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Published on August 23, 2004

Global tire industry hits $80 billion

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Date Published August 23, 2004

Currency translation benefits and growth by new companies in China sparked a 12-percent increase in the size of the global tire market in 2003, to about $80 billion.

The bulk of the total growth generated by the 150-plus pneumatic tire companies came from the major multinational tire makers, which gained the most from currency translation. However, 16 Chinese tire makers now have entered the ranks of world's 75 largest tire companies, including three among the top 20. Collectively, these 16 firms accounted for more than $4 billion in tire sales revenue last year.

According to U.S. Department of Transportation data, there are 120 tire factories in China with a DOT new tire plant code, necessary for selling tires in the U.S. Three years ago there were 45. The growth isn't likely to stop soon, with both the multinationals and the independent Chinese companies investing in new capacity.

The biggest changes in the Rubber & Plastics News annual ranking of the Top 75 tire makers are Hankook Tire Co. Ltd.'s advancing to ninth ahead of Toyo Tire & Rubber Co. Ltd., and Grandtour Tyre Pte. Ltd., a Singaporean holding company, emerging as China's second-largest tire manufacturer.

Hankook's jump was based on 6.2-percent sales growth in its reporting currency-the South Korean won-and a 4.4-percent shift in the value of the won/dollar exchange rate.

The average annual exchange rates are used to convert revenues to U.S. dollars. Last year the exchange rates for major currencies like the euro, Japanese yen and South Korean won shifted 16.6, 7.2 and 4.4 percent, respectively, from 2002 as the dollar weakened internationally.

Groupe Michelin retained its hold on the top spot, outdistancing No. 2 Bridgestone Corp. $16.2 billion to $14.8 billion despite reporting lower sales, in euros, than in 2002. Bridgestone's tire sales also increased by more than a billion dollars, although in yen the increase was a more modest 2.2 percent.

Michelin took several steps in the past year to solidify its sales base, including taking minority shares in Indonesia's P.T. Gajah Tunggal Tbk., South Korea's Hankook and India's Apollo Tyres Ltd. and setting up a joint venture with Apollo to coordinate a new tire plant in India.

In addition, it took controlling interest in late 2002 of Yugoslavia's Tigar Rubber Products Co., which reported sales of $62 million in 2002.

Michelin also is in the midst of a dozen expansion projects globally.

No. 3 Goodyear had the largest percentage increase in sales among the major tire makers, more than 10 percent, as it kept pace with Michelin and Bridgestone in dollar growth. Goodyear's total of $13.6 billion included revenue from its 50-50 South Pacific Tyres joint venture in Australia and New Zealand.

Germany's Continental A.G. remained No. 4 with $5.6 billion in tire sales. It supplemented its existing capacity base earlier this year by taking controlling interest in the tire activities of Malaysia's Sime Darby Sdn. Bhd., a move that should add $250 million or more to Conti's sales.

No. 6 Sumitomo Rubber Industries Ltd. continues to grow steadily, investing in new capacity in Japan, Indonesia and China to bolster its pan-Asian growth strategy.

The average sales per employee for the 11 billion-dollar companies in 2003 grew 8.9 percent from the previous year to $176,255. The averages ranged from $143,123 for Michelin to $361,600 for Toyo.

Of the billion-dollar companies, only Goodyear reported a loss in fiscal 2003. The average net-income-to-sales ratio was 1.3 percent for these companies, with Hankook, Kumho and Bridgestone leading the pack with 6.1-, 4.5- and 3.9-percent net profit ratios, respectively.

From an operating profits standpoint, the average for the 11 was 6 percent, with Hankook, Sumitomo and Bridgestone above average at 10.2, 8.4 and 8 percent, respectively.

Sixteen of the companies ranked are from China, followed by eight from the U.S., seven from India, five each from Japan, Russia and Taiwan and three each from Iran and South Korea.

New names in the Top 75 ranking this year are:

* Grandtour Tyre (No. 14), the holding company for five Chinese manufacturers operating under the Grandtour name. Last year Grandtour Tire (Anhui) Co. Ltd., the largest single factory in the group, was ranked 18th, and Yinchuan CSI (Greatwall) Rubber Co. Ltd., acquired by Grandtour in late 2002, was listed 54th.

* Amtel Group (No. 20), the Russian holding company for three Russian and one Ukranian tire plants. Last year Amtel was represented in the Top 75 by C.S.C. Rosava (No. 59) and Kirov Tyre Co. (No. 60).

* Aeolus Tyre Co. Ltd. (No. 26), the new name for Henan Tyre Co. Ltd., ranked 37th last year.

* Sime Darby (No. 36), the combined sales of DMIB Sdn. Bhd. and Sime Tyres International (M) Sdn. Bhd. (ranked 42nd and 56th last year), reported together this year for the first-and last-time. Continental A.G. bought controlling interest in the Malaysian tire companies earlier this year and has started reporting their sales in its financial statements.

* CGS Ceska Gumarenska Spol. (No. 43), the corporate name for the Czech Republic's Mitas Praha. The company earlier this year bought Continental's agricultural tire business, which has annual sales of $110 million.

* Liaoning Tyres Group Co. Ltd. (No. 56), reporting sales for the first time.

* Southern Rubber Industry Co. (No. 69), the Ho Chi Minh City, Vietnam-based tire company. Its 34.5-percent rise in sales last year boosted it into the Top 75.

* General Tyre & Rubber Co. of Pakistan Ltd. (No. 73), the Continental affiliate, qualified for the Top 75.

* Kavir Tire & Rubber Co. of Birjand, Iran (No. 75).