Yokohama TWS year focused on customer productivity

TIVOLI, Italy—Yokohama TWS recently marked its one-year anniversary since Yokohama Rubber Co. Ltd. acquired and renamed it Trelleborg Wheel Systems.

The division operates in three off-road tire markets in North America—agricultural, materials-handling and construction—and Paolo Pompei, president and CEO of Yokohama TWS, said the integration of Trelleborg into Yokohama is "going well."

"For us it was a great opportunity to join a larger family that speaks the same language and is really focused on tires," Pompei told Tire Business. "Don't forget, we were coming from a group that was doing many other things and tires as well.

"In this case, we really are in a family, a larger family, that obviously is talking about tires, live with tires and is focused on tires. So for us, it's really a great opportunity to develop more of the business and to be supported by shareholders that understand the challenges of the tire business, even more than our previous shareholders. So the transition is working well."

Pompei said there is no overlap of products with Yokohama's Off-Highway Tires division, which also offers agriculture and construction tires, along with forestry, industrial, earthmoving, mining and port tires.

The advantage of the Yokohama portfolio is that the company can service any kind of market needs and any market segments, he said.

"I think we are one of the few companies in the world who is able today to do that. So we have a leading position in the agri business. We have a leading position in the material business. We have an extremely wide product portfolio with different brands servicing different customer applications.

"So really, I think today we are in a position where it's going to be a tough life for our competitors because obviously we have a really great portfolio and we like it as it is. So forget those two companies are together because together they're stronger."

Yokohama TWS builds and distributes Trelleborg-, Mitas-, Maximo- and Cultor-brand tires while Yokohama ATG distributes Alliance, Galaxy, Primex and Yokohama OTR brands. There are no plans to consolidate brands, according to Pompei.

"We have brands for different customers and this is giving our customers some possibilities to choose the brand that is delivering a valuable position that is requested by them. So really, we will invest even more in our brands, we will invest more in promoting our brands in the market.

"Again, targeting different customers and different end-users ... It's really, really a great portfolio. It's really, really the strength of Yokohama today when we are working in our industry."

The three North American tire markets Yokohama TWS operates in have experienced different sales trends this year, Pompei said.

Material handling and construction are experiencing a "very good market environment, both in OE and aftermarket," he said.

"The market has been quite stronger and remains strong. On top of this, I think we did very well. We gained market share. We're developing our Interfit, which is our service network for the aftermarket," he said. Interfit, a mobile, onsite replacement tire service available in 21 countries, is being established in North America.

"I havent' seen any decline. I see the market remaining stable. The economy in the United States has remained quite strong."

The agricultural tire market, on the other hand, is a bit different.

"I think it's normalizing because obviously sales were booming in the last three years. There was a really strong cycle, in particular on the original equipment side. It was growing three consecutive years quite nicely and now the OEMs are obviously slowing down. … I'm expecting, and I see already, a stronger replacement market in the agri business in the second half of the year. This is quite normal when you have so many new machines in the market, the aftermarket is becoming stronger. ...

"OEMs have been slowing down. We were expecting this after so many years of growth. So the OEM business is slowing down because I think the supply chain is adapting now to the normal level of business. We should never forget that the last three years were exceptional for many of the OEMs in the agricultural business," he said.

Yokohama TWS maintains a strong business in the materials handling and construction tires markets, he said, so ag tires is a targeted growth area for the division.

"So agri is really one of the segments at the moment I see as great potential for us. But also the development of our service network in the material and construction business. We have quite a good presence in the OE and the aftermarket that we're growing, getting closer to the customers and giving them better services and making sure, also, that we're able, with our service people and with our people in the field, to give them added value, not only through products and sustainable products, as well, but also through service capabilities. This is really our main focus at the moment," Pompei said.

"Again, confirming our strategy is to be closer to the customer with product, with people and our manufacturing facilities as where it makes sense."

"Any challenges are an opportunity," he said, adding, "Challenges in my opinion are opportunities to do better at business and to differentiate and be a leading company in the premium segment in North America."

That being said, he noted that inflation and cost of labor increases are challenges for the manufacturing side of the business.

Also, there is a growing number of competitors offering different solutions.

"I see really opportunities for us to differentiate with innovation because if you want to be more competitive ... Innovation is one of the ways to differentiate and to support market growth with solutions that (offer) higher efficiency and higher productivity," he said.

