Report code: 0XCHE09 Analyst: Petra Frent Publication: October 2010
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The 5 phases of Xerfi Globals Global Markets and Competition reports
Phase 1: Identification of the playing field At Xerfi Global, we believe that international classifications are not the only valid definition of a market. It is the companies that make the sector and not vice-versa. During our first brainstorming session, we strive to give a clear-cut definition of the scope of the report.
Phase 2: Identification of market leaders During the second phase, Xerfi Globals analysts identify the players who will be studied in the report. Our aim is not only to classify by total sales, but also to detect tomorrows movers and shakers, especially those from emerging markets
Phase 3: Identification of the main market indicators Using the best and most up to date international sources, Xerfi Globals experts handpick the most relevant indicators pertaining to both supply and demand.
Phase 4: Identification of corporate strategies During a further brainstorming session, the Xerfi Global team aims to decipher the main corporate strategies and key future trends.
Phase 5: Identification of the key conclusions Thanks to a final brainstorming session, drawing on the knowledge of all the members of Xerfi Global, the main conclusions are debated and ultimately summed up in no more than a dozen slides. Concision, precision and accurate forecasts are our main aims.
This report was written under the supervision of:
Petra Frent
Other main contributors include:
Alberto Balboni Alexander Law Aurlien Duthoit Hlne Alary Laurent Marty
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Table of contents
0. CONCLUSIONS 9 1. MARKET FUNDAMENTALS 21 1.1. Key characteristics ________________________________________________________________________________________ 22 Key characteristics 22 1.2. Tyre industry overview ____________________________________________________________________________________ 23 What is the business? 23 What are the products? 24 1.3. Supply and demand _______________________________________________________________________________________ 25 Who are the suppliers? 25 Who are the customers? 26 1.4. Market leaders ___________________________________________________________________________________________ 28 Who are the key players? 28 1.5. Geographic data __________________________________________________________________________________________ 29 Where are activities located? 29 2. MARKET ENVIRONMENT AND PROSPECTS 30 2.1. Overview of the market ____________________________________________________________________________________ 31 Pestel analysis 31 2.2. Supply __________________________________________________________________________________________________ 34 Raw materials 34 Production and exports 35 Raw material prices 36 Production prices 37 2.3. Demand _________________________________________________________________________________________________ 38
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Automobile production 38 Global vehicle fleet 39 Online retailing 40 2.4. International Trade _______________________________________________________________________________________ 41 Exports 41 Ranking 42 2.5. Regional overview_________________________________________________________________________________________ 43 3. CORPORATE STRATEGIES AND COMPETITION 44 3.1. Competitive environment __________________________________________________________________________________ 45 Driving forces of the industry 45 Global market share 48 Small-scale players 49 3.2. Business models __________________________________________________________________________________________ 50 Diversification 50 Strategic alliances 52 Vertical integration 53 3.3. Geographical presence _____________________________________________________________________________________ 54 Presence on the main geographic markets 54 Operations in emerging markets 55 3.4. Brand strategy ___________________________________________________________________________________________ 56 Multi-brand versus single-brand 56 3.5. Differentiation strategies ___________________________________________________________________________________ 57 Case studies 57 3.6. Outlook _________________________________________________________________________________________________ 60 Investments 60 3.7. Ranking _________________________________________________________________________________________________ 61 Net sales 61 Ranking by operating margins 62 4. COMPANY PROFILES 63
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4.1. Bridgestone ______________________________________________________________________________________________ 64 Company Overview 64 Business segments 65 Corporate strategy 66 Recent events 67 Key data 68 Revenues by business segment 69 Revenues by region 70 Operating margin 71 Research and development 72 Statistical data 73 4.2. Michelin_________________________________________________________________________________________________ 74 Company Overview 74 Business segments 75 Corporate strategy 76 Recent events 77 Key data 78 Revenues by segment 79 Revenues by region 80 Operating margin 81 Research and development 82 Statistical data 83 4.3. Goodyear ________________________________________________________________________________________________ 84 Company Overview 84 Business segments 85 Corporate strategy 86 Recent events 87 Key data 88 Segment volumes 89 Revenues by region 90 Operating margin 91 Research and development 92 Statistical data 93 4.4. Continental ______________________________________________________________________________________________ 94
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Company Overview 94 Business segments 95 Corporate strategy 96 Recent events 97 Key data 98 Revenues by segment 99 Revenues by region 100 Operating margin 101 Research and development 102 Statistical data 103 4.5. Pirelli ___________________________________________________________________________________________________ 104 Company Overview 104 Business segments 105 Corporate strategy 106 Recent events 107 Key data 108 Revenues by segment 109 Revenues by region 110 Operating margin 111 Research and development 112 Statistical data 113 4.6. Sumitomo________________________________________________________________________________________________ 114 Company Overview 114 Business segments 115 Corporate strategy 116 Recent events 117 Key data 118 Revenues by segment 119 Revenues by region 120 Operating margin 121 Research and development 122 Statistical data 123 4.7. Yokohama _______________________________________________________________________________________________ 124 Company Overview 124
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Business segments 125 Corporate strategy 126 Recent events 127 Key data 128 Revenues by segment 129 Revenues by region 130 Operating margin 131 Research and development 132 Statistical data 133 4.8. Hankook ________________________________________________________________________________________________ 134 Company Overview 134 Business segments 135 Corporate strategy 136 Recent events 137 Key data 138 Revenues by segment 139 Revenues by region 140 Operating margin 141 Research and development 142 Statistical data 143 4.9. Cooper __________________________________________________________________________________________________ 144 Company Overview 144 Business segments 145 Corporate strategy 146 Recent events 147 Key data 148 Product lines 149 Revenues by region 150 Operating margin 151 Research and development 152 Statistical data 153 4.10. Maxxis _________________________________________________________________________________________________ 154 Company Overview 154
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5. STATISTICAL APPENDIX 155 6. INFORMATION SOURCES 166 International organisations 167 Press 167 Corporate websites 168 7. ANNEXES 169 7.1. Overview of the market ____________________________________________________________________________________ 170 2009 sales 170 2010 sales 171 7.2. Demand _________________________________________________________________________________________________ 172 Market breakdown 172 Profile of the leading companies 175 Net sales 177 Operating margins 178 7.3. Presence in main geographic segments________________________________________________________________________ 179 Asia 179 India 181 South America 182 North America 184 Europe 185 7.4. Differentiation strategies ___________________________________________________________________________________ 186 Research and development 186 7.5. Regional overview_________________________________________________________________________________________ 188 Asia-Pacific 188 Latin America 189 North America 190 Europe 191 Africa and Middle East 192 Statistical framework 193 Data 194
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0. Conclusions
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Key trends by 2015
Tyre manufacturers have a major goal: further global expansion of their operations. Although demand in mature economies will pick up, the immense growth opportunities in emerging markets have led tyre companies to decide on investing in boosting capacity in already established plants or building new ones. Tyre manufacturers profitability is to a great extent dependent on raw material prices: they are expected to remain highly volatile, thus putting more pressure on companies operations. In order to secure procurements, tyre makers are highly vertically integrated structures: groups such as Michelin own and run several natural rubber plantations in the rubber belt countries. Small-scale players will continue to take market shares of the Big Three: Michelin, Bridgestone and Goodyear have held the greater proportion of total industry sales, but their share is gradually decreasing as companies from emerging countries and China in particular, are expanding their sales and operations. Groups are to increase their focus on their core business: diversified groups have been divesting their other businesses, and generate more than three quarters or revenues from tyre operations. Furthermore, top-notch players are multi-specialists, manufacturing tyres in all market segments (from passenger cars to aviation, from premium brands to private brands). In making and marketing their products, tyre manufacturers pursue either differentiation (the Big Three are trend-setters in all aspects of innovation in the industry, dominating the ultra-high performance and premium tyre segment) or cost leadership strategies (the large majority of such players are companies from China and Taiwan).
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Tyre production continues to expand globally
Total tyre production worldwide unit: 1,000 tons of rubber
Recently, weak economic conditions, troubled financial markets, and detrimental exchange rates resulted in a drop in rubber tyre sales volumes in North America and Europe. Some companies recouped their losses by increasing sales in the emerging markets and expanding production in developing countries where production costs are lower. Over the next decade the economic landscape will improve, as overall market indicators strengthen and global economic activity picks up: strong (China and India) to moderate GDP growth, increased industrial production and improved consumer activity and freight movement. The demand in the automotive industry is also picking up pace, driving demand for tyres and growth is foreseen in both industries for the years ahead.
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Raw material prices are set to remain volatile
Prices for main raw materials main trading indexes unit: % Tyre production is the biggest consumer of synthetic and natural rubber. The industry uses the majority of natural and synthetic rubber output. The sharp price volatility for natural rubber and petroleum-based materials contributes to the difficulty in managing the costs of raw materials. The cost of raw materials represents the largest component of total cost of goods sold or approximately 50 percent on average, with variations from one company to another. While the industry will continue to grow, material shortages and price increases are evident. Raw material volatility has been and remains an issue, with price increases expected to be announced by all companies in 2010.
Source: Xerfi Global. Primary source: International Rubber Study Group.
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Most tyre companies are vertically integrated
Vertical integration of tyre companies
Rubber and tyre manufacturing companies tend to be highly vertically integrated. There is a growing trend in the industry to own rubber plantations because it creates a strong competitive advantage. Michelin for instance, owns and operates six rubber plantations (one located in Latin America and the others in West Africa and Asia), while Goodyear Tyre and Rubber Company has recently invested in two new synthetic rubber plants.
Further down the line, many tyre companies own and operate their own distribution networks: Cooper has five distribution centres and five sales offices in Europe and Michelin has two integrated tyre distribution and service networks, Euromaster and TCI. The Korean Regional Headquarters of Hankook operates over 2,100 direct-run and franchised dealerships.
Source: Xerfi Global.
