tire companies by 2014.”

In North America, “in spite of the dramatic decrease in new car sales and economic recession, Hankook’s total tire sales were up 8%, topping $840 million dollars for the first time,” he said.

“While the global economy may be stabilizing, I’m not convinced that all the difficulties are behind us. Unemployment is still too high and consumers remain cautious when it comes to new home purchasing and discretionary spending. In fact there may have been a permanent change in consumer spending habits.

“Economic recovery may have begun but it will be slow. In the tire industry specifically, raw materials and transportation costs remain on the rise.

“That said, the mission and focus for Hankook Tire remains the same: deliver market driven, high quality products that provide exceptional value for the consumer and a profitable, competitive edge for our dealers.”

Here are some more excerpts from his speech.

* “The tire industry is experiencing change at an unprecedented rate. We are witnessing technology breakthroughs in terms of enhanced performance, and reductions in rolling resistance that will make our tires an even better value for consumers than they are already today.

“As we continue to forge ahead, we are constantly refining all aspects of our business to remain strong yet flexible… able to adapt to the ever-changing industry landscape and take advantage of expanding markets around the world.”

* “As you know, during 2009 we have done many things to improve how we conduct our business including relocating our Canada headquarters into a new facility with modern warehouse attached. And we’re not stopping there. We plan to add additional warehouse storage in Vancouver by the end of this month.” (In the U.S., Hankook has storage capacity for more than two and a half million tires in six locations.)

'It’s encouraging to see vehicle miles driven... beginning to trend up.'

Hershberger touched on what the dealers can expect to see in 2010 and beyond.

“Most economists suggest that gradual recovery is on the horizon for 2010," he said. "Perhaps, but let’s keep in mind that consumer confidence remains low, unemployment too high, and tight credit will continue to slow the economy down.

“That said, Gross Domestic Product is expected to grow by around 2% in 2010 and 2.9% in 2011. Not back to historic levels of 3%, but clearly on a path to slow, gradual recovery.”

Two of the leading indicators in the tire industry also are on this same “moderately rising” path, according to Hershberger: vehicle miles driven and freight volumes.

“As we all know, you simply can’t wear out tire treads if the car or truck is parked. So it’s encouraging to see vehicle miles driven through the first 11 months of 2009 beginning to trend up versus 2008.

“Unfortunately, we’re still 3.38% below 2007,” he said. “In terms of miles driven, that’s 94 billion fewer miles driven in 2009 versus the same eleven month period of 2007. Now, let’s focus on the positive -- the trend shows a slow and continuing recovery.

“Freight volumes fell 20% in the last 18 months, but we should see this starting to turn around as well in the second half of 2010, again a slow, gradual recovery.

“The tire industry is projected to follow this same path: shipments up about 2% on consumer tires and 6% on commercial tires."

Hershberger said this “new economy” has impacted the way people buy tires.

“I’ve repeatedly heard stories about consumers postponing tire purchases and fleets cannibalizing their parked fleet to keep their partial fleets running. Even the used tire business is suffering, because tires are being run until the tread is nearly gone.

“I don’t believe this behavior will change very much on the consumer side in 2010, but look out for an uptick on the commercial side as freight starts moving again. I expect a good deal of the equipment that many fleets were cannibalizing will need to go back into service, and that means they’ll need tires!”

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