"There are other competitors and other players in our own industry. So from our side, this means competition for our own customers, meaning that we need to be able to give to our own customers the possibility to be more productive, more efficient and really work, because they need to compete in the global market as well."

By helping end-users with productivity and efficiency, he said it helps the customer to be more profitable and beat their competition.

"I see more and more how it's important to put innovation at the center of any decision, more than selling tires. A company that is only selling tires will not survive," he said.

With that perspective, Yokohama TWS is pursuing more digitalization.

"We're investing a lot in digitalization of the product and obviously on the service side because we believe that with true digital solutions we give the possibility for our customers to increase their efficiency and productivity to get better service.

"Connected products to the machines that are able to give important information to the driver of the machine and to give the driver of the machine the possibility to save money, be more productive and more efficient, …reduce fuel consumption, do the same job in less time."'

On the service side, the company is "developing anything that is needed to support our dealers in the market with B2B and B2C solutions," he said. This includes providing dealers with information and enabling them to place orders in real time.

"I see that digitalization playing an important role in the future development of business when dealing with our customers, when dealing with our dealers or end-users."

Another innovation the company is working on is autonomous systems capable of measuring the dynamic load of each individual tire during operations. This allows for real-time detection of the tire's working conditions and provides advice to the driver on how to optimize tractor productivity, reduce soil compaction and lower fuel consumption. This is achieved through recommended inflation pressures, correct tractor ballast and implement set up, as well as inputs for the tractor engine and transmission power management, he said.

Yokohama TWS has invested in capacity expansion and automation at its two OTR tire plants in Charles City, Iowa, and in Spartanburg, S.C., this past year.

"We increased capacity last year, particularly at our plant in Spartanburg in South Carolina. We continuously update our plants. For us it's really about filling additional capacity and making sure that we keep growing. Obviously, we keep investing in automation because automation is becoming important and we keep investing in the service side."

Pompei said investments in the two factories supports the company's "local for local" business model, meaning made in the U.S. to supply U.S. customers.

This strategy has helped the company offset shipping disruptions earlier this year when low water levels slowed shipping traffic through the Panama Canal.

"I would say the supply chain is quite stable now. Our business model is made in a way that we limit supply-chain issues because in agri, we are local. So obviously being local we are extremely close to the local market," he said.

"At the moment, from our side, at least, the supply chain is quite normal. We don't see major issues at all."

Pompei said the general political uncertainty also supports the need for stronger localization and being closer to the market.

"In that respect, I believe we have an advantage because this is part of our strategy since many, many years, being local for local business because obviously it gave us the possibility to absorb any kind of geopolitical issue or market issue that can be happening in the market."

Yokohama is participating in the sustainability trend by working to cut CO2 emissions at its plants and reduce the use of natural resources.

Yokohama TWS has a goal of becoming carbon neutral by 2035 and increasing the use of biomaterials and recycled materials in its products while ensuring end-of-life reuse of tires in its industry or other industries.

Late last year, during Hanover, Germany's Agritechnica fair, the company unveiled its most sustainable tire yet, the TM1 Eco Power, made from 65% recycled and bio-based materials for electric tractors.

"I think we need to carry on in this journey if we really want to give our contribution in eliminating utilization of resources or carbon-free resources," he said, noting that the company's goal is to deliver more products that are "green" with biomaterial or recycled material.

While European farmers have embraced radial tires, the adoption of radials in the U.S. has been slower, Pompei noted.

"I see a slow decrease in bias. When you look at the balance between radial and bias in Europe, 85% of the market is radial due to spending a lot of driving time on the road. In North America, the market is just a little more than 50-50 between radial and bias.

"We at TWS, we are really focused in the agri business on the radial because we believe radial technology is offering the customer the possibility to be more productive and more efficient long term," he said, noting that the company only produces radial tires for the U.S. market.

"We are extremely committed to the North American market, we're extremely committed with our production facilities. We're extremely committed with our people, with our service network," Pompei said.

"We want to make sure (dealers) consider TWS as a strong partner for them long-term, sustainable as well, because obviously we are there for a sustainable future. I really want to make sure they understand the valuable position of our own brands and that they understand the value that our own brands can deliver to their own customers.

"So having a good partner like us means having a partner who is able to serve their problems and at the same time generate a return for them and additional business because we are fully focused on delivering value to the end-user more than selling rubber," he said.