Raw material suppliers
Tyre production facilities
Distribution networks
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New players have been cutting into the Big Threes market share
Change in market share of the global players unit: %
For most of the history of the tyre industry, the top three leaders have remained unchanged, with Bridgestone and Michelin battling for first position. The results for fiscal 2009 and the first half of 2010 confirm Bridgestones supremacy in the industry. Although in 2000 the Big Three held almost 60% of the whole market share, this proportion has gradually declined over the last decade, reaching 46% in 2008. This trend is likely to continue, as smaller players competing on volume and low-pricing strategies continue to increase their market shares. Such is the case in emerging countries or China, where domestic tyre manufacturers have doubled their sales both in volume and value over the past decade, and this development is set to continue.
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2000 2001 2002 2003 2004 2005 2006 2007 2008 Mi chel i n Goodyear Bri dgestone Others
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Asian manufacturers dominate the top 10
Tyre companies ranking GROUP COUNTRY GROUP NET SALES (2009) PRODUCTS Bridgestone
19.8 bn Tyres, chemical products, others Michelin
14.8 bn Tyres Goodyear
11.9 bn Tyres Continental
20 bn Tyres, automotive parts Pirelli
4.4 bn Tyres Sumitomo
3.9 bn Tyres, sport goods Yokohama
3.5 bn Tyres, industrial products Hankook
2.9 bn Tyres Cooper
1.9 bn Tyres As far as the top three are concerned, the picture has remained unchanged for years with Bridgestone, Michelin and Goodyear setting the trends for product innovation in the industry. These are players present in all market segments and geographical regions. The 10 largest tyre manufacturers account for about 80% of the worlds tyre sales, while the leading three companies, Michelin, Bridgestone, and Goodyear, accounted for 46%. To compete with the Big Three, smaller manufacturers have tended to focus on a specific niche (specialty tyres) or in regional markets. Moreover, this trend will continue.
Maxxis
1.8 bn Tyres Source: Xerfi Global with companies annual reports.
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The Big Three are multi-specialists, present in every market segment
Market segments of main tyre companies Types of tyre Company Passenger car and light truck Heavy truck and bus Two-wheel Off-the-road vehicle Aircraft Civil engineering Agricultura l Bridgestone Michelin Goodyear Continental
Sumitomo
Pirelli Yokohama
Hankook
Cooper
Source: Xerfi Global with companies annual reports.
The tyre industry is a highly competitive one, especially in the passenger vehicle and truck tyre segments, where top-notch players face fierce competition from low-cost producing companies. However, specialty tyres (agriculture, aviation, two-wheel, earthmovers) which require extensive R&D resources and specific know-how, is a field where flagship brands such as Michelin, Bridgestone or Goodyear are prominent. The specialty segment represents 15% of the total revenues of Michelin or 20% of Goodyears annual sales. The Big Threes diversified array of distribution channels includes specialty tyre wholesalers and dealers. Michelin is the market leader in earthmover and aircraft radial tyres, the European market leader in agricultural tyres and one of Europes leading motorcycle tyre brand, a segment where top positions belong to Pirelli and Bridgestone.
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Main customers of the tyre industry ORIGINAL EQUIPMENT MANUFACTURE RS
25bn TYRE DISTRIBUTION for replacement of original tyres
75bn
The replacement market will remain the largest market segment Customers of the tyre industry
Global tyre market value: estimated at 100 bn in 2008 (of which light-vehicle tyres accounted for 60% and truck tyres for nearly 30%).
Global tyre market volume: estimated at around 1.1 bn tyres for cars and light trucks and 125 mn for trucks and buses in 2008.
Vehicle manufacturers or OEMs In the wake of the recent financial crisis, there has been a noteworthy change in demand for tyres in mature markets, where increasing orders for vehicles with high fuel economy led to a shift to smaller size passenger tyres light truck tyres, products of lower profitability to the industry.
Replacement In order to boost sales in the replacement market, tyre companies pursue extensive marketing campaigns using tremendous resources and budget. The global visibility guaranteed through extensive media interest, has made tyre makers strike exclusive supply deals in Formula One or other motor sports: Pirelli is currently the sole supplier for the GP3 series, the World Rally Championship and has been chosen as the exclusive supplier for Formula 1 between 2011 and 2013; Bridgestone is the official tyre supplier of the MotoGP and GP2 series. Another company intensively working on building a premium brand image is Hankook: since 2005, Formula 3 in Germany has been racing exclusively on Hankook tyres. Source: Xerfi Global.
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Leading players are planning to expand their presence in emerging markets
Bridgestone is set to invest $540 mn between 2010 and 2013 to build a car and truck tyre plant near Pune, India, to support growing demand for radial tyres in Asia and an additional $142 mn over two years to expand capacity for passenger tyres at its plant in Poznan, Poland, by nearly a third.
One of the industry leaders, Michelin, plans to invest $870 mn to build a truck and off- the-road tyre plant in Tiruvallur, near Channai in southern India in the upcoming years.
Sumitomo is another major player with an eye on the Chinese tyre market: it will spend $297 mn to build a passenger tyre plant in Changsha, China, with production expected to start by July 2012.
The Pirelli Group intends to reinforce its presence and to invest heavily in Brazil. The 300 mn US dollars of total investments in the 2008-2011 period are destined one third for research and development and the remainder for increasing production capacity. The new investments will enable a 20% increase in car and motorcycle tyre production. Pirelli aims to increase tyre production in eastern Europe, namely at its factory in Slatina, Romania: the 250 mn investment is to be carried out between 2009 and 2011.
Enjoying rapidly increasing demand, Hankook is completing a plant expansion project in Hungary, which is scheduled to start operations in 2011, when annual output will total 10 mn units (from 5 mn currently). Another project to build a new plant capable of producing five mn tyres a year by 2013 is seriously being considered.
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Top tier companies dominate the premium tyre segment
Tyre industry mix in mature economies unit: % Competition in the tyre industry unfolds around either product differentiation or cost domination strategy. The market is divided into the premium and economy segments: the former consists of two tiers, with tier 1 as a market with flagship brands such as Bridgestone, Goodyear, and Michelin and tier 2 as a market segment with secondary or former tier 1 brand tyres such as BFGoodrich, Uniroyal, and General. The tier 3 segment is characterised by economy or mass-market tyres that consist of private brands and lower level associate brands owned by major producers. Small players or domestic companies in emerging countries make up the bulk of tier 3. In developed economies, consumers favour companies with higher technology and brand strength, while in emerging countries economy and mid- tier tyre producing companies are dominant.
Premium Mid-tier Economy 0% 20% 40% 60% 80% 100%
Source: Xerfi Global estimations. Primary source: annual reports.
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Manufacturers in countries such as China are focusing on low-cost products
Prices for 215/70 R15 tyres in the United States unit: dollars TYRE BRAND PRICE Primewell PS850 $ 52.10 Triangle TR928 $ 52.20 GT Radial Wingpro 70 $ 55.80 BCT S600 $ 62.20 Cooper CS4 Touring $ 72.10 Goodyear Assurance $ 74.50 BF Goodrich Radial T/A $ 75.40 Goodyear Assurance FuelMax $ 82.60 Bridgestone Turanza EL 400 $ 87.20
Companies have shown continued selectivity with respect to their markets (replacement versus original equipment, branded versus private label). Largest players made significant strategic business decisions to shift production toward higher-value tyres and capitalise on consumer brand loyalty. Most flagship brands such as Michelin, Goodyear or Bridgestone have put more emphasis on their ultra-high performance, touring, and winter tyre offerings during the last few years, leaving low-cost production to overseas manufacturers. There have been shifts in demand involving lower-profile brands, such as BF Goodrich and Yokohama and economy brands from China and other developing markets, but no significant swings in the private brand market.
Michelin HydroEdge $ 107.40 Primary source: Tyre-easy. Chinese brands
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1. Market fundamentals
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1.1. Key characteristics Key characteristics
The tyre global market is dominated by The Big Three
Diverse products The major product segments are original equipment tyres and replacement tyres primarily for passenger cars, trucks, two-wheelers, aircrafts, and off-the-road vehicles. Sales driven by the replacement market Roughly 75% of tyre production is sold to the replacement market with only 25% going to the original equipment manufacturers (the automotive industry). A fluctuation in the production of vehicles is correlated with a decrease or increase in the tyre industry revenues. Higher margins in the specialty segments Tyres are largely a commodity, thus profitability depends on cost-efficient operations. Small companies can compete by producing tyres or tyre-related products for niche markets, such as bicycles or agriculture equipment. Large companies can afford the research to develop tyres from technologically advanced materials, and can invest in high-margin segments such as radial tyres (for trucks, aviation, and motorcycle), civil engineering or agricultural tyres. A highly concentrated sector 55% of global market share is held by the Big Three tyre manufacturers: Bridgestone (Japan), Michelin (France) and Goodyear (United States). The major players in the industry are highly specialised and competition is intense in major market segments (passenger car and truck tyres in particular). Raw material costs for manufacturers continue to go up
The primary raw materials used to make tyres are synthetic rubber, carbon black (for traction), natural rubber, various chemicals and reinforcing components such as steel wire, steel cord, and polyester. Both synthetic rubber and carbon black are derived from petroleum or natural gas. Hence, rubber prices have increased in line with oil prices, leading to a higher cost of production and an overall price boost of all tyre products.
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1.2. Tyre industry overview What is the business?
Tyre sales in the replacement market account for more than 7O% of sales
Breakdown by market of tyre sales unit:% The tyre industry sells its products in two main markets: 25% in the original equipment market (automotive industry); 75% in the replacement market (distributors who sell tyres to companies or clients to replace original equipment tyres).
Passenger car and light truck tyres together with truck tyres correspond to almost 90% of the total tyre market both by volume and value.
Replacement 75% Original equipment manufacturers 25%
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1.2. Tyre industry overview What are the products?
Tyres for the passenger car segment are predominant
Main products of tyre industry
Companies in the tyre industry essentially manufacture new tyres, but they can also produce other rubber goods, such as inner tubes or materials for tyre repair and retreading (a process that extends the life of a used tyre). Tyre manufacturers may specialise by type of vehicle or size of tyre, such as for cars, motorcycles, trucks, air planes, farm equipment, or bicycles. There are manufacturers present in all market segments (Michelin, Bridgestone, Goodyear or Sumitomo). Most of the companies concentrate only on selling tyres for passenger cars and trucks (Continental or especially domestic players in emerging markets such as China for instance). However, some tyre manufacturers have a strategic focus on a certain market (Cooper produces only light vehicle replacement tyres in the North American market).
