PALM DESERT, Calif.—Sure, there were plenty of new tires to dazzle the eye, hints of marketing programs to come and promises that, despite coming out of a very tough year, things would improve.
But the proverbial “elephant in the room” at the recent annual dealer meeting of Kumho Tire U.S.A. Inc. was the precarious financial condition of its South Korea-based parent Kumho Tire Co. Inc. In a show of how important the matter—and the U.S. unit—is to the overall operation, that company's president and CEO, J.H. Kim, opened the meeting and made quick work of dispelling any lingering concerns the company's customers might have about its financial stability going forward.
Addressing dealers at a resort in Palm Desert, Kim admitted, “We have experienced some very unprecedented challenges” and the new year “will no doubt bring other problems and issues to be dealt with.” He was alluding to recent news of Kumho Asiana Group's financial struggles, which led to a workout plan with the South Korean government.
“I want to make one thing very clear,” Kim told dealers. “Kumho is here to stay.”
The company has produced a workable plan to address its problems—which did not affect the operation of its Rancho Cucamonga, Calif.-based Kumho Tire U.S.A. unit—and that plan “does not involve courts or government handouts,” he said. It is being enacted “without any detriment to our customers. We have sufficient supplies for all our customers.”
As further proof that the company was indeed on firmer footing, a Kumho spokesman later cited a report in the Korea Times that stated the Asiana unit “barely avoided court receivership,” but Honorary Chairman Park Sam-koo and other founding members agreed to offer their stakes in group units as collateral in return for fresh loans, according to Kumho's main creditor, the Korea Development Bank.
Kim noted that Kumho is, in fact, operating at optimal level—practically 100-percent production capacity—so it can “have adequate product for all our business partners.”
Several executives of Kumho's U.S. operation said that Kim's very presence at the dealer meeting was not only a testament to his increased hands-on involvement in the company as it emerges from its financial setback, but his vote of confidence in the U.S. unit.
Taking responsibility
Armand Allaire, as the new man on the block for Kumho Tire U.S.A.—he was recently hired as national vice president of sales after a stint at Toyo Tire USA Corp.—told customers at the meeting, “I have a responsibility for your results.”
Noting a “near-perfect storm” that began for the company last year, he cited a strike by Kumho tire plant workers in Korea, Kumho Asiana's financial difficulties, and tariffs enacted by President Obama on Chinese-made passenger and light truck tires as reasons that made 2009 a very tough year for the company. “Yet we delivered well over 8 million units into the U.S. to our customers,” he said.
In response to the tire tariffs, he said Kumho has been moving molds to its plants outside China, especially to its relatively new factory in Vietnam. But he also reminded customers that “Kumho carries the bulk of that tariff. We did not pass it on to you.”
That may have to change, though no Kumho executive offered any specifics.
Responding to the parent firm's financial difficulties, Allaire said Kumho Tire has “taken appropriate, proper and ethical” measures and “no one has been left holding the bag—if they're owed money, they got paid. ... All our supply pipelines are intact, we're healthy, we have made changes and are moving forward.”
While vowing an open-door policy for customers—“Any time you have any questions, feel free to ask me”—Allaire, who has sold tires in the retail, commercial and off-road arenas, said several times that his personal philosophy is to “under-promise but over-deliver. … I will exceed expectations. I don't settle for less.”
Goals for 2010
Going point by point over what Kumho hopes to accomplish in 2010, Allaire said the company will standardize its business programs and actions for its management team and the Kumho brand, and will continue to focus not only on its own but on its customers' profitability, as well.
He also professed improvements to the management of the firm's supply chain and logistics system, telling dealers the tire maker will “provide increased value to your business by establishing a 'Kumho Kulture,' ” Allaire said. “We will provide you with all the benefits that will make you successful, but that will take a change of culture and will take time.”
As Kumho marks the 50th anniversary of its founding in South Korea in 1960, Rick Brennan, vice president of marketing for Kumho Tire U.S.A., called it the “youngest tire company in the world's top 10. We may be the youngest but not the least capable. … We build a tire as good as anybody and in some cases better.”
Pronouncing the industry's trend toward selling “bling” tires—exotic sizes to fit a wide variety of vehicles from small cars to Hummers—over, or at least in a deep state of hibernation, Brennan urged dealers to focus on the replacements for OE tires, which is where the market has headed.
The economic recession has taken its toll on the bling fitments, he said, as customers without unlimited capital struggle to keep the basics on their vehicles and are searching for low-cost tires.
As an economic recovery takes shape, “the good news is things will be pretty bright for the tire industry” over the next few years, he said, but because it's working from a deficit position, the “tire industry will recover—but slowly.”
Brennan told dealers that “for us to change the things we need to change within our company, we need to change some things with you. To be better is our mission for 2010.”
Consumers today are more open to eco-friendly products, he said, and that can create an opening for Kumho, which is rolling out several “green” tires that promise better rolling resistance and fuel economy.
In a separate interview, Kenneth K. Lee, coordinator of sales for Kumho Tire U.S.A., said construction of a tire plant in Georgia, which was put on hold a year ago, is still pending. A contract with the local government calls for the plant to be up and running by 2013 and Kumho fully intends to meet that deadline.
Brennan said because Kumho supplies tires to Hyundai Motor Co., which operates a car plant in the South, many of the tires that eventually will be made at Kumho's Georgia plant will be destined for Hyundai.