Sumitomo eyeing future production in North America

KOBE, Japan—Even as Sumitomo Rubber Industries Ltd. (SRI) moves to close its only U.S. tire factory, company executives continue to be sold on the need for a manufacturing presence in North America.

"I believe that local production for local consumption is the best for the tire industry," Hidekazu Nishiguchi, managing executive officer for SRI, told the Japanese financial community during the firm's third-quarter financials conference call.

"Eventually, we will have factories in the vicinity of North America again. … We assume the environment will have changed considerably by the time we build the next one."

Nishiguchi declined to be more specific during the conference call about the firm's plans, other than to say a new factory would benefit from advances in digital manufacturing, enterprise resource planning (ERP) and manufacturing excellence systems (MES), as well as being carbon-neutral.

"Also, it will be a factory that incorporates smart automated processes in the face of very high labor costs," he added, as well as a factory that "will incorporate equipment that will enable us to produce higher value-added products through the renewal of facilities."

SRI is in the process of moving most—if not all—of its capacity from the now idled Tonawanda, N.Y., factory to its 18-year-old plant in Amati City, Thailand, and going forward will supply the U.S. market almost exclusively from that factory.

The executives also mentioned the company's manufacturing operations in Indonesia as a potential source of tires for the U.S. in the future.

Throughout the conference call, SRI executives cited the "rising cost of labor" as a key factor in their decision to close the 110-year-old factory near Buffalo, despite committing $350 million in capital expenditures at the facility over the past eight years.

The executives also pointed to recent turmoil in U.S. market dynamics, specifically a "price attack" by an unidentified third-party tire maker that has led to a softening trend in passenger tire prices.

SRI's decision also came amid rising sales in North America. According to the firm's third-quarter financials, tire-related sales revenue in North America increased nearly 11 percent through the first nine months of 2024, to $1.23 billion. The SRI execs cited demand for the firm's Falken Wildpeak light truck/SUV tire line.

To help keep costs under control, SRI has struck an exclusive shipping agreement with an as-yet unnamed ocean-freight company that executives said will ensure stable freight costs for the foreseeable future.

Even if ocean-freight costs and/or tariffs increase, SRI executives believe the "low cost of Asian factory products will make them more profitable than those produced in the U.S. up to now," SRI President and CEO Sataro Yamamoto said,

Yamamoto also addressed another topic of potential importance for SRI, the future of the Dunlop brand, Sumitomo's primary brand in markets outside of North America and Europe, where Goodyear controls the brand rights.

Goodyear has identified that asset as one it intends to divest, and recently Goodyear CEO and President Mark Stewart told Tire Business that Goodyear won't "fire-sell" that asset. Goodyear earlier pegged Dunlop-brand sales at roughly $700 million annually.

Asked about the status of the Dunlop brand rights, Yamamoto stated:

"We are of course interested in using the Dunlop brand in this area (Europe, North America and Australasia), as it is a premium brand and will naturally facilitate our development for future growth."

But having said that, he declined to comment specifically on any ongoing negotiations toward resolving the issue.

Goodyear negotiated rights to the Dunlop brand for North America, Europe and parts of Australasia in 1999 as part of its global alliance with SRI. It then secured the rights to the brand in those markets in 2015 when the companies dissolved that alliance.

SRI controls the rights to the brand throughout most of Asia, Africa and South America. It uses the Falken and Ohtsu brands in North America and Europe.