Mid-year Report: Toyo finding success despite COVID-19 impacts

According to President and CEO Roy Bromfield, Toyo Tire U.S.A. Corp. has weathered the COVID-19 pandemic successfully and is looking ahead to the start of a "new regular." He addressed the pandemic as well as other industry issues recently with Tire Business.

How has your company reacted to COVID-19?

At Toyo Tires, we tightened our belts, starting in March, primarily through budget reductions to bring projected expenses in line with what we anticipated revenue declines to be. We have kept our team intact as we plan on emerging from this pandemic successfully and will need all hands on deck for that.

We are so impressed with the ability of our Toyo team to react quickly to working remotely and often under challenging conditions at home, and to continue to deliver, in all our organizational disciplines, at high levels.

Although the rapid market declines starting in mid-March did have a negative impact on sales, looking back at our March, April and May sales, we are grateful to our dealers and distributors for the performance we have had, which has dramatically outperformed the market.

We have tried to stay in close touch with our dealers and distributors during this crisis. Communication is critical in a time of uncertainty, so we have urged our sales and management teams to be a friendly voice and a sense of calm.

What type of practices has your company implemented in light of COVID-19?

First and foremost, the health and well-being of our employees is most important, which is why our office and field staff have been working remotely from their homes and avoiding travel since mid-March. Now, as parts of the country open, some members of our sales and technical teams are beginning to visit dealers while following local orders and health guidelines.

What are some of the pleasant surprises you are seeing in the industry?

Although rushing out to buy tires is not top of mind for most mass market buyers, but for those who need them, the Toyo brand provides an excellent price/performance value proposition, so we think that we are in a sweet spot for both retailers and the consumer. We also hear from "enthusiast" consumers that the time at home has allowed them time to work on their cars and trucks (in particular), so there is still relatively strong demand for our Open Country line of light truck products.

The USW has petitioned for antidumping and countervailing duties on passenger and light truck tires made in Thailand, South Korea, Taiwan and Vietnam. What is your company's reaction to that?

Our company does not manufacture in any of those countries.

How might additional duties impact the industry?

It is too early and not appropriate on our part to speculate. But from a lessons-learned perspective, we certainly all have the recent experience of similar actions relative to China-manufactured products.

Where do you see the industry markets heading during the second half of 2020?

Commercial segments have remained relatively strong during this crisis, so we expect them to be even more robust as we come out of it and business heats back up across the broader economy.

We believe the pent-up demand will be in consumer segments, certainly in the mass-market areas where drivers have limited their travel and postponed purchases, but also in enthusiast segments where people will be happy to go camping and racing and off-roading once again.

We are already beginning to see more vehicles on the highways than just weeks ago, which means miles driven will begin to accelerate, as will traffic into tire dealers.

What kind of trends are you seeing in the marketplace? How is your company reacting to them?

Toyo recently released another all-terrain product in its Open Country line, the Open Country A/T III. How are early sales? Is that segment immune to the current economic slowdown?

Thank you for asking about our Toyo Open Country A/T III. We have actually launched three products since March 1st: The Open Country A/T III all-terrain tire, Proxes Sport A/S all-season UHP tire and the commercial NanoEnergy M671 super regional drive tire.

These products were in the planning and development stages for years, so the launch dates had been established for quite some time. Our decision has been, "Do we delay, or do we move forward as planned?"

We have great new products, ones that provide enhanced technical capabilities, improved performance and appearance, as well as new fitments. Although we had to curtail a number of our planned launch activities due to coronavirus guidelines and restrictions, we felt it was critical to bring these products to market.

In a world that bombards us with bad news each day, we see our recent launches as exciting news, something for our internal teams and our dealers to get excited about. The response from both dealers and consumers has been extremely positive, and sales are going well. We are confident that we will emerge from this crisis and hopeful that it will be sooner rather than later; we'll be in a great position with our product lineup when we do come out of this.

Do you expect to roll out any more products in 2020?

We do have two more product launches planned for 2020. They are in the commercial and commercial van segments, which continue to be strong, so we expect they will be well-received by the market.

Do you foresee any price hikes in the second half of the year?

At this time, we are not anticipating general price increases. Of course, raw materials and market dynamics are fluid, so we will adapt and act if necessary throughout 2020.

Do you expect any major investments in the next six months?

Toyo has a number of expansion projects around the world in various phases. Clearly corporate management is assessing all of those currently considering the COVID-19 pandemic. We are not able to reveal any of those decisions yet, whether it is to continue as planned or to postpone.

How has the UHP market fared in light of the proliferation of LTs, SUVs and CUVs? Are you seeing growth and potential for future growth? Any new innovations in the segment?

The UHP segment has continued to evolve to be aligned with vehicle trends. We have updated our Proxes line of products with the launch of our Proxes Sport A/S, Proxes Sport and Proxes ST III to help provide options for our dealers to address the wide variety of UHP fitments for sports cars, luxury touring cars, CUVs and SUVs.

The UHP market already is alive and well in the CUV and SUV market. If you look at the OE sizes on most of these type of vehicles, the rim diameters are 17 inches and larger, the aspect ratio is 55 or smaller, and the speed/performance is V-rated and higher. That is the classic definition of a UHP-sized tire.

In the beginning CUVs and SUVs that were equipped with a performance sport package offered UHP-type products, including staggered fitments. Today almost every trim level CUV and SUV has a UHP-sized product, including 19- and 21-inch rim diameters.

For example, Toyo Tire builds a 235/55R19 101V Open Country A39, which is OE on the 2019 Toyota RAV4. The 2019-2020 Chevy Blazer is option equipped with a 265/45R21 104V, and the 2020 Ford Explorer is option equipped with 275/45R21 110W sizes.

It is true that consumers are trading in their performance sedans for CUVs and SUVs that offer equal to or better performance, so tire manufacturers are going to continue to build UHP products to meet the performance requirements and future market demands. Tire dealers will see increased revenues and profits from this new market segment.

Given the current conditions, how has your social media emphasis helped promote your product?

It is no surprise people have been spending more time on social media, and as a result, we have seen high engagement and continued fan growth across our channels. Every day, up to six times a day, we are delivering high-quality photo and video content that features popular products in our Open Country and Proxes lines.

In fact, on June 9 we premiered a very special video project featuring our new Open Country A/T III all-terrain tire, SCORE Baja 1000 winner and Team Toyo driver Alan Ampudia, and Grammy award winning artist Lil Jon. We encourage Tire Business readers to check it out at Youtube.com/ToyoTires.

Content like this provides a platform to increase both brand and product awareness. The person seeing it might not need tires in that moment, but we sure hope they will think of Toyo Tires when they do.

What are some of the challenges of the industry going forward? What keeps you up at night?

In an economic crisis there are those who adapt and thrive, those who merely survive, and those who disappear. We read every day in the business news of companies outside of the tire business declaring bankruptcy or closing their doors.

Certainly our industry is not immune, and we can anticipate that there will be a reshuffling of players, both at the manufacturer level and amongst dealers and distributors. Manufacturers and dealers alike will not be able to do things post-pandemic exactly the way they did it before because this global crisis has changed what we call "normal."

Innovators and adapters will define how we react to the new world we'll face together. The only thing that we can predict at this time is that the "who and how" will be the topic of a Tire Business article as we look back on this historic year of 2020!

As to what keeps me up at night: Now that we at Toyo USA have thus far weathered the storm relatively well, the biggest concern is the safe re-opening of the country as the economy re-engages and the safe deployment of our teams as we head toward the "new regular" in operations and lifestyles.