Yokohama Tire Corporation Commercial Division Year in Review and Preview of 2012

Rick Phillips, Yokohama director of commercial sales, assumed leadership of the division in January of this year. In this Q&A, he discusses the current state of the business, as well as provides an outlook for the year 2012.

Question: With the earthquake/tsunami, product shortages and cost increases in raw materials, how did Yokohama’s Commercial Division fare in the industry?

Rick Phillips: Demand has continued to outweigh supply so we have literally sold everything that we are able to build. At the same time though, it has been very frustrating to not be able to meet the expectations of our customer base. The tsunami just presented another set of issues that we had to manage through. We actually recovered quite well and the impact was less than what it could have been given the severity of the situation.

Question: How did Yokohama address some of these industry problems?

Phillips: The costs have been a huge factor. Although raw materials have fluctuated of late, they have increased dramatically over the last two years. These include transportation, insurance, labor and related expenses. We have had to bear these costs but also pass some of them along, unfortunately. However, if you consider the past couple of years in aggregate, we still have not recouped the full impact of all the rising costs.

Question: Do you see some of these issues carrying over to 2012 for the industry? Which ones and how much of an effect will they have?

Phillips: As an industry, we will go into 2012 with very little beginning inventory much like we did in 2011. This alone will be a challenge but add to it a demand that’s forecasted to remain at high levels – especially within the OEM segment – and further pressure can only be expected on the replacement market. Although costs are probably not going to rise at the rates seen by tire manufacturers this year, they are likely to continue to escalate.

Question: Any new opportunities for commercial tires in 2012?

Phillips: Yes, we see the demand continuing to be greater than supply, at least through next summer. Despite reports on the economy being on the brink of another recession, the trucking industry remains strong. Commercial equipment sales and future orders remain high as does the demand for freight. It’s also interesting to note that amid all the bad economic news, we actually have had eight consecutive quarters of GDP growth. Not every quarter witnessed robust growth, but growth was achieved nonetheless.

Question: What is Yokohama’s outlook for 2012? Are there any new products in the pipeline?

Phillips: We are expecting a solid year, with new products lined up for launch. There will be a new steer tire, the RY647™, which will be built on a highly retreadable casing, be extremely fuel-efficient and exceptionally resistant to irregular wear. It’s scheduled to be released in 2012. We will also be releasing the 709ZL™ drive tire. This will be a shallow and ultra-fuel-efficient drive tire and the latest addition to our Zenvironment® line-up. The 709ZL aims to be the most fuel-efficient drive tire in the industry, and, of course, will carry our best-in-industry casing warranty.

Question: How about the production of the tires themselves? Is there talk about building a new commercial tire plant in the U.S.?

Phillips: We are actively looking at a number of options all over the globe to expand production and yes, that would include the possibility of building a facility in the U.S. We will continue to conduct research and will make a decision based on what is the most appropriate strategically for Yokohama on a global scale.

Question: YTC launched its SmartSolution™ program in 2011. How has it been received by dealers?

Phillips: SmartSolution has been a remarkable platform for us and has been well received by our commercial dealer network. It is an effective way to get our message out to the industry and to demonstrate the strengths of the Yokohama brand. When dealers look at all four pillars of the platform and combine the longevity, efficiency, availability and dependability of Yokohama, they appreciate the advantages we bring to their business needs.

Question: Any new updates or programs?

Phillips: SmartSolution is a living entity in and of itself and we will continue to build upon and expand its reach. There are currently several updates planned throughout the year, including the creation of a Smart Certified Dealer Network. This will identify and recognize our top-tier Full Service Dealers. We are also looking at several interactive web-based analysis tools as well as apps for smart phones and tablets that will serve as resources for the dealers

Question: You were promoted at the beginning of this year to your current position of director of commercial sales. What have been some of your challenges – and opportunities?

Phillips: Every day is a challenge and at the same time every day is very rewarding. Managing the business with severe supply limitations and rising costs have definitely been at the forefront. The way you deal with these and any challenge is to be flexible and adaptable without over- reacting and simply staying close with the core values that have made you successful in the market. And at Yokohama, we have been able to do that.

At Yokohama also, we have a highly committed group of individuals that have a wealth of industry experience and which have developed a unique culture as a team. This makes for a very enriching experience every day. It additionally makes Yokohama a very easy company to do business with and I find that especially gratifying as we provide service to our customers. And last but certainly not the least, I feel fortunate enough to do business with some of the best people in the industry.

Yokohama Tire Corporation is the North American manufacturing and marketing arm of Tokyo, Japan-based The Yokohama Rubber Co., Ltd., a global manufacturing and sales company of premium tires since 1917. Servicing a network of more than 4,500 points of sale in the U.S., Yokohama Tire Corporation is a leader in technology and innovation. The company’s complete product line includes the dB Super E-spec™ – the world’s first tire to use orange oil to reduce petroleum – as well as tires for high-performance, light truck, passenger car, commercial truck and bus, and off-the-road mining and construction applications. For more information on Yokohama’s extensive product line, visit www.yokohamatire.com.

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