Nobody would blame Cooper Tire & Rubber Co. if it was shy about jumping back into a joint venture in China. After all, problems with its Cooper Chengshan Tire Co. Ltd. JV in that nation helped torpedo Cooper's merger with India's Apollo Tyres Ltd.
But the Findlay, Ohio-based firm showed it was willing to go that route again with its deal to buy a 65 percent stake in Qingdao Ge Rui Da Rubber Co. Ltd. for about $93 million. Cooper officials, though, were quick to say they had been careful while performing due diligence on the Chinese firm, known more commonly as GRT.
They seem confident they found a partner they could trust, and CEO Roy Armes cited GRT's staff as one of the biggest reasons they went with this partner. He also said while he realizes the JV is not risk free, he feels “really good about this one.”
In the short term, the deal gives Cooper a supply of truck and bus radial tires other than from Prinx Chengshan (Shandong) Tire Co., its former JV. GRT currently has plenty of available capacity for TBR tires and also could produce more passenger tires if needed.
Cooper stressed that diversifying its supply of truck-bus radials was a top priority. It has an off-take agreement with PCT under terms of the former JV's dissolution that runs until mid-2018. While that partnership ended badly, Armes said since the sides terminated the JV, PCT actually has been a good partner, and the Cooper official didn't dismiss extending the off-take supply deal once it expired.
It also wouldn't be surprising to see Cooper and Argentina's Fate S.a.i.c. expand a recent distribution partnership to include supply of TBR tires. Cooper found itself exposed by having limited supply for the TBR market before, and it will make sure that doesn't happen again.
The company showed that ruling out the JV option wasn't a good long-term plan, as long as it takes a close look at the partner.