Armes is optimistic about opportunities: Cooper's new CEO correlates success with brand awareness
Less than 90 days into his tenure as president and CEO of Cooper Tire and Rubber Co., Roy Armes sat down with Modern Tire Dealer to share his early impressions about the company and about the industry.
Since then, Cooper has announced its 2006 financial results. The company posted sales of $2.7 billion, a 24% increase from 2005. It had a total operating loss of $10 million and a net loss of $79 million. In the fourth quarter, however, the company posted a $28 million operating profit.
Armes said at the time of the interview, "I'm more optimistic about our opportunities today than when I started in this role two months ago. We have the right alignment to achieve our goals." He further stated that the company will be concentrating on cutting costs in North America and will save more than $100 million in 2007, including some $20 million in the first quarter.
During the interview, Armes was relaxed and engaging. He was very comfortable in admitting that he was still learning about the tire industry. He agreed to talk again in a few months to address more in-depth questions.
On what Armes brings to the table:
Armes: I would say the following:
1) My operations experience will be my biggest strength.
2) My understanding of globalization and international experience which saw me through four moves during my career at Whirlpool. (Armes spent 31 years working for Whirlpool Corp. before joining Cooper.)
3) I've been in every function in every product category and in most (global) regions. Cooper is just now getting there.
4) I'll bring leadership that a company needs to drive to a new level. As an example, I'll be taking advantage of the strength that Cooper has for better value.
On his first 90 days:
Armes: We're well ahead of where I thought I'd be in the first 90 days. I've conferred with a couple hundred customers, talked with employees and touched base in U.S., Europe and Asia. I still believe I'm getting up to speed.
On surprises found at Cooper:
Armes: I'm pleasantly surprised at how supportive our customer base has been. Management got sidetracked the last couple of years while spending time getting up to speed on UHP lines and getting plants taken care of, but our customers remained supportive.
I also found that we have a lot of experience in the company. People here have a desire to be successful and make the company successful, and this will go a long way to drive value to our shareholders.
On customer support:
Armes: Customers have told me that I am a welcome change to the company. They felt we didn't keep up with the market as well as we should have. We didn't provide service. Dealers feel confident that we have the right priorities in place. They like the fact that we're looking at the cost structure of the company. I'm very pleased with the confidence and support we've received from our customer base.
On distribution channels:
Armes: Right now, we're satisfied with where we're at (selling through independent tire dealerships), but we're still looking at distribution for future growth. I don't see any change with our Mastercraft label program. We will be looking at other ways to grow our business. (He did not foresee any changes with the Avon brand in the U.S., either.)
On private label business:
Armes: Each company must look at their own situation and determine its strategic needs. As it relates to our private brand business -- our private brand customers are very important to Cooper's business, and have been for a long time. At the same time, we also understand and realize we have to find different and better ways to serve them to sustain a mutually beneficial relationship.
On brand clutter:
Armes: The industry is comprised of many brands, and you must differentiate your brand at the dealer base in order to succeed. It is important to have high brand awareness. (Armes mentioned the sheer number of brands that are in the market on several occasions during the interview.)
On replacement vs. OE markets:
Armes: We plan to stay in the replacement market for tires. With that said, we have a lot of work to do for a long-term strategy. There is more of a squeeze on the OE model side of the business and it will take time to determine this strategy.
On cost structure:
Armes: We've been able to get increased pricing for our new tires. We're doing this by adding value and getting customers' support -- we're providing a good value for the price. In North America, we're running three plants and filling them, with our fourth plant -- Texarkana, Ark. -- being used as a flex plant.
On appliances vs. tires:
Armes: I initially believed the appliance industry was much further ahead of the tire industry in globalization and marketing, but as I've examined it, the tire industry is closer and is rapidly catching up. The appliance industry became globalized sooner and was on the innovation curve earlier.
Armes: I built my first tire in the Albany plant recently and am absolutely surprised at the complexity of our products. We are in good position with a $350 million line of unused credit should we determine we need to use it.
Cooper launches SC4 Touring tire: Tire will boost broad-line business, company says
Cooper Tire & Rubber Co. executives have said pointedly that the CS4 Touring tire launch is one of the company's most important product introductions in its history.
Cooper, which CEO and President Roy Armes said got sidetracked while trying to go after the UHP business, intends to use the CS4 line to strengthen its position in the broad-line segment of the market.
The CS4, which replaces the company's existing Lifeliner SLE Touring line, is being placed at the top of the premium all-season touring line category. John Pecoraro, product marketing manager, says that most of the replacement tire volume "remains in the broad-line business. In fact, it has expanded to include various types of vehicles."
The CS4 sizes range from 14 through 18 inches. The size lineup fits many of the most popular sedans, minivans and crossover vehicles on the road.
The tire has two all-season tread options: a T-rated, four-rib tread design (in 29 sizes), and an H- or V-rated, five-rib design (in 31 sizes). The tire has a black sidewall with an extended bead filler designed to provide good handling capabilities and lane change and cornering ability. (A white pinstripe sidewall is available in size 225/60TR16.)
Cooper is backing the premium touring tire with two limited tread wear warranties: an 80,000-mile warranty for T-rated sizes, and a 60,000-mile warranty for H- and V-rated sizes. The company also is offering CS4 Touring buyers a free 45-day road test "to assure complete consumer satisfaction."
Company officials say the new tire line pricing will be 7% to 10% higher than the line it is replacing.
"This tire is unquestionably the most thoroughly performance-tested passenger tire in the history of Cooper," says Chuck Yurkovich, vice president, global technology. "In the past two to three years, Cooper has invested $200 million in its four U.S. plants."
Yurkovich says the investment helped them reduce harmonic force by 15%, static balance by 17% and improve lateral run-out over its predecessor.
Dealer orders for the CS4 were first taken in April and the consumer push is beginning now. "This is one of the most integrated launches we've ever had," says Dave Craig, director of North American advertising.
Cooper will give a free Verizon Razrphone to any consumer who buys two or more CS4 tires. The deal is good until the company gives away 50,000 phones. Craig says the company is heavily depending on point-of-sale materials at dealerships to help promote and advertise the tire. An e-learning module for salespeople at dealerships is also a part of the marketing support for the tire launch.
One Cooper dealer from each of its six sales regions will be eligible to win either a 2007 Roush 427R Ford Mustang or a 2007 Roush Ford F-150 Stage 1 truck in a promotional contest.
The Cooper CS4 Touring will be produced at the company's Tupelo, Miss., and Albany, Ga., manufacturing facilities.
(The company first previewed the tire at the Specialty Equipment Market Association Show last November.)