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October 28, 2008 02:00 AM

Bridgestone/Toyo to work together in 5 areas

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    TOKYO (Oct. 28, 2008) — Bridgestone Corp. and Toyo Tire & Rubber Co. Ltd. have agreed to work together in five key business areas.

    The companies said they will join forces in development of advanced production methods, joint purchasing of raw materials and equipment and producing tires for each other at selected plants, including Toyo's U.S. factory and Bridgestone's plants in Latin America.

    The Bridgestone and Toyo—the No. 2 and No. 11 tire makers worldwide, respectively—have issued shares in each others' name to solidify the intent of the agreement, but neither quantified the financial advantages of the agreement. The length of the agreement wasn't disclosed.

    Bridgestone and Toyo will license their respective advanced manufacturing systems—Bridgestone Innovative & Rational Development and Toyo's Advanced Tire Operation Module—to each other. The companies also will work together on small-lot production systems and specifically on strip-winding techniques to help with small-lot production.

    In purchasing, the companies will make available to each other their integrated up-stream production chains, so that Toyo will have access to carbon black, steel cord and other materials made by Bridgestone companies. The two companies also will investigate the joint purchasing of equipment and raw materials for production.

    Regarding off-take production, Bridgestone will make available capacity at its plants in Latin America for Toyo-brand production and Toyo will offer capacity at its White, Ga., factory to make Bridgestone-brand tires. This aspect will improve the firms' respective production efficiency and flexibility, they said in a joint statement.

    Part of this aspect will be studies to standardize production systems between the two companies where feasible. Furthermore, they said where they are considering adding capacity in small-volume and niche areas, they will work together to build and modify factories to ensure those factories can make products for each company.

    Over the mid- to long term, the companies will implement the cross-production of radial tires for trucks and buses, integrate manufacturing of certain products such as cross-ply tires and supplementary products and aim for cross-production at plants built in the future.

    In terms of logistics, the focus will be on Japanese domestic production, where the companies will use each other's warehouse facilities and attempt to ensure trucks and other vehicles are used in both directions shipping tires from one to the other whenever possible, on both outward and return journeys. Longer term, the companies aim to develop a joint transportation strategy and to locate warehouses strategically for mutual advantage.

    The two companies also intend to work together in two non-tire areas, anti-vibration systems and in urethanes businesses. In AVS, the two companies will conduct joint research into eco-friendly technology and production technology and investigate the possibility of joint procurement of components.

    The cross-ownership consists of Toyo's having issued 20 million new ordinary shares (equal to 8.72 percent of the issued stocks including this issue) in Bridgestone's name, and Bridgestone's having allocated 3.9 million shares of its treasury stock (0.48 percent of all issued stocks) to Toyo.

    The value of Bridgestone's shareholdings in Toyo is roughly $40.6 million and Toyo's in Bridgestone $63 million, based on the stocks' closing prices on Oct. 27. Bridgestone's and Toyo's stock closed the day down 12.1 and 10.7 percent, respectively.

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