Bridgestone Corp. has big plans for its global tire business, and Kiyoshi Nomura, vice president in charge of international tire operations, is one of the top people charged with seeing the company realizes those ambitions.
The Japanese manufacturer aims to hit $27.8 billion in sales with a 6-percent return on assets and more-than 5-percent net profits by 2010. With that in mind, the firm in October reorganized its global business, putting in place a profit-center structure focused on major market regions.
Nomura, 54, recently discussed the company's performance and plans in an interview at corporate headquarters in Tokyo with Roger Schreffler, a Rubber & Plastics News correspondent. The following is an edited version of that conversation.
What organizational changes, both in Japan and overseas, are you making to plan for long-term, sustainable profits and growth?
Our new president, Mr. Shoshi Arakawa, instituted a ``strategic business unit'' or SBU concept, which places responsibility for product development and sales into six main regions and two product segments. The regions include Japan, China, continental Asia and Oceania, the Americas, Europe, and the Middle East and Africa.
We transferred the headquarters for the Asia-Pacific and Africa-Middle East regions to Singapore and Dubai. Each unit is responsible for meeting demand and making profits.
So they are independent profit centers?
Yes. Each unit structures its activities around Bridgestone's mid-term plan, which is formulated in Japan. The basic structure comprises a global headquarters, based at Bridgestone's head office in Tokyo, eight strategic business units, all underneath the headquarters, and what we call a ``global management platform,'' which includes such business functions as research and development, logistics, finance and human resources. This platform supports each business unit. The mid-term business plan is updated periodically.
What was the purpose for doing this-to make Bridgestone a stronger company in the future?
Of course, that's the first objective. But in addition, as you are aware, we acquired Firestone 18 years ago and overnight became a global company. Even though we made considerable investments, there were issues we couldn't resolve to our complete satisfaction. My point isn't to criticize Firestone but to remind you that prior to the acquisition, we were a company principally involved in the production and sale of tires in Japan and to a lesser extent Asia. After the acquisition (a total of 26 plants including 19 tire plants in 13 countries plus a North American retail network comprising 1,500 franchise stores, subsequently expanded to more than 2,000) we effectively became a holding company for a large number of overseas subsidiaries, not only in Asia but also Europe, North America, South America and the Pacific Rim. We were not as successful in managing this operation as we would have liked, which doesn't mean we were dissatisfied. We've had considerable success. But hopefully, with this organizational change we can better manage and improve the efficiency of these assets.
So basically this is the completion of the restructuring of Firestone. After 18 years you now have that operation the way we want it?
No. It's still not complete. As I mentioned, Mr. Arakawa, in instituting this strategic business unit structure, wants to shift part of decision-making out of the head office that we might respond more quickly to customer needs around the world. Please note this isn't an organizational change for Firestone or Bridgestone/Firestone. This is for Bridgestone Corp. in order that it might become more efficient.
When will this reorganization be completed?
We can't say clearly. But our target for the new Asia-Pacific and Middle East-Africa units is around three years. At least we hope they'll be fully operational by then. But that depends on many factors, including changing market conditions, eventualities that we can't foresee.
Ultimately, what do you hope to gain, reduced costs?
This undertaking has nothing to do with reducing costs, but with improving efficiency. The point of this effort has to do with bringing about long-term sustainable growth-both in profits and sales.
So basically, Bridgestone hopes to tailor-make tires for each region or, put another way, be more responsive to its customers, both OEM and aftermarket, through local decision making, local development and local manufacturing?
We expect these business units to pursue their own business strategies in line with our mid-term strategic plan.
What is Bridgestone's global tire demand forecast for 2006 to 2010, both original equipment and aftermarket?
We don't have data for all markets, regions and product segments. What I can say is that we believe global demand over the six-year period from 2002 to 2008 will grow by an average of 3.6 percent.
I personally believe we will see slightly slower growth both this year and next due to the impact of higher fuel prices. I also believe that once gas prices settle (at a higher level) passenger car owners will drive as much as they did before.
Looking specifically at the truck and bus tire segment, we predict growth in original equipment demand, most probably from the year after next, to meet new, tighter emission standards in the U.S. Over the long term, perhaps through 2010 or 2012, we expect global truck and bus tire demand to grow annually by 3-4 percent.
What is your share of the total global tire market? And what about passenger radials?
About 20 percent of the total market, 15-18 percent for passenger radials worldwide.
Passenger radials are your biggest business segment? What's the most profitable?
In terms of total sales, yes, passenger radials are the biggest segment. We produce everything from ultra-high performance to general-use (low segment) passenger radials. Competition has become extremely fierce in the general-use segment, where many new players have emerged from countries with low labor costs, notably China and to a lesser extent South Korea. Moreover, Korean tire makers, in particular, have gone into China to take advantage of cheaper labor there, and this is having a dampening effect on the market. Korean tire makers are very aggressive.
What is Bridgestone's strength in passenger tires-high performance units?
Yes. Whether it's runflat or ultra-high performance, we have complete confidence in our technology. However, Bridgestone's brand image still lags in the U.S. Therefore, to a certain extent our technological strength is not reflected in our market share. In contrast, in Europe, where we will be sole supplier of Formula One racing from 2007, our brand is highly evaluated from a technological standpoint. And this is exhibited in our success with luxury car makers like Mercedes-Benz and BMW and, of course, other leading nameplates. So in Europe, we are seeing steady growth in sales of ultra-high performance and runflat tires.
Please note that the structure of these tires is substantially different from conventional radial tires, thus they are more difficult to manufacture. On the other hand, demand, as I said, is growing steadily, so much so that we are having trouble keeping pace. To address this supply shortfall, we are in the process of adding production capacity for both runflat and high-performance tires.
What sales volumes are you achieving in the runflat segment?
In 2002, we sold 210,000 units. In the following three years, our totals grew steadily to 1.8 million units in 2005. This year we are aiming for 2.4 million.
What is Bridgestone's strategy with respect to green, environmentally friendly tires?
In the Japanese market, we are selling Ecopia tires, low-fuel consumption truck and bus radials. Volumes are still small, however.
Looking at Bridgestone's major competition as you move forward-Michelin, Sumitomo, Goodyear, Kumho-who is of greatest concern?
That's not an easy question. As I mentioned, we feel that technology is the key to our success. In that sense, Michelin is our strongest competitor. For general-use tires, Korean tire makers are becoming stronger. But the basic direction for us, where possible, is to focus on tires where technology offers an advantage.