Cooper Tire & Rubber Co.´s interim CEO maintains the company is moving in the right direction, but isn´t ready to predict when it will reverse six straight quarters of losses.
"Ask me in another month," Byron Pond said in an interview during the recent Specialty Equipment Market Association trade show in Las Vegas. "Our (business) plan won´t be finished until the end of November, but I think we´re making headway. That´s all I can say right now."
The tire maker also is making pro-gress in finding a new top executive, Pond said. It has narrowed the search to two candidates to replace Tom Dattilo, who resigned as chairman, president and CEO in August.
"We´re getting close, but getting close isn´t having it done," he said.
A hold-up could be timing. With the year-end approaching, companies are planning for the coming year, he said. "The people we´re talking to are fully employed, and it may not be easy for them to break loose. We´ll see how it goes."
Neither candidate is from the tire industry, although one is on the fringe. Pond also said he is unsure whether the company will name a replacement for D. Richard Stephens, who retired in June as president of Cooper´s North American tire division.
"For the time being, we´re not planning to make any changes there," he said. "North America, as anyone knows from reading our statements and our financials, is a business that needs to be improved dramatically. And I think it´s important that the CEO have direct access to the North American tire business.
"There will be a new CEO, but I´m not sure we´re going to re-create that position of the North American tire president. That will be up to the new CEO."
Focus on the bottom line
Pond outlined some of the moves Cooper is taking to restore its once-profitable bottom line, including reducing redundancy in its tire lines and complexity at its tire plants.
As part of this effort, the tire maker will eliminate one of its associate brands, which Pond didn´t reveal, and trim its products in the low-end, low-value tire segment.
Cooper already has identified 120 product specifications and more than 1,200 stock-keeping units it intends to take out of production. This amounts to about a 14-percent reduction in specs and about a 21-percent reduction in SKUs, he said.
These cutbacks will be done in three stages-in January, April and July.
To further reduce redundancy in its tire lines, Cooper will consolidate all its ultra-high-performance tire products under the Cooper Zeon label, while still offering some H-rated performance tires through various brands, including Mastercraft.
There still will be a Mastercraft brand, Pond said, but dealers will sell Cooper Zeons in the UHP segment.
Reducing complexity in its tire factories also "will enable us to get product flowing through the plants like it used to," Pond said. "Like it was with the old Cooper."
Payback from China
While the world´s ninth-largest tire maker has struggled financially of late, Pond said he thinks "there is a lot of optimism at Cooper."
Part of that stems from the anticipated benefits the company will begin to receive from its investments in China. That starts with Cooper Kenda (Kunshan) Co. Ltd., the joint venture the company established in 2003 with Taiwan´s Kenda Rubber Industrial Co. Ltd. to build a factory in China.
That facility, expected to come on stream in January, will provide Cooper with about 1 million tires in 2007, Pond said. At full capacity, output will reach 6 million to 7 million tires,
Phase 2 of the Cooper Kenda investment, which hasn´t been approved, would double capacity at the plant to 12 million units, Pond said.
Cooper also is starting to benefit from its 51-percent ownership of Shandong Chengshan Tire Co. Ltd., in China, which it acquired in February. Cooper has renamed the company Cooper Chengshan (Shandong) Passenger Tire Co. and Cooper Chengshan (Shandong) Tire Co. Ltd.
"It´s a nice little company, and we are introducing this month (November) the Cooper line of tires for light vehicles in China," the interim CEO said.
Cooper will use the name GuBo in advertising the products in China, "something people locally are going to understand," Pond said. Gu in Chinese means strong, tough and safe, while Bo means precious, premium and luxury.
Originally Cooper planned to name its tires for the Chinese market KuPo, which had no meaning but sounded similar to the name Cooper. However, the firm discovered the name had been trademarked.
The GuBo tires will feature the Cooper name on the sidewall and consist of the Zeon high-performance line, a high-end touring line and a Discoverer light truck line.
"We think we´re going to have a lot of growth in Chengshan," Pond said. "As you know, the economy is growing very rapidly in China-double digit. We think our tire business through Chengshan is going to grow at about 16 percent a year for the next three years. Part of that is natural growth of the economy, but part of that is the introduction of the Cooper brand through the Chengshan distribution system."
The firm also is moving forward on its transition from a company known mostly for its broadline and low-end tire products to one that puts more emphasis on mid-range and premium tires.
"I think the Cooper people are a lot more enthusiastic about this approach because everybody recognizes that the broadline tires are reducing in unit volume every year and all of the growth has been in the premium lines," Pond said.