WHITE, Ga.—Toyo Tire North America Manufacturing Inc. has made quite an impact on the economy of the rural area in Georgia that houses its tire production facility.
In 2007, the U.S. unit of Japan's Toyo Tire & Rubber Co. Ltd. barely had christened its first U.S. tire manufacturing facility built on a highly automated process that promotes repeatability and the ability to make small lots competitively. Since then, the facility has been in expansion mode almost continuously, with the total capital investment moving toward $1 billion.
“In Toyo's case, the outlook is pretty fair,” said James Hawk, the facility's president and general manager. “I'm not going to say glowing, because the U.S. economy is still kind of anxious.”
Since the time when Toyo first set up shop in White, one of the main changes for tire manufacturers in the U.S. has been the growing complexity of shipments. Sizes for light truck tires—the mainstay of the factory's output—can range from 14- to 22-inch diameters, with a wide variety of aspect ratios and patterns.
“The complexity makes is more difficult if you don't have a process and sales/marketing plan that promotes the different products,” Hawk said. “We promote that and have a manufacturing process that supports that, especially the new plant in Georgia based on small-lot production.”
Toyo anticipated this need and made it part of the tire plant's design. “It costs you more because you're dealing in smaller lots,” he said. “You're taking a little bit of a hit on efficiency because you're making a lot more changeovers and carrying more inventory. That's the nature of the business, and we've designed our manufacturing process to meet that challenge.”
Raw material costs, particularly for natural rubber, have been volatile over the last five or more years, Hawk said, though recently the trend has been down. The good news is that utility costs have been stable, particularly with many power companies focusing on natural gas.
The political situation in Washington remains a concern for U.S. manufacturers, from all the conflict to dealing with such programs as the Affordable Care Act, a more active National Labor Relations Board and regulations from the Environmental Protection Agency, according to the Toyo executive.
“When you're looking at increases of 8 to 12 percent year after year on health care costs, that's a problem,” he said. “We want to do our best to maintain competitive health care programs for our employees, but when prices are increasing every year, we have to include that in our budget and our costs. We try to negotiate better health care costs and not penalize the employees and try to maintain our level of coverage. In most cases we're eating those increases.”
Even with these issues, however, Toyo has no regrets over its choice to begin producing tires in the U.S., he said, as the Japanese-based tire firm has grown its sales in the region significantly since opening the plant.
“One of the keys for us locating in the U.S. and remaining competitive here is to manufacture in the region or the country that you're selling in,” Hawk said. “If you're simply going to have an office and keep importing things, in order to sell your tires, you have to be pretty competitive on your margins. Whereas if you manufacture here, you mitigate currency risk, and you can control your logistics and inventories much better. The decision to manufacture in the U.S. has worked out very well for us.”