Source: Xerfi Global.
TYRES
PASSENGER CAR AND LIGHT TRUCK
Around 60% of the value of sales TRUCK AND BUS
Around 25% of the value of sales SPECIALTY Civil engineering Agricultural Two-wheel Aircraft
Around 15% of the value of sales
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1.3. Supply and demand Who are the suppliers?
The tyre industry relies mostly on natural and synthetic rubber
Main raw materials used in tyre manufacturing
Raw material usage unit: % of total input value Natural rubber Rubber Synthetic rubber Vulcanizing agents Antioxidant Filler Compounding ingredients Softener Carbon black Reinforcing agents Silica Steel cords Tyre cords Textile cords
Raw materials cost represent close to 40% of total purchases (according to 2009 data for Michelin, but with variations from one company to another). Thus, optimising raw material usage is essential for securing rubber and staying profitable. More than 100 raw materials are used in the production of tyres. Approximately half of the materials, including synthetic rubber, are chemical products based on petroleum. As a result, the tyre industry is highly dependent on petroleum. More than 90% of the natural rubber supply comes from Southeast Asia. Rubber trees grow only in the Rubber Belt, an equatorial zone that stretches through Thailand, Indonesia, Malaysia, India, and China, accounting for 89% of the worlds natural rubber.
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Main customers of the tyre industry ORIGINAL EQUIPMENT MANUFACTURE RS
25bn TYRE DISTRIBUTION for replacement of original tyres
75bn
1.3. Supply and demand Who are the customers?
The industry sells tyres mostly for the replacement markets Main customers of tyre industry
Global tyre market value: estimated at 100 bn in 2008 (of which light-vehicle tyres accounted for 60% and truck tyres for nearly 30%).
Global tyre market volume: estimated at around 1.1 bn tyres for cars and light trucks and 125 mn for trucks and buses in 2008.
Vehicle Manufacturers or OEMs The demand from the Original Equipment Manufacturers is derived and directly correlated to the level of automotive production. Tyres are sold directly to the automotive industry. Generally, one tyre company can supply several automobile manufacturers (Hankook makes tyres for Ford, GM, Volkswagen or Audi).
The replacement market The demand in the replacement market depends on the size of the vehicle fleet, the level of economic activity, the price of tyres and the quality of road infrastructure. The replacement market offers higher margins and is therefore extremely competitive. The size of the replacement market is determined by the interplay of several factors: economic activity slow-downs account for longer replacement intervals and lower business mileage retreading (or applying a new tread), a process that can extend the life of tyres at a significantly lower cost, thereby lowering replacement demand. Retreads are made only in segments such as truck, bus and commercial aviation tyres. A tyre can be retreaded several times. radial technology for passenger car, truck and bus tyres increases operating efficiency by delivering better mileage and minimising wear and tear. Radial tyres represent roughly 90% of all tyres in developed economies, whereas their proportion is significantly smaller (under 60%) in emerging countries, leaving room for growth. Source: Xerfi Global with companies annual reports.
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1.3. Supply and demand
Tyre are sold through multiple distribution channels
Tyre industry distribution channel Multiple efforts are made in order to secure various distribution channels on a global scale.
Customers can purchase a certain brand of tyres directly through a companys own shop (flagship stores, exclusive direct-run and franchise shops), prime locations for promoting products and essential for building brand image. Other distribution channels include multi-brand retailers, wholesalers (a major UK-based European tyre dealer, ATS, sells Michelin, Pirelli or Cooper tyre brands to retail or business customers) or independent dealers who generally sell multiple tyre brands.
.
Source: Xerfi Global with companies annual reports.
TYRE MANUFACTURERS
Original Equipment Manufacturers
Replacement Distributors : Tyre wholesalers and retailers Proprietary/ franchised shops Automobile part retailers Large fleet users (business)
Automotive industry
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1.4. Market leaders Who are the key players? The market has been dominated by the Big Three for over a decade Largest groups in the tyre industry GROUP COUNTRY GROUP NET SALES (2009) PRODUCTS Bridgestone
19.8 bn Tyres, chemical products, others Michelin
14.8 bn Tyres Goodyear
11.9 bn Tyres Continental
20 bn Tyres, automotive parts Pirelli
4.4 bn Tyres Sumitomo
3.9 bn Tyres, sport goods Yokohama
3.5 bn Tyres, industrial products Hankook
2.9 bn Tyres
Cooper
1.9 bn Tyres It was status quo for the top 10 in 2009, except for Taiwans Cheng Shin Rubber (Maxxis) slipping past Japans Toyo Tyre & Rubber Co. Ltd. to come in 10 th in the industrys ranking. China has the most companies of any country (Triangle, Giti, Double Coin, Double Star etc...). Hangzhou Zhongce Rubber Co. Ltd. of Hangzhou is the largest of these, ranked 11th. The Chinese firms combined sales are more than 10 percent of the estimated world total. Apollo and JK Tyre are two of the main Indian companies in the rankings, but MRF Ltd. is the largest Indian tyre maker. The U.S. has six companies, followed by Taiwan with five (Kenda, Nankang, etc), Japan and Russia (Sibur etc) with four each, South Korea (Hankook, Kumho, Nexen) with three.
Maxxis
1.8 bn Tyres Source: Xerfi Global with companies annual reports.
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1.5. Geographic data Where are activities located?
Tyre production sites are chiefly based in Asia Global tyre production (volume) breakdown by geographical area unit: million tyres
Source: Xerfi Global with JATMA (2007 and 2008 data). ASIA & OCEANIA MIDDLE EAST & EUROPE SOUTH & CENTRAL AMERICA NORTH AMERICA Commercial vehicle tyres Passenger vehicle tyres 2007 2008 167 41 182 46 2007 2008 49 33 49 34 2007 2008 303 86 326 93 2007 2008 38 17 38 17 2007 2008 437 214 424 204
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2. Market environment and prospects
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2.1. Overview of the market Pestel analysis
Growth is picking up in the industry
PESTEL analysis of the tyre industry
Source: Xerfi Global. + - Politics Economy Society Technolo Environme Legislatio Widespread support for the automotive industry as a major provider of employment Political unrest in rubber supplying countries. End of car scrappage schemes (Europe)
Securing raw material
Price volatility of raw materials
Increased mobility needs
The challenges of sustainable mobility
Longer tyre life impacts demand Requires intensive R&D spending Road infrastructure development in the emerging economies
Scrapping of end-of-life tyres
Environment regulations Employment regulations Legislation on chemical substances + - + - + - + - + - + - An upbeat business environment Emerging markets
E-business New type of tyres for electrical vehicles Higher margins for specialty tyres
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2.1. Overview of the market An upbeat business environment
During the global recession, the results of 8 out of the top 10 companies showed a double digit drop. However, by mid 2010 the tyre market is on the rise again, a trend that will continue for the years ahead. backed by growing demand in emerging markets
Of course, there have been regional variations in the rise and fall of local tyre markets - with China bouncing back much faster than other economies. Although China experienced a downturn in 2008, it ended up with a 20% growth in 2009, while other regions were still in recession. Emerging markets will drive industry sales in the years to come. and meeting with increased mobility needs
To date, there are nearly 800 million vehicles on the road worldwide, a figure that is likely to double by 2030. In both mature and emerging markets, the road transport sector is faced with increasingly demanding requirements that call for higher tyre performance standards. enhanced by road infrastructure improvement in developing economies
The development of road infrastructure in developing economies is driving a faster shift from bias to radial tyres, which is the case in the Indian truck tyre market, for example. Radial tyres offer enhanced durability and fuel economy compared to bias tyres, and higher margins for tyre manufacturers. more than ever, companies with technological edge will secure higher profits
Tyre manufacturing is a capital-intensive industry with long investment payback periods. Added to this, the pace of technological innovation is slow. However, there are higher margins from selling differentiated products as the tyre has become a focus for OEMs (original equipment manufacturers).
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2.1. Overview of the market
Nonetheless, the price of raw material decides the margins
Most of the components used in tyre manufacturing are synthetic and obtained from crude oil - and this situation is not likely to change, although the quest for natural alternatives continues. With increases in oil and natural rubber prices, a growing number of tyre manufacturing companies will try to shift to these types of alternative materials. and securing raw material can be problematic
Raw materials such as oil, which is used to make synthetic rubber, and other non-renewable raw materials are becoming increasingly scarce and will remain expensive in the years ahead, notably due to strong demand from China and other emerging markets. With the new demand, there will be a frantic need to replenish inventories. the cost of R&D is elevated
Specialised tyres are likely to become more commonplace - with consumers in mature economies choosing to spend more money on products with specific attributes. managing end-of-life tyres is essential
It is estimated that one billion tyres reach the end of their lives every year, on a global scale. Minimising the environmental impact of end-of-life tyres (ELTs) will remain a high priority goal of the tyre industry. Various efforts by public authorities and the tyre industry are currently underway to address the issue of ELTs. complying with environmental regulation is challenging
Road transport accounts for 18% of all fossil-based CO2 emissions due to human activity, with tyres representing 4% from the fuel used to overcome their rolling resistance. Producing tyres which limit green house gas emissions is essential in complying with ongoing legislation, considering that the tyre- labelling system becomes mandatory in 2012.
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2.2. Supply Raw materials
Production of both natural and synthetic rubber is concentrated in Asia
Total production of rubber (natural and synthetic) unit: % of total tonnage
Rubber production by type and region unit: mn tons Asi a/ Oceani a 71% Afri ca 2% European Uni on 14% Lati n Ameri ca 4% North Ameri ca 9%
0 5 10 15 20 Africa Lat in America North America Europe Asia/ Oceania Nat ural Synthetic
Source: International Rubber Study Group, 2009 data. Source: International Rubber Study Group, 2009 data.
