Hankook’s Pae reviews record-setting 2007, previews 2008

Jan. 26, 2008

At the 2008 Hankook Tire Dealer Meeting in Paradise Island, Bahamas, Hankook Tire America Corp. President Greg Pae addressed the challenges faced by the company past, present and future.

In his speech to the retailers and wholesale distributors in attendance, Pae also revealed some of the goals of his parent company, Hankook Tire Co. Ltd. Here are excerpts from his speech, delivered on Jan. 24, 2008.

"2007 was rewarding for our company in many ways. However, as many of you know, it was also one of our most challenging. Despite the tire industry's marginal performance in both original equipment and replacement tire sales in North America, the demand for Hankook tires continued to exceed our ability to supply all of the tires that our customers wanted to buy.

"So while we achieved another record-setting year, posting significant gains in tire sales and market share, it was disappointing that we were not able to fully meet your needs. I want to offer my personal assurance that as we begin 2008, we're working hard to make some improvements, many of which you’ll hear about this morning.

"Before we talk about where we're going, let me share with you some of the results that you helped us achieve in 2007.

"Our 2007 sales in North America topped $751 million for an increase over 2006 of more than 9.5%. Our success in the United States is a direct result of your support and on behalf of everyone at Hankook, I want to express our gratitude and congratulations.

"As we 'grow forward' together, you can count on the fact that in 2008, Hankook will invest more than ever before in:

* manufacturing capacity, including plant expansions and proprietary systems to ensure product quality;

* product technology and the development of new sizes and patterns;

* brand building marketing programs that will increase consumer demand for Hankook tires and direct them to your points of sale.

"Let me explain just a bit more on each of these three points. First regarding manufacturing and capacity.

"Last year at our meeting, as a result of ongoing expansion activities at our factories in Korea and China and with the opening of our new plant in Hungary, I estimated that by 2010, our total annual capacity would exceed 73 million tires.

"Actually, I am pleased to report that our capacity expansion is ahead of schedule, and I expect that we will exceed 73 million tires by the end of this year, two years ahead of schedule! (Also see “Hankook addresses supply shortages at its 2008 dealer meeting," Jan. 24, 2008.)

"Second, while building capacity and unit production is very important, it is equally important to build quality into every product to satisfy our customers' needs. Innovation and technology are the two primary factors that continue to drive Hankook Tire's growth and reputation. Therefore, we will continue to invest approximately 5% of total revenue in R&D annually, which we believe is proportionally more than any of our competitors.

"In North America, as we become a more and more important player in the marketplace, our growth will always be based on balance between original equipment and the replacement market segments.

"Our pursuit of OE business does not and cannot disrupt our replacement market business.

"Right now, we enjoy global OE fitments with Ford, GM -- Saturn, Chevy and Pontiac brands -- Hyundai, Kia, Volkswagen, Audi, International Truck and others, including our first fitment with Chrysler. These OE positions serve to further validate our commitment to quality and eventually bring new customers to our replacement business.

"Finally, I want to assure you that our increasing investments in technology and manufacturing will be complimented by increasing our investments in brand building and marketing activities.

"Just a few weeks ago at the SEMA Show in Las Vegas, we not only introduced the new Ventus V12 evo ultra-high performance tire line, but also introduced our new motorsports sponsorship that will allow us to compete in the American Lemans Series. As you know, this is the premier road-racing series in North America, and we're excited to have our tires do battle at this high level of competition….

"Many of you and your customers remain enthusiastic about our major league baseball home plate signage and motorsports activities as the anchors in our brand awareness campaigns. Last year, we also launched our first mobile marketing exhibit in order to interact with more consumers and generate a positive interactive experience with them.

"In 2008, these programs will continue to be refined and complimented by even more marketing activities that are designed not only to increase Hankook brand awareness, but to 'value up' the Hankook brand.

"The benefits will be increased (by) consumer demand for our performance tires and increased sales for dealers who are committed to merchandising and selling Hankook tires.

"To this end, later this morning, you'll hear about some exciting new investments we're going to make in TV advertising that will build brand equity and ultimately drive more foot traffic to Hankook retail locations. (See also “Watch for Hankook commercials on a television nearest you," Jan. 24, 2008.)

"For all of us to achieve our goals in 2008 and beyond, we must work in partnership together. We're optimistic and excited about the future growth of our company and we need your continued support. With growth comes challenge and opportunity. I want to assure you that our company is committed to earning your trust and your business 'growing forward.'"