CANCUN, Mexico — Kumho Tire Co. Inc. wants to jump from 10th to fifth-largest global tire maker by 2015, and it´s counting on its growing dealer network to help it achieve that ranking.
Executives of Kumho Tire U.S.A. Inc., the U.S. subsidiary of the South Korean company, told dealers at a Jan. 5-9 annual conference in Cancun about the initiatives launched to reach its goal. They range from increased manufacturing and distribution capacity to dealer training and outreach to associate dealers.
"2007 and beyond will bring many new challenges and that´s not only for the tire industry but also Kumho Tire Co.," said B.K. Kim, CEO and president of Kumho Tire North America. "Kumho´s primary objective is to earn the position of the No. 5 rubber and tire company by 2015 and the No. 8 by 2009... but we cannot accomplish this alone."
Kumho would need to more-than double its annual sales volume to reach No. 5. Ahead of it now are Cooper Tire & Rubber Co., Hankook Tire Co. Ltd., Yokohama Rubber Co. Ltd., Sumitomo Rubber Industries Ltd. and Pirelli Tyre S.p.A. Current No. 5, Pirelli, recorded 2005 tire sales of $4.5 billion.
Kumho´s global revenue in 2006 reached about $1.9 billion, said Dave Hudrlik, senior vice president of sales for Kumho Tire U.S.A., and this year the firm expects to move into ninth place. In the U.S., Kumho posted sales of $465 million in 2006-a 15-percent improvement-and is on track to record $610 million in sales this year.
Getting to No. 5 isn´t just a matter of filling the void between Kumho´s and Pirelli´s sales, said Kumho Brand Manager Rick Brennan.
"Everybody else is going to try to grow," he told dealers. "We have to go past four companies to get there, and those four companies are not going to let us go by because we want to. So we need your help. ... Partnering with you guys is the only way to get there."
Reaching the goal
The underlying task for Kumho is to grow its brand, Brennan said.
"What we have to do is ´tier up´ ourselves," he said. "And by that we mean add capability and add resources because when you look at the scheme of things, we have to be able to sell ourselves as well as a tire."
A big program in the second quarter is an online training program for dealers, dubbed Edge. The program is aimed at educating counter staff on topics such as tire pressure monitoring systems and Kumho tires. Dealers will receive incentives when employees complete various levels.
Kumho in February also will introduce a program through which dealers who commit to buy certain amounts through a wholesaler can access many incentives and promotional items that are now for direct dealers. That move, Brennan said, will give Kumho a new relationship with these dealers.
Internally, a North American team in South Korea was disbanded to give the U.S. subsidiary a direct line of communication with overseas factories, and staff was added to consumer sales, marketing and customer service departments.
Capacity — especially in light truck tires — has been a challenge for Kumho in recent years. With new plants being built in China and Vietnam, Hudrlik said Kumho will boost its manufacturing capacity nearly 50 percent to 76 million units by 2010 from 52 million units in 2007.
Kumho also is moving its warehouse functions in the U.S. to just-in-time delivery, no longer doing container loads.
Fill rates at year-end 2006 slipped to 62 percent from about 97 percent for most of the year as the company was hit by factory miscues and demand brought on by the Goodyear strike.
Hudrlik said fill rates should return to normal levels by the end of the first quarter.
Kumho, which in recent years sought to improve its sales in part by increasing its share of dealers´ business, is competing with a dozen or so companies for the 40 percent of retailers´ business generally left over from the Big Three tire makers, officials said.
While Kumho had done a good job in boosting its percentage of dealers´ business in the past five years, the executive said "there´s still lots of opportunity to grow."
Kumho isn´t only contending with the five tire makers ahead of it in the rankings. Two of the top 15 tire producers are based in China.
Hudrlik said Kumho will compete against these companies through its product mix. He pointed to market share numbers-including 4.1 percent in passenger tires, 1.4 percent in light truck, 7.2 percent in ultra-high performance and 11.1 percent in high performance-where the firm has decent share in higher-margin categories.
"Mix can solve a lot of evils," he said. "Since our mix is good, we can continue to supply products (dealers) need in categories that everybody else is trying to get rid of."