Asia is the worlds leading supplier of both natural and synthetic rubber, with a 71% share of the world rubber production, but also the largest consumer (industry growth in China and India has triggered higher demand for rubber). It is followed by the European Union with 14% and North America with 9%. Thailand, Indonesia and Malaysia retain over 70% of the global natural rubber reserves and rubber production facilities are concentrated in these countries. Brazil is also a small-scale producer of natural rubber where Michelin runs a large plantation facility. Europe and North America hold a significant role in production synthetic rubber, but they dont posses any natural rubber resources.
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2.2. Supply Production and exports China exports roughly half of its tyre production
Tyre production and exports unit: million tyres China is the leading tyre producing country in the world, with exports amounting to 235 million tyres (according to latest available data), an equivalent of 8 million. The past 4 years, Chinese producers annual capacity increased from 93.2 million tyres to 235.2 million tyres, with a 53.8 million increase in tyre capacity taking place between 2006 and 2007 alone. Similarly, exports expanded at a skyrocketing pace and this trend is likely to continue.
Exports by U.S. producers, as a share of total shipments, increased from 12.3 percent in 2004 to 14.1 percent in 2008.
0 50 100 150 200 250 China Japan USA Producti on Exports
Source: Xerfi Global with CHELEM, latest available data.
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2.2. Supply Raw material prices
Raw material prices are volatile, impacting profitability
Prices for main raw materials main trading indexes unit: % change The sharp pricing volatility for natural rubber and petroleum-based materials contributes to the difficulty in managing the costs of raw materials. Tyre production is the biggest consumer of synthetic and natural rubber. The industry uses the majority of natural and synthetic rubber output. On the supply side, the synthetic rubber industry is being clutched by high petroleum costs and butadiene, the tyre industry's major chemical raw material used for producing synthetic rubber, is not easily available. High raw material prices impact the competitiveness of the tyre industry and securing raw materials will remain a critical issue in the tyre industry for the years ahead.
Source: Xerfi Global. Primary source: International Rubber Study Group.
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2.2. Supply Production prices
Operational efficiency is key to staying competitive
Tyre production prices unit: % ( quarterly change) Prices are the most important factor in successfully competing for the sale of tyres. The pricing volatility for natural rubber and petroleum-based materials contributes to the difficulty in managing the costs of raw materials. Increasing costs for raw material supplies amplify companies production prices and affect its margins if they are unable to pass the higher production costs on to customers in the form of price increases. The milder change in production prices in the European Union can be explained by a stronger euro offsetting input prices (as opposed to a weaker dollar in the United States).
-10% -5% 0% 5% 10% 15% 2000 2002 2004 2006 2008 2010 United States European Monetary Union
Source: Xerfi Global with JATMA. Source: Xerfi Global. Primary source: Federal Reserve Board.
Global economy growth and expanding production in the automotive industry drive tyre production growth. During the recent global recession, automobile production was down by over 30% and this led to a subsequent decrease in tyre production levels. While having been less affected by significantly lower economic activity in the sector, the newly developing countries remain markets with remarkable growth potential for the automotive sector and consequently for the tyre industry.
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2.3. Demand Global vehicle fleet
The tyre industry will benefit from the expansion in the global vehicle fleet
Projected number of vehicles on the road unit: mn vehicles With over 90 percent of the growth derived from emerging economies countries, the world vehicle fleet is expected to triple by 2050 from the current level. In terms of road transport, more miles will be driven by more vehicles, so the tyre industry can take full advantage.
Both the number of vehicles and the amount of travel are set to increase substantially during the next few decades. Overall, activity involving heavy vehicles is expected to increase more than activity involving light vehicles, thus triggering increased demand in commercial vehicle tyres which ensure higher margins for manufacturers.
0 500 1,000 1,500 2,000 2,500 3,000 1990 2010 2030 2050 Li ght vehi cl es Heavy vehi cl es
Source: Xerfi Global. Primary source: OECD.
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2.3. Demand Online retailing
Internet sales are booming and will continue to do so
Tyres sold via the internet-Germany Units: % of total sales Customers are becoming increasingly sensitive to prices when making a tyre purchase. This could explain the boom of tyre sales on the internet. Customers can truly take advantage of modern e- commerce: convenience in order placing, quick, efficient delivery, cost information (sites offer cost comparisons) and, last but not least, low prices (15% to 20% cheaper).
Delticom, Europes largest online tyre retailer delivers tyres in two business days to any address/ professional fitting shop the customer chooses. Its sales were up 20% in 2009 from the previous year, and they are expected to keep growing at a similar pace. In France and Germany, online tyre retailing accounts for 7% of total replacement sales, and will achieve more significant proportions over the next few years.
0% 2% 4% 6% 8% 2004 2005 2006 2007 2008 2009
Source: Xerfi Global. Primary source: ADAC.
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2.4. International Trade Exports
Asia is by far the largest tyre exporter Tyre exports between geographical regions (Values over 1 bn USD - the width of the arrow is proportional to the value of exports)
Source: Xerfi Global. Primary source: CHELEM. LATIN AMERI NORTH AMERIC EUROP E ASIA/ OCEANIA AFRIC A MIDDL
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2.4. International Trade Ranking
China has overtaken Japan to become the worlds largest tyre exporter
Tyre largest exporters in 2000 unit: mn USD
Tyre largest exporters in 2008 unit: mn USD 0 1,000 2,000 3,000 4,000 Belgium Luxemburg Great Britain China Italy Spain Canada South Korea Germany France United States Japan
0 2,000 4,000 6,000 8,000 10,000 Italy Thailand Slovakia Spain Belgium Luxemburg Sout h Korea Unit ed St ates France Germany Japan China
The worlds largest tyre exporting countries ranking in 2008 reinforces the emergence of China as a leading global economic power: in less than 10 years, China has become the number one tyre exporter in the world (from the 9 th position occupied in 2000). Since the Obama administration slapped antidumping duties on China-made tyres on September 26th, 2009, China's tyre exports to the United States have tumbled. In October 2009, China's tyre exports to the U.S. dropped 37.5 percent year-on-year to $130 mn. The figure was a record low from the preceding 44 months. China-made passenger vehicle and light truck tyres imported into the U.S. were subjected to an additional 35 percent import duty for the duration of a year. The duty would be then lowered to 30 percent in its second year and 25 percent in its third year.
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2.5. Regional overview Trends 2010-2015
Emerging markets are poised for substantial growth Production and demand trends in main geographical regions
Vehicle production Type of tyre Vehicles per 1,000 inhabitant s Breakdown of tyre sales
AFRICA AND MIDDLE EAST Passenger cars: 12 mn Commercial vehicles: 0.3 mn Radial: 72% Bias: 28% 45 Passenger car tyres : 80 mn Commercial vehicle tyres: 16mn
Source: Xerfi Global.
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3. Corporate strategies and competition
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3.1. Competitive environment Driving forces of the industry
The tyre industry: a highly competitive environment
Competitive forces of the tyre industry
Source: Xerfi Global. 0 1 2 3 4 5 New entrants Substitutes Customers Suppliers Competitive Rivalry 2010 2015 In the emerging markets industry leaders will face intense competition from domestic players. Top players in the industry are likely to forge alliances with local tyre manufacturers in developing countries. In mature markets, buyers are more sensitive to brand image and product differentiation There are no actual substitutes to tyres. Barriers to entry are high as the tyre industry is capital-intensive.
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3.1. Competitive environment
Competitive rivalry
The Big Three acquisitions and aggressive pricing strategy are geared towards raising market shares and profits. In these conditions, smaller manufacturers encounter further difficulties in generating profit margins. To compete with the leaders, smaller manufacturers tend to focus on a specific niche (high performance or premium tyres) or in regional markets, a trend that will continue to shape the industry environment. New entrants Barriers to entry such as the influence of brand loyalty or brand-building expenditures, capital requirements related to building or modernizing manufacturing facilities, and maintaining highly advanced research and development facilities will become more and more encumbering as the industry faces further consolidation. Substitutes There are no real substitutes for tyres, but consumers can choose with respect to replacement tyres and that can affect the demand for specific types of tyres. They have a choice to purchase new or used tyres, high-performance tyres or have their tyres retreaded. The demand for a specific type of tyre is elastic and more dependent on price. More explicitly, higher prices for new tyres determine consumers to postpone replacing worn tyres or to purchase used or retreaded tyres. Car tyres can be retreaded once but truck tyres can be retreaded several times.
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3.1. Competitive environment
Suppliers Natural rubbers physical properties make it irreplaceable in some market segments such as truck tyres. Although natural rubber is a renewable resource, its sharp fluctuations in prices could pose a threat to long-term supply. Generally, procurement of natural rubber and petroleum is managed through multiple arrangements, make use of the spot or the forward market. For other major raw materials, possible combinations include supply agreements that entail formula-based pricing according to commodity indices, multi-year agreements or spot purchases. To ensure continuing supplies for operations and mitigate the risk of potential supply disruptions, tyre makers acquire raw materials from various sources around the world. They have purchasing offices in Southeast Asian rubber producing countries in order to acquire natural rubber from producers. Top-line companies such as Michelin, own several rubber production facilities. This enables them to work directly with producers to constantly improve quality and to reduce the costs of materials or transactions. Falling in line with increasing demand, companies sometimes prepurchased significant amounts of raw materials, particularly natural rubber. The rising demand for rubber (especially from emerging markets such as China) and price fluctuations make raw material procurement one of the industry top priorities in the years ahead. Customers Customers in developed nations are becoming increasingly attracted by performance products offering tread longevity, reduced rolling resistance, improved handling, durability, and safety. As technological progress speeds up, buyers will value more these characteristics of tyres. In emerging markets, consumer expectations will remain more related to prices than to any ecological attributes a tyre may present.
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3.1. Competitive environment Global market share
New players have been eating into the Big Threes market share
Change in market share of the global players unit: %
For most of the history of the tyre industry, the top three leaders have remained unchanged, with Bridgestone and Michelin battling for first position. The results for fiscal 2009 and the first half of 2010 also confirm Bridgestones supremacy in the industry. Although in 2000 the Big Three held almost 60% of the whole market share, this proportion has gradually declined over the last decade, reaching 46% in 2008. This trend is likely to continue, as smaller players competing on volume and low-pricing strategies keep on increasing their market shares. Such is the case of emerging countries, especially China, where domestic tyre manufacturers have doubled their sales both in volume and value over the past decade, and this development is set to continue.
