Tire Business talked with Jeff Barna, Yokohama Tire Corp. president and an officer on the Yokohama Rubber Co. board, about his company's initiatives heading into the second half of 2018.
Q: How would you describe the tire business in the U.S. this year?
A: One word: surreal. I can't remember being part of any industry with as many dynamic moving parts. It probably should be mentioned that most of those moving parts have implications.
But overall, it's very exciting when you consider the major acquisitions, the consolidations, competitors partnering to create JVs, there's a continuation of massive financial commitments for U.S.-based manufacturing—you name it. Throw in a little espionage or a scandal or two, and you'd have the makings of best-selling thriller.
For most manufacturers, it's been a tough 120 days. We're hearing a lot from our dealers about market softness, and I think that corresponds with some of the USTMA shipment data. The good news for Yokohama is that demand for our product remains strong, and we continue to introduce new products in core categories. We finished off 2017 with good momentum, and that momentum has continued for our company into 2018.
Q: The thriving economy and low unemployment aren't helping tire companies?
A: That's the biggest surprise I think for me in 2018 is the overall market softness, especially in consumer replacement and commercial replacement. When you look at all the positive macroeconomic indicators, along with the bullishness on leading indicators throughout the balance of 2018, it's the ultimate head-scratcher. We were confused. I don't think we're alone in respect to why there is such softness at retail or sell-out.
Q: Where do you see the market heading the rest of the year?
A: We believe it will continue to be a challenging competitive marketplace as it seems to be every year but maybe more so in 2018. Given the strength of the economy, seasonality, we expect an uptick in demand across all sectors, or at least that's what I think everyone's hoping for. Personally, I'm not so sure that we'll see a hockey stick reaction to reflect increased sales in the back half of 2018, but I hope I'm wrong.
In short, we're preparing for an uphill climb for the balance of the year and would welcome any unforeseen tailwinds. It should also be mentioned that with all of these seismic changes in the manufacturing and distribution landscape, I'm not so sure that we've seen the end of these major customer/manufacturer moves.
Q: Any trends you are seeing in the marketplace or anticipating in the near future?
A: We continue to see increasing demand across several light truck categories. This is in part predicated on OE trends—for example, recent announcements from Ford where they decided that they'll kill off their production of sedans, that combined with a strong economy which is driving demand for larger vehicles.
We also see stronger tire manufacturing investments in what I would call embedded technology, like tire monitoring sensors that can create a quicker feedback loop to those in the value chain, everywhere from distributors to retailers to consumers. And these sensors can track wear performance and quality, which I think is a nice safety add for the consumer.
Q: What is your company doing to address these trends?
A: We're hitting the light truck market very hard. By the time 2019 is concluded, we will see the strongest offerings in LTR products that Yokohama has brought forth to the market, maybe in its history.
Additionally, we've got new, exciting products in the ultra high performance sector and, unfortunately, I can't tip our hat on the technology piece because much of that is proprietary.
Q: With the push toward CUVs, SUVs and light trucks, is that going to impact UHP demand negatively?
A: It might. The greatest unknown and potential adverse effect on UHP is the emergence of autonomous vehicles (AVs) and what that will mean to just driving and the U.S. population or any population for that matter. So if there is any one phenomena that is presenting risk to UHP, it's probably the emergence of AVs.
Q: Is Yokohama on the bandwagon for developing tires for AVs?
A: Yes, we're on the bandwagon. It's a big bandwagon so I think it's important to try to carve out, if at all possible, a niche or two within the context of what that will mean. A great deal of investment capital is being earmarked for development projects relating to AVs. So, yes, we intend to be a significant player when this particular market does rise up and confront us all.
Q: What tire sectors are looking strong right now?