RANCHO MIRAGE, Calif. — Concerns about tire availability and Michelin´s involvement with the company were among the questions Hankook Tire America Corp. executives fielded at a recent tire dealer meeting.
Responding to a question about the supply of the H714 entry-level passenger tire, Bill Finn, Hankook senior vice president of sales, said dealers should not expect to see the company increase capacity for the tire.
Finn told the dealers at the February meeting in Rancho Mirage that this is a diminishing part of the business, and other major tire manufacturers have started de-emphasizing this type of product.
"The size and range on the 714 and the product level that that´s at, that´s not really where we see our future growing," he said. "So I don´t think you´re going to see a significant, or any change or true capacity increase, on the 714."
While Hankook isn´t discontinuing the 714, Finn said, "We have to be prudent in how we produce that tire. We have to manage the distribution of that tire better. That´s our challenge in 2007. How do we manage what we have available and do a better job of managing the equitable distribution of that product?"
Finn said of the company´s relationship with Michelin, "It´s no secret Michelin owns stock in our company." Michelin has a 6.3-percent stake in the South Korean tire maker and has said it intends to buy up to a 10-percent share in the firm as part of a plan to involve Hankook in its global manufacturing network.
"This was a strategic alliance that was put together several years ago, with the view that it would give them an opportunity to gain market share or get a presence in China," he said.
Michelin-owned Tires Center L.L.C., he said, is a customer of Hankook´s. "They´re a buying customer that markets our products. They have a limited product range. When we say limited, they don´t have access to the complete product range that we make."
On the firm´s agreement with TCI, Finn said it was a business decision to sign with the firm, one of the nation´s largest tire distributors, that started three years ago with the company supplying primarily ultra-high performance tires. "We were a little behind the curve on UHP sales, and we were trying to gain market share in UHP sales. And there was an opportunity with the relationship and it was a natural fit."
Initially, Finn said there was not a lot of conflict in the marketplace. But over the last year or so that has changed, with some dealers concerned about TCI´s pricing for Hankook tires and that the distributor was benefiting from marketing efforts they had done over the years to help promote and build the Hankook brand.
Finn said Hankook is aware of these issues and is addressing them. "It wasn´t a problem when we initially started, but now we seem to be getting more and more complaints from the marketplace that it´s disturbing the market, so it´s something we have to address."
Finn said Hankook will provide TBC with a co-branded product similar to what Sears Holdings Corp. has done with its Roadhandler tires co-branded with Bridgestone, Goodyear and Michelin.
"With TBC, I think you´ll see that same concept," Finn said. "It´ll be a Hankook product that will be co-branded with a Big O name on it, let´s say. And it will have a completely different tread design."
Hankook will benefit from this by having its name on the tire, Finn said, and at the same time this will allow the company to expand its distribution.