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2000 2001 2002 2003 2004 2005 2006 2007 2008 Mi chel i n Goodyear Bri dgestone Others
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3.1. Competitive environment Small-scale players
For instance, in China, domestic makers are increasing their market share
Domestic tyre manufacturers in China unit: million euros Company Net sales 2006 Net sales 2009 % change Hangzhou Zhongce 703.4 1,747.7 148.5% Triangle Group 825.4 1,325.7 60.6% GITI Tyre 439.5 1,241.7 182.5% Shandong Linglong 365.3 1,236.7 238.5%
According to the China Association of Automobile Manufacturers (CAAM), the Chinese automotive market is heading for stable growth", predicted to be at 16% for the years to come. That's the market's average annual growth rate in the 15 years before 2008. Under these circumstances, tyre demand is increasing. But international players will have to face stiffer competition from domestic manufacturers, who have seen their market share rise constantly over the past years. In line with growing tyre demand, major tyre companies have announced production capacity expansion plans: Sumitomo Rubber Industries Ltd. plans to build its second tyre plant in China to meet rising demand for radial tyres.
Aeolus Tyre 323.8 580.6 79.3% Source: Xerfi Global. Primary source: tyre press.
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3.2. Business models Diversification
Most groups are focused on their core business
Tyre operations of diversified groups unit: mn euros, % of net sales
The process of manufacturing tyres is complex and capital intensive. Groups such as Goodyear, Michelin or Cooper are exclusively dedicated to their core business: tyres. A second category includes companies that manufacture other rubber goods except tyres, such as Yokohama and Bridgestone, on the one hand, or companies that operate in completely different market, such as Pirelli who owns real estate subsidiary. Continental is a special case: the group is a first-line supplier of parts for the automotive industry (interior, power trains etc.). A companys facilities are generally specialised by tyre product (passenger car or tuck) and by type of tyre (bias or radial) produced.
Hankook Pirelli Sumit omo Cooper Goodyear Michelin Bri dgest one Cont inent al 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 0 3,000 6,000 9,000 12,000 15,000 18,000 Tyre operations net sales T y r e
s h a r e
i n
n e t
s a l e s Over 80% specialization
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3.2. Business models
and leaders are present in every market segment Market presence of leading tyre manufacturers Types of tyre Company Passenger car and light truck Heavy truck and bus Two-wheel Off-the-road vehicle Aircraft Civil engineering Agricultura l Bridgestone Michelin Goodyear Continental
Sumitomo
Pirelli Yokohama
Hankook
Cooper
Source: Xerfi Global with companies annual reports.
There are two different types of tyre: bias-ply constructed tyres or radial constructed tyres. Radial tyre construction allow more tread contact with the road surface (providing increased safety) and also present less forward rolling resistance, thus improving fuel economy. Radial tyres have a longer lifespan than bias-ply tyres, and the transition from bias to radial tyres, which began in the mid 70s, has been a factor in reducing growth of domestic demand for replacement tyres. Most tyre production in the developed countries (North America, Western Europe, Japan) is of radial tyres: nearly all car tyres for original equipment manufacturers and over 80% of truck and bus tyres are radial. In emerging economies, the radial-tyre proportion does not exceed 60%.
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3.2. Business models Strategic alliances
Leading players are looking to increase the value of their products Partnerships and alliances in the tyre industry WITH RETAIL CHAINS AND TYRE DEALERS
Michelin with the fifth largest independent truck tyre dealer Snider Tyre Co.
WITH CARMAKERS
In the premium segment, Hankook struck deals with Porsche , Audi A4, Daimler E- Class, Volvo XC60, Aston Martin, BMW, Bentley WITH OTHER TYRE COMPANIES
Sumitomo and Goodyear: joint ventures for production and sales activities in Europe and North America. Cooper and Kumho
PARTNERSHI PS AND ALLIANCES TECHNOLOGICAL PARTNERSHIPS
Pirelli with Brembo and Magneti Marelli for the Cyber Tyre Pirelli runs a joint research laboratory with Politecnico University of Turin
The global rubber tyre manufacturing industry is fairly concentrated, dominated by large multinationals.
Competition in the industry is based on factors such as the influence of brand loyalty, capital requirements related to building or modernizing manufacturing facilities, and maintaining highly advanced research and development facilities in order to secure innovations that are increasingly important to customers: in the original equipment market tyre makers compete to secure contracts, while in the replacement segment consumers have multiple choices.
This is leading to an increasing number of strategic alliances and partnerships intra and extra-industry.
WITH STRATEGIC SUPPLIERS
Michelin in South America has a technical assistance partnership, Michelin supports 52,000 hectares of natural rubber plantations.
MARKETING PARTNERSHIPS
Pirelli becoming official sponsor of the Formula 1 starting 2011 Source: Xerfi Global with companies annual reports.
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3.2. Business models Vertical integration
Most tyre companies are vertically integrated Vertical integration of tyre companies
Rubber tyre manufacturing companies tend to be highly vertically integrated. There is a growing trend in the industry to own rubber plantations because it creates a strong competitive advantage. Michelin for instance, owns and operates six rubber plantations (one located in Latin America and the others in West Africa and Asia), while Goodyear Tyre and Rubber Company has recently invested in two new synthetic rubber plants.
Further down the line, many tyre companies own and operate their own distribution systems: Cooper has five distribution centres and five sales offices in Europe and Michelin has two integrated tyre Distribution and Service networks, Euromaster and TCI. The Korean Regional Headquarters of Hankook operates over 2,100 direct-run and franchised dealerships.
Source: Xerfi Global
Raw material suppliers
Tyre production facilities
Distribution networks
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3.3. Geographical presence Presence on the main geographic markets
Industry leaders are still mainly focused on their domestic market
Geographical presence of companies key: +++ = predominant presence in the region; ++ = important presence; + marginal presence
Geographic market Company Country Europe North America Latin America Asia-Pacific Africa Middle East Bridgestone
++ ++ ++ ++ ++ Michelin
++ ++ ++ ++ + Goodyear
++ ++ + ++ + Continental
++ + + + + Sumitomo
+ + + ++ + Pirelli
++ + ++ + + Yokohama
+ + ++ + + Hankook
+ + ++ ++ + Cooper
++ ++ + + Source: Xerfi Global with companies annual reports and web sites
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3.3. Geographical presence Operations in emerging markets
and are planning to expand their presence in emerging markets
Bridgestone is set to invest $540 mn between 2010 and 2013 to build a car and truck tyre plant near Pune, India, to support growing demand for radial tyres in Asia and an additional $142 mn over two years to expand capacity for passenger tyres at its plant in Poznan, Poland, by nearly a third.
One of the industry leaders, Michelin, plans to invest $870 mn to build a truck and off- the-road tyre plant in Tiruvallur, near Channai in southern India in the ucoming years.
Sumitomo is another major player with an eye on the Chinese tyre market: it will spend $297 mn to build a passenger tyre plant in Changsha, China, with production expected to start by July 2012.
The Pirelli Group intends to reinforce its presence and to invest more in Brazil. The 300 mn US dollars of total investments in the 2008-2011 period are destined one third for research and development and the remainder for increasing the production capacity. The new investments will enable a 20% increase in car and motorcycle tyre production. Pirelli aims to increase tyre production in eastern Europe, namely at its factory in Slatina, Romania: the 250 mn investment is to be carried out between 2009 and 2011.
Enjoying rapidly increasing demand, Hankook is completing a plant expansion project in Hungary, which is scheduled to start operations in 2011, when annual output will total 10 mn units (from 5 mn currently). Another project to build a new plant capable of producing five mn tyres a year by 2013 is seriously being considered.
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3.4. Brand strategy Multi-brand versus single-brand
Multi-brand strategies are dominant among global leaders
Tyre brands of global leaders. Company Brands Bridgestone Ecopia, Firestone Michelin BF Goodrich, Kleber, Uniroyal , Warrior Goodyear Kelly, Fulda Continental Continental, General Tyre, Uniroyal, Barum Sumitomo Dunlop, Falkon Pirelli Pirelli Yokohama Advan Hankook Ventus, Smart
Brand loyalty is revealed when car owners replace tyres on their cars with the same brand as that originally installed. As a result, tyre manufacturers attempt to obtain original equipment contracts. Original equipment contracts are also attractive to tyre companies because they reduce distribution expenses and advertising costs. Most tyre groups pursue a multi-brand strategy. This strategy allows them to be present on different market segments. Companies develop global brands or regional brands; for instance, Michelin sells Kleber tyres only in Europe, Uniroyal in North America and Warrior tyres in China.
Among the world leaders, only Pirelli has implemented a single brand strategy.
Cooper Cooper, Discoverer, Roadmaster, Mastercraft Source: Xerfi Global with companies annual reports and web sites.
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3.5. Differentiation strategies Case studies
Cooper: emphasises high quality tyres for the replacement market
U.S. Light Vehicle replacement tyre market unit: %
A different strategy for competing in the tyre industry is illustrated by one relatively small firm in the sector. Cooper Tire of Findlay, Ohio, emphasises high quality tyres aimed at the replacement market in North America (no original equipment), where it holds a 13 percent market share, according to the companys 2009 releases.
The success of the company is largely explained by its cooperation with about 1,700 independent dealers rather than using a chain of company-owned stores for selling its tyres. Cooper encourages long term relationships with each dealer rather than cultivating transaction-based rapports.
Cooper has shown resilience despite the crisis, and together with Hankook, it is the only company that in 2009 secured margins even higher than in 2005-2008 (see annexes).
Others 87% Cooper 13%
Source: Xerfi Global. Primary source: Cooper annual reports.
