(From the July 9, 2012, issue of Rubber & Plastics News)
RANCHO CUCAMONGA, Calif.—The business philosophy of J.B. Kim, president and CEO of Kumho Tire U.S.A. Inc., is simple: “Focus on the customer and take care of his needs in any way possible.”
Building strong partnerships between suppliers and customers takes mutual effort, and that effort is both the top priority and a continuing process at Kumho, according to Kim.
“To accomplish this task, we must constantly challenge how we do business,” he said. “For example, over the past few years we have worked very hard to provide our clients with the tires they need when they need them.”
Kumho has consolidated its warehouses to make sure inventory was in the right place at the right time, said Kim, who spoke from his office at the firm's Rancho Cucamonga headquarters. The company also improved its logistics systems to reduce the time between orders and receipt of orders.
“We have initiated monthly collaborative meetings with many of our clients,” he said. “We get the actual people from our company responsible for operation, sales, warranty and marketing together with our clients by phone, and initiate real solutions to joint challenges to improve our service and profit from our brand.”
Like other tire makers, Kumho faces challenges caused by the rapid changes in the industry. Size proliferation, an evolving product mix caused by shifts in vehicle purchases and the consolidation of distribution channels are only some of the biggest changes, Kim said.
“For the second half of 2012, we see cost increases as one of our largest challenges,” he said. “Many of our clients are telling us they cannot pass more increases on to consumers, and recent industry studies show profit margins for dealers are being squeezed as a result.”
Kumho has resisted price increases since the first of the year, though other manufacturers have raised prices, Kim said. “We believe costs will continue to rise through the remainder of the year, putting more pressure to raise prices on all manufacturers.”
Industry consolidation is making the big get bigger on the retail side and changing the regional players on the wholesale front, he said.
“We are also seeing an expansion in large dealers building new locations,” he said. “This evolution is changing the tire distribution landscape in many ways. For an acquired location, the brand names may be changing and the entity supplying them may change. But as the big get bigger, new inventory control measures must be implemented.”
With retail groups gaining power, there are more consumer rebates and associate dealer reward programs targeting brand loyalty or switching dealers from one brand to another, according to Kim, head of the U.S. subsidiary since August 2008.
“We will continue to have new programs developed, geared to moving tires through the entire system, creating program-type sales,” he said.
Government regulation is a constant consideration for the tire industry. Two of the biggest pieces right now are the pending tire fuel-efficiency labeling rules expected later this year from the National Highway Traffic Safety Administration, and the prospective end in September of a three-year round of tariffs on passenger and light truck tires imported from China.
In the case of tire fuel-efficiency labels, the true impact may not be the labels themselves, but helping consumers understand what they mean, according to Kim.
“Of course we will have to produce new labels and add rolling resistance grades,” he said. “We will have to implement testing schedules to produce the correct information for the labels, which will increase costs.
“The larger impact will be the training and information availability systems we will need to create to make sure dealers and consumers understand what they are looking at,” he said. “Expect to see significant efforts from the industry, either through government mandates or through the Tire Industry Association, to educate dealers and consumers.”
The impending end of the tariffs on Chinese tires is one of the hottest topics in the industry right now, Kim said.
“At this point, no one knows what will actually happen,” he said.
Kumho moved its Chinese production immediately after the tariffs were instituted in 2009.