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3.5. Differentiation strategies
Hankook: more than 70% of its sales are made abroad Growth rates in the tyre industry unit: % of change
-30% -20% -10% 0% 10% 20% 30% Bri dgestone Conti nental Goodyear Sumi tomo Mi chel i n Yokohama Cooper Hankook 2005-2008 2009
Another successful story in the tyre industry is Hankook of South Korea, a company that has not only survived the crisis, but managed 15% growth in 2009. This has strengthened its position as the worlds eight-largest tyre manufacturer and laid the groundwork for a further rise. Hankook has followed a four-part strategy: increased capacity, "product renovation," improved overseas distribution, and reinforcement of sales and R&D efforts. With five large-scale factories in three countries (Korea, China and Hungary), about 70% of its total sales come from overseas. The company focuses on boosting sales in Korea (its home market) and China (its second largest market) where distribution channels exclusively handling Hankook products were reorganised to expand the sales of premium tyres. The company has strengthened brand value by introducing diverse new products and engaging in aggressive marketing activities. Source: Xerfi Global with companies annual reports.
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3.5. Differentiation strategies
Michelin: securing rubber is at the core of its strategy SWOT analysis of Michelin STRENGTHS Global brand recognition Trend-setter in innovation Natural rubber suppliers and distribution system integration
WEAKNESSES
Weaker presence in the emerging markets
MICHELIN
Michelin takes vertical integration to a new level: while natural rubber is subject to sharp price fluctuations and rising demand, developing and maintaining rubber tree farms is a major priority for Michelin, which uses nearly 10% of the worlds natural rubber output. Michelin is directly involved in the production of natural rubber through its three latex processing units in Brazil and its 20% stake in SIPH (Socit Internationale de Plantations dHvas), which operates rubber plantations in West Africa (Nigeria, Cote dIvoire, Ghana and Benin). Michelin remains the trend-setter in terms of industry innovation. This positioning, combined with a strong presence on global markets, brand recognition and integrated operations, is translated into elevated operational margins (10%) and global leadership in the high performance segments.
OPPORTUNITIE S Presence in every geographical region Strong growth in the emerging economies Better economic outlook in mature economies
THREATS Financial performance dependent on the state of the economy (change in raw material prices, exchange rates) Bridgestones aggressive strategy in Europe Source: Xerfi Global.
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3.6. Outlook I nvestments
From cutting back on investment, to an infusion of capital planned for the years to come
I nvestments planned by tyre manufacturers for the period between 2010 and 2013 ( Plans to boost capacity; Plans to build new plant) Bridgestone Cooper Michelin Goodyear Pirelli Yokohama JK Tyre (India)
Nexen (S Korea)
Cheng Shin Double Coin (China)
Hankook Continental Sumitomo Toyo
United States Brazil Poland Romania Hungary Russia Indonesi a Thailand India China Korea Japan Source: Xerfi Global with companies annual reports.
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3.7. Ranking Net sales
All companies but Hankook recorded lower sales in 2009 compared to 2008 Net sales unit: million euros 0 5,000 10,000 15,000 20,000 25,000 30,000 Cooper Hankook Yokohama Sumitomo Pirelli Continental Michelin Bridgestone Goodyear 2008 2009
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3.7. Ranking Ranking by operating margins
Continental and the Japanese tyre manufacturers have the highest margins Groups operating margins from tyre operations in 2009 unit: % 0% 2% 4% 6% 8% 10% 12% 14% 16% Goodyear Cooper Pirelli Michelin Hankook Sumit omo Yokohama Bridgestone Continent al
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4. Company profiles
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4.1. Bridgestone Company Overview
Fiscal year ended March, 31 st 2010 Headquarters Tokyo, Japan
Key figures Net consolidated sales 19.7 billion Operating income 577 million Net consolidated profit 7.6 million Staff 137,135
The roots of the Bridgestone Group date back to the establishment of Bridgestone Tyre Co., Ltd. in 1931. Founder Shojiro Ishibashi used an English translation of his surname to name the company. Tyres account for about 80% of Bridgestone Group sales. Besides a wide variety of tyres, Bridgestone also expanded its operations into chemical and industrial products, sporting goods and bicycles, supply tyres for trucks and buses, construction machinery and mining. The Bridgestone Group sells its products in more than 150 countries around the world and employs over 137,000 people.
International presence Japan 26.2% of net sales The Americas 43.3% of net sales Europe 13.9% of net sales Others 16.7% of net sales Bridgestone Net sales 2009: 19.7 bn euros Tyre Business
83 % of sales Diversified Products Business
17% of sales
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4.1. Bridgestone Business segments
SEGMENT % OF SALES OPERATIN G MARGIN OPERATIONS MAIN CUSTOMER S TYRE BUSINESS 82.8% 3.5% Tyres: tyres and tyre tubes for passenger cars, trucks, buses, construction and mining vehicles, industrial machinery, agricultural machinery, aircraft, and motorcycles, retreading materials and services, automotive maintenance and repair services, tyre raw materials, and others. Consumers and companies DIVERSIFIED PRODUCTS 17.2% 0.1% Chemical and I ndustrial products: Vehicle parts, polyurethane foam and related products, electronic precision parts, industrial materials-related products, civil engineering and construction materials and equipment, and other. Sporting goods: Golf balls, golf clubs, other sporting goods, and other. Bicycles: Bicycles, bicycle-related goods, and other. Other: Finance, and other. Consumers and companies Source: Xerfi Global with Bridgestone.
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4.1. Bridgestone Corporate strategy
I mproved operational efficiency
2009 was a challenging year for the worlds leading tyre manufacturer, who saw its profit drop by 19.7%. To enhance its competitiveness and operational efficiency, Bridgestone aims to consolidate production at manufacturing sites that are the most competitive. In this view, one restructuring measure taken was the closing of Bridgestone Australia Ltd.s Adelaide Plant and Bridgestone New Zealand Ltd.s Christchurch Plant.
Focus on environmentally friendly products in mature markets
In the mature markets of developed countries, where there is little anticipation for steady growth, consumers are shifting their preferences to environmentally friendly products and services. In line with this trend, the company has introduced enhanced environmentally friendly products such as ECOPIA brand tyres in Europe and North America. In the same regions, where retread businesses for buses and trucks accounts for roughly half of the tyre demand, the company intends to expand its retread tyre operations.
Expanding manufacturing sites in strong growth potential markets
In developing countries with anticipated economic development, Bridgestone has announced its decision to: - invest in increased production at its passenger tyre plant in Wuxi, China, in April 2009. - start production of truck and bus radial tyres in India, where demand for these tyres will likely increase as the countrys expressway network and as higher-performance trucks become more prevalent. - open a retread materials plant in Thailand in order to respond to the strong growth in the Asia market, in July 2009. Since the demand for ultra-large off-the-road radial tyres (specialty tyres) for construction and mining vehicles remains strong, Bridgestone plans to increase its production capacity in this segment by about 30% compared to 2009 levels
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4.1. Bridgestone Recent events
Date Event J anuary 2009 Bridgestone Americas Tyre Operations announced the suspension of passenger and light truck tyre manufacturing at the LaVergne Plant in LaVergne, Tennessee (United States). February 2009 Bridgestone started operations at its retread learning centre in Kodaira, Tokyo. Retreading prolongs the life of tyres and is applicable for large-size tyres such as trucks, aviation etc. April 2009 Bridgestone announced an increase in radial passenger tyre production capacity at its Wuxi Plant in Jiangsu Province, China, in line with growing market demand. May 2009 With the intention to set foothold into emerging European markets, Bridgestone officially opened its truck and bus tyre plant in Stargard, Poland. J une 2009 Bridgestone started production at its Kitakyushu Plant (where it manufactures large and ultra-large tyres): the production capacity expansion project was finished 3 months ahead of schedule. J uly 2009
Bridgestone announced it will build a plant for retread materials in Thailand: the retread business is mature in both Europe and the United States for use on trucks and buses and rapidly growing in emerging markets. Bridgestone announced that its aircraft radial tyres will be supplied as standard equipment on the Airbus A350 XWB. October 2009
Bridgestone Australia announced the restructure of its operations: operations in Australia are no longer viable due to increasingly difficult market conditions. November 2009 Bridgestone announced it would cease supplying tyres to the FIA Formula One World Championship. December 2009 Bridgestone announced that the Toyota Sienna would be the first vehicle to fit the third generation of runflat tyres as standard equipment. J anuary 2010
Bridgestone will produce truck and bus radial tyres at Indore, India plant: in India, demand for truck tyres is expected to keep growing due to the expansion of the expressways and road infrastructure as a result of economic growth in the nation as well as the introduction of higher-performance trucks. March 2010
Bridgestone will establish new plant in India: the plant will begin passenger car radial tyre and truck and bus radial tyre production in response to increasing demand in these segments in India. May 2010
Bridgestone announces the expansion of Karawang tyre plant in Indonesia: the Karawang plant is already undergoing an expansion project which started in August 2007 to increase its daily production capacity by 8,400 units. However, with global demand expected to continue growing, the Bridgestone Group determined that further expansion of the plant is necessary to meet market demands. Source: Xerfi Global. Primary source: business press
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4.1. Bridgestone Key data
Bridgestones net sales unit: mn euros; annual % change
The decline in global automotive production and sluggish demand in the replacement market sent sales down to 19.7 bn, a 19.7% decrease from fiscal 2008, partially impacted by a stronger Japanese yen. After having peaked at 25.8 bn in 2007, the groups revenues fell by 4.6% in 2008 and 19.7% in 2009. Chart 2:
The slump in demand in the automotive industry affected results of tyre companies who make approximately 25% of sales in the original equipment market, Bridgestone being no exception. Its tyre sales were down 18% compared to the previous year, a 21.7% decline from the pre-crisis level.
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4.1. Bridgestone Revenues by business segment
Bridgestones revenues by segment unit: share in %
Bridgestones change in revenues by segment unit: annual % change in revenues Tyres 83% Di versi fi ed products 17%
-30% -25% -20% -15% -10% -5% 0% Tyre Diversified product s 2008/ 2007 change in % 2009/ 2008 change in %
Net sales in the tyre segment totalled 16.4 bn euros, an 18% decrease from fiscal 2008. Tyre operations account for 83% of the groups revenues, or 2% more than in 2008.
Chart 2:
In 2009, the net sales in diversified products segment saw a sharper fall than in the tyre segment, 27.1% versus 18% respectively. This continued the declining trend in the 2008 revenues, which dropped 4.6% for tyres and 4.4% for Bridgestones diversified operations in 2007.
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4.1. Bridgestone Revenues by region
Bridgestones revenues by region unit: share in %
Bridgestones change in revenues by region unit: annual % change in revenues Japan 26.2% The Ameri cas 43.3% Europe 13.9% Other 16.7%
-30% -20% -10% 0% 10% 20% Europe United St at es Ot her Japan 2008/ 2007 change in % 2009/ 2008 change in %
Bridgestone has maintained its global leader position in the tyre business. Almost half of the companys revenues were generated by its American operations in 2009. Also present in Europe, Bridgestone derives about one quarter of its revenues from Japan. Chart 2:
The only region where Bridgestones sales saw an improvement in 2008 was Japan, but that was not the case for 2009. The group reported lower sales in all regional operations, markedly a more than 20% drop in Japan and Europe. A slighter drop was noted in emerging economies.
World Tyre Manufacturers Market analysis Corporate strategies October 2010
Bridgestone reported declining profits for the second consecutive year. With a significant impact from such factors as sharply higher prices for raw materials, operating income decreased 42.5%, to 0.5 bn euros in 2009 and 47.4% in 2008. Chart 2:
Bridgestones operating margin continued to drop from 2007, due mainly to a sharp increase in raw material price and partly to yen appreciation. Declining profitability has forced Bridgestone to reshuffle its operations and close down two plants in Australia and New Zealand.
World Tyre Manufacturers Market analysis Corporate strategies October 2010
Bridgestone spent about 650 mn for research and development in 2009, 8% less than in 2008. Nonetheless, it is important to bear in mind that Bridgestone sales were down more than 40% in FY2009, which explains the decrease. Chart 2:
Despite its declining sales, Bridgestones R&D ratio has stood at a constant ratio of more or less 3% of net sales for the past 5 years. This reflects Bridgestones commitment to product innovation, an important pillar of growth in mature markets, where innovations drive sales.
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4.1. Bridgestone Statistical data Year Sales Change in % 2006 20.5 11.4% 2007 22.8 11.1% 2008 25.8 13.3% 2009 24.6 -4.6%
Source: Xerfi Global with Bridgestone annual reports
2009 19.8 -19.7%
Region % of sales Change in % (2009/2008) Change in % (2008/2007) Japan 26.2% -21.3% -8.1% The Americas 43.3% -19.9% -6.3% Europe 13.9% -23.6% -8.0%
Bridgestones revenues by region unit: share in %; annual % change
Source: Xerfi Global with Bridgestone annual reports
Others 16.7% -12.5% 12.8%
Year Change in Operating profit Operating margin 2005 8.2% 7.9% 2006 -10.8% 6.4% 2007 31.0% 7.4%
Bridgestones operating profit unit: annual % change; share in %
Source: Xerfi Global with Bridgestone annual reports
2008 -47.4% 4.1% 2009 -42.5% 2.9%
Year R&D expenses R&D ratio 2005 8.9% 3.0% 2006 9.2% 2.9% 2007 0.1% 2.6%
Bridgestones R&D expenses unit: annual % change; share in %
Source: Xerfi Global with Bridgestone annual reports
2008 7.5% 2.9% 2009 -8.0% 3.3%
Segment % of sales Change in % (2009/2008) Change in % (2008/2007) Tyres 82.8% -18.0% -4.6% Bridgestones revenues by activity unit: share in %; annual % change Source: Xerfi Global with Bridgestone annual report Diversified Products 17.2% -27.1% -4.4%
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4.2. Michelin Company Overview
Fiscal year ended December, 31 st 2009 Headquarters Clermont-Ferrand, France
Key figures Net consolidated sales 14.8 bn Operating income 862 mn Net consolidated profit 104 mn Staff 109,000
In 1832, Aristide Barbier and Edouard Daubre opened in Clermont-Ferrand a factory for farming equipment and rubber items. In 1889, Edouard Michelin became manager of the company renamed Michelin et Cie. Also, Michelin holds a 35% share of the French Map and Guide market and a 73% share of the road map segment. The Michelin Guide is the benchmark for gourmet dining guides with a 40% market share. With 72 production facilities in 19 countries, the Michelin Group sells its products in more than 170 countries around the world and employs over 109,000 people.
International presence Europe 45.6% of net sales North America and Mexico 33.7% of net sales Other zones 20.7% of net sales
Michelin Net sales 2009: 14.8 bn euros Specialty tyre businesses
13.7% of sales Truck tyres and related distribution 30 % of sales Passenger car and light truck tyres 56% of sales
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4.2. Michelin Business segments
SEGMENT % OF SALES OPERATIN G MARGIN OPERATIONS MAIN CUSTOMERS PASSENGER CAR AND LIGHT TRUCK TYRES AND RELATED DISTRIBUTION 55.9%
8.0%
Michelin covers every segment of the replacement market with a strong presence in all geographic regions, especially Europe.
Michelin is a leader in fuel-efficient tyre technologies, its flagship being the Michelin Energy Saver tyre.
Consumers and companies TRUCK TYRES AND RELATED DISTRIBUTION 30.4%
-1.5%
Tyres account for 2 to 3% of truck fleet operating expense and have a significant impact on fuel consumption, which can represent up to 30% of a trucks operating cost. Hence the importance of total cost of ownership, which includes tyre life, retreading and fuel consumptions. Consumers and companies SPECIALTY BUSINESSES 13.7%
13.3%
High-technology products and solutions in every market: in earthmover and aircraft tyres, in agricultural tyres in the two-wheel segment, Michelin offers motorcycle and scooter tyres The specialty businesses also include: Maps, guides and electronic services Michelin Lifestyle. Consumers and companies Source: Xerfi Global with Michelin.
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4.2. Michelin Corporate strategy
Extending technological leadership
In ten years, Michelins patent portfolio has almost tripled. With technology centres in North America, Europe and Asia, Michelin seeks to adjust its product portfolio to local climate conditions, so as to be able to respond pro-actively to emerging needs. This approach is visible in Asia, where research and development facilities are located in China, Thailand and Japan. Enhancing competitiveness In response to the break in its markets due to the recent economic slowdown, Michelin has prioritised improving its organisational efficiency: - standardising processes and components and sourcing globally in order to reduce capital expenditure; - resources are being focused on plants that are bigger or more specialised ; - additional production capacity is being built in fast emerging markets such as China, India and Brazil. I nvesting in growth markets
In the past five years, the percentage of sales generated in high growth countries has increased to 32% from 26%. In line with recent advance in the global marketplace, Michelin is stepping up the rate of expansion in China, India, and Brazil to keep up with these surging markets, by increasing production capacity, expanding its partner dealership networks, introducing assistance services, and setting up retread plants to encourage the trucking industry to switch to radial tyres.
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4.2. Michelin Recent events
Date Event February 2009 Michelin is supplying NASAs next generation Lunar Rover Vehicle with specially designed tyres meant to help lunar vehicles maintain mobility under extreme conditions over harsh terrain. March 2009 The Michelin guide France 2009 celebrates its 100th edition. April 2009 In response to the unprecedented drop in market demand, Michelin is set to close its North America BF Goodrich tyre manufacturing plant in Opelika, Alabama. Michelin tread pressing plant in Mexico will be closed, due to overcapacity in its North American retread operations. Production is to be shifted to the U.S. retread plant J uly 2009 The first co-branded MICHELIN/Harley-Davidson motorcycle tyre was launched: Michelin and Harley- Davidson have joined forces to develop the all-new MICHELIN Scorcher 31 tyre, which carries both companies trademarks. October 2009 Michelin and Agco Corporation signed a cooperation agreement: Michelin and Agco, a leading agriculture equipment company, are working together to strengthen relations especially in three areas: research and development, marketing and supply chain. J anuary 2010 Michelin announces the end of tyre production at its Ota plant, Japan: despite measures taken to improve productivity, reduce production costs and refocus on the production of complex products, the production cost at Ota plant remains around twice as high as those of other plants serving that tyre segment. February 2010 Michelin is the transferee of the 30% shares of Shanghai Michelin Warrior Tyre Co. Ltd: after the transaction, the Double Coin Group will continue to grant Michelin the exclusive right to use the Warrior trademark for its passenger car and light truck tyre businesses for two years. The company launches the new Michelin Alpin, its latest winter tyre, the fourth-generation Michelin Alpin. The new tyre has been designed to fit a wide range of vehicles, from city cars and compacts to multiple purpose vehicles (MPVs) and sedans. March 2010 Michelin Power Pure The Lightest Two-Compound Sport Premium motorcycle tyre was unveiled by Michelin. J uly 2010 Michelin and Air France-KLM signed a long term contract: as a result Michelin tyres will be fitted on all aircraft operated by the Air France-KLM group and by other airlines for which Air France and KLM provide maintenance services. Source: Xerfi Global. Primary source: business press
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4.2. Michelin Key data
Michelins net sales unit: mn euros; annual % change
In 2009, under the circumstances of a recessionary environment, Michelin recorded a limited 9.8% decline in net sales (compared to its main rival, Bridgestones 19.7% drop in revenues) to 14.8 bn.
Chart 2:
Free cash flow reached 1,387 mn in 2009 compared to a negative 359 mn in 2008. The improvement was driven by a tight management of both working capital (particularly inventory) and capital expenditure, which was reduced to 672 mn from 1,271 mn in 2008.
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4.2. Michelin Revenues by segment
Michelins revenues by segment unit: share in %
Michelins change in revenues by segment unit: annual % change in revenues Passenger car and l i ght truck tyres 56% Truck tyres 30% Speci al ty tyre busi ness 14%
-18% -13% -8% -3% 2% 7% Passenger car and l ight t ruck tyres Truck tyres Specialt y t yre businesses 2009/2008 change i n % 2008/ 2007 change in %
In 2009, it was the passenger cars and light truck tyres operations that contributed the most to the groups revenues (56% of net sales), ahead of truck tyres (30%) and specialty tyre (14%) operations. Chart 2:
Net sales in the passenger car and light truck tyres segment stood at 8,280mn for 2009, down 4.5% on 2008. The truck tyres and related distribution segment was down 17.2%, while the specialty tyre business income declined by almost 13%.
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4.2. Michelin Revenues by region
Michelins revenues by region unit: share in %
Michelins change in revenues by region unit: annual % change in revenues Europe 45.6% North Ameri ca and Mexi co 33.7% Other regi ons 20.7%
-25% -15% -5% 5% 15% Europe North America and Mexico Other regi ons 2009/ 2008 change in % 2008/ 2007 change in %
Europes largest company generated about 45.6% of its sales from its main market operations in 2009. Michelin derives about 55% of its revenues from other regions, mostly Nafta and emerging countries. Chart 2:
Michelin reported lower sales in Europe and Nafta in particular. The company mentions lower sales volume and falling prices per unit as the main contributors to the decline in sales.
World Tyre Manufacturers Market analysis Corporate strategies October 2010
Operating income stood at 862 mn for the year 2009, compared with 920 mn in 2008, reflecting the combined impact of: the steep 14.8% decline in unit sales and the underutilization of production capacity. Chart 2:
Despite a 9.8% decline in net sales, in 2009, Michelin saw a slight improvement in operating margin before nonrecurring items to 5.8% from 5.6% the previous year.
World Tyre Manufacturers Market analysis Corporate strategies October 2010
One of Michelins strategic axes involves strengthening its technological leader position; therefore R&D expenses are essential to deliver ground-breaking innovations. Michelin allocates around 500 million euros to R&D each year. Chart 2:
Michelins R&D ratio stood at 3.4% in 2009, slightly lower than the 3.6% ratio of 2005 and 2006, and at higher levels than the peak years of the recent economic crisis.
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4.2. Michelin Statistical data Year Sales Change in % 2005 15.5 3.6% 2006 16.3 5.1% 2007 16.8 2.9% 2008 16.4 -2.7%
Michelins net sales unit: bn euros ; annual % change
Source: Xerfi Global with Michelin annual reports.
2009 14.8 -9.8%
Segment % of sales Change in % (2009/2008) Change in % (2008/2007)
Passenger car and light truck tyres and related distribution 55.9% -4.5% -4.1%
Truck tyres and related distribution 30.4% -17.2% -3.7%
Michelins revenues by activity unit: share in %; annual % change
Source: Xerfi Global with Michelin annual reports.
Specialty tyre businesses 13.7% -12.0% 5.5%
Region % of sales Change in % (2009/2008) Change in % (2008/2007) Europe 45.6% -17.2% -4.1%
North America and Mexico 33.7% -3.2% -6.5%
Michelins revenues by region unit: share in %; annual % change
Source: Xerfi Global with Michelin annual reports.
Other regions 20.7% -1.0% 8.6%
Year Change in operating profit Operating margin 2005 8.2% 7.9% 2006 -10.8% 6.4% 2007 31.0% 7.4% 2008 -47.4% 4.1%
Michelins operating profit unit: annual % change; share in %
Source: Xerfi Global with Michelin annual reports.
2009 -42.5% 2.9%
Year R&D expenses R&D ratio 2005 8.94% 3.0% 2006 9.16% 2.9% 2007 0.07% 2.6%
Michelins R&D expenses unit: annual % change; share in %
Source: Xerfi Global with Michelin annual reports.
2008 7.50% 2.9% 2009 -8.03% 3.3%
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The Goodyear Tire & Rubber Company
Net sales 2009: 11.6 bn euros
4.3. Goodyear Company Overview
Fiscal year ended December, 31 st 2009 Headquarters Akron, Ohio -USA
Key figures Net consolidated sales 11.6 bn Operating income 862 mn Net consolidated profit -269 mn Staff 69,000
The Goodyear TIre & Rubber Company is one of the worlds leading tyre companies, with operations in most regions of the world, founded in 1898 by 38- year-old Frank Seiberling. Goodyear is the leading tyre manufacturer both in North and Latin America and Europe's second largest tyre maker. The company operates more than 57 plants in 23 countries, with marketing operations stretching in almost every country around the world. The company manufactures products for most applications, from passenger, light truck and motorcycle tyres (more than 75% of sales) to commercial truck, off-the- road (OTR) and aviation tyres. Additionally it runs several truck retreading centres.
International presence North American Tyre 42.8% of sales Europe, Middle East and Africa Tyre 35.6% of sales Latin American Tyre 11.1% of sales Asia Pacific Tyre 10.5% of sales
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4.3. Goodyear Business segments
SEGMENT % OF SALES OPERATIN G MARGIN OPERATIONS MAIN CUSTOMERS NORTH AMERICAN TYRE 42.8%
-4.4%
World Headquarters, North American Tyre headquarters, Innovation Centre, racing tyres, chemicals, tyre proving grounds, global purchasing, airship operations, research and development facilities Consumers and companies EUROPE, MIDDLE EAST AND AFRICA TYRE
35.6%
-2.9%
Brussels: Goodyear Dunlop Tyres Europe headquarters; Europe, Middle East & Africa Tyre headquarters. Tyres, steel tyre cord, tyre molds, innovation Centre, tyre proving grounds. Consumers and companies LATIN AMERICAN TYRE.
11.1% 16.6% Sao Paolo: Latin American Tyre headquarters, tyres, aero retread facility Retread materials Tyres, tyre proving grounds
ASIA PACIFIC TYRE
10.5%
12.3%
Shanghai: Asia Pacific Tyre headquarters Natural rubber purchasing Tyres, Aero retread facility Consumers and companies Source: Xerfi Global with Goodyear.
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4.3. Goodyear Corporate strategy
Product Leadership
Goodyear is one of the industry leaders with worldwide known brands. To address market challenges, the company wishes to achieve product leadership. In order to reach its targets, Goodyear plans to build on: the speed of the new product engine: rapidly launch products globally based on market- backed innovation key fuel efficient products such as Assurance FuelMax (North America) or EfficientGrip (Europe).
Advantaged Supply Chain
The strategic decision to build the Advantaged Supply Chain programme is instrumental to Goodyears competitive position. This programme is focused on specific segments of the market, especially targeting original equipment fitments with a high potential of replacement pull-through. The Advantaged Supply Chain programme already contributed to a reduction of roughly 1 billion in its 2009 inventory.
Lower Cost Structure
Goodyear intends to obtain a lower cost structure by:
Achieving cost savings exceeding 1 billion dollars over the next three year period; Increasing its low-cost production; Raising its low-cost sourcing to more than 900 million dollars by the end of 2010; Lowering unabsorbed fixed costs as volumes continue to recover.
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4.3. Goodyear Recent events
Date Event February 2009 During the JP Morgan investor conference, Goodyear highlights industry challenges as a result of the economic crisis and ensuing production cuts. Mars 2009 Goodyear celebrated 100 years of innovation: on this occasion, Goodyear Aviation announced its Flight Eagle product line enlargement. In this respect, Goodyear Tire & Rubber Companys aviation business introduces its Flight Eagle LT (Light Turbine) tyre for the rapidly growing entry level, very light and light jet business segments. Goodyear introduces its latest product, the Assurance Fuel Max tyre: it features a proprietary fuel-saving tread compound that helps reduce energy loss as the tyre rolls, so less gas (4%) is required to keep the tyre rolling. April 2009 Goodyear was named Americas most respected automotive company. May 2009 Goodyear wins an important military supply contract: BAE Systems (a UK-based defence, security and aerospace systems company) has selected the Goodyear 395/85R20 MV/T tyre as the exclusive fitment for its FMTV (Family of Medium Tactical Vehicles), the U.S. Armys vehicle of choice in the 2.5 to 10 ton capacity. The contract calls for supplying approximately 100,000 tyres to be delivered through 2010. Goodyear announces plan to discontinue consumer tyre production at French plant and it will further explore divesting EMEA, Latin America farm tyre businesses. These actions are part of Goodyears strategy to reduce high-cost manufacturing capacity globally. J une 2009 Goodyear moves to align capacity with weak industry demand: Goodyear will move its tyre plant in Union City (USA), to a five-day, three-shift operation from continuous production to align capacity with weak industry demand. J uly 2009 Goodyear announced the closing of its Philippines tyre plant as part of a strategy to address uncompetitive manufacturing capacity globally. August 2009 Goodyear and NASA develop the Spring Tyre for Moon, possibly Earth. November 2009 Goodyear Assurance Fuel Max tyres were selected to be fitted on the 2010 Toyota Prius vehicle. J anuary 2010 Toyota selects Dunlop tyres for 2011 Sienna SE. The 2011 Toyota Sienna SE was conceived as a sporty design and responsive performance vehicle. April 2010 Kramer becomes Goodyear's president & CEO. J une 2010 Goodyear announces leadership changes in finance organization, names new vice president & treasurer. Source: Xerfi Global. Primary source: business press.
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4.3. Goodyear Key data
Goodyears net sales unit: mn euros; annual % change
Net sales were 11.6 bn in 2009, compared to 13.9 bn in 2008. Net sales declined due to lower tyre volume, primarily in North American Tyre and Africa Middle East and a decrease in other tyre-related businesses, primarily in North American tyres third party sales of chemical products. Chart 2:
The impact of the global economic slowdown led to a scale- down of investments for Goodyear. Capital expenditures were 535mn in 2009, compared to 752mn in 2008 and 530mn in 2007. The increase in capital expenditures in 2008 primarily related to projects targeted at increasing capacity for high value- added tyres was scaled back in 2009 due to the recessionary environment.
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4.3. Goodyear Segment volumes
Goodyears volumes sold by segment unit: mn tyres
Goodyears change in volumes sold by segment unit: annual % change in volumes Repl acement Uni ts 77% OEUni ts 23%
-25% -20% -15% -10% -5% 0% Replacement Units Original equipment units Total 2009/ 2008 change in % 2008/ 2007 change in %
In 2009, Goodyear managed to sell 128 mn tyres in the replacement unit business, 4.6% less than in 2008. Lower volumes were recorded for the OE unit, where the slump in the automotive industry contributed to a sharper decrease, 22.5% less volume than in 2008. Chart 2:
The decrease in worldwide tyre unit sales of 17.5 mn units, or 9.5% compared to 2008, included a decrease of 11.4 mn OE units, or 22.5%, due primarily to diminishing consumer markets in North American, Europe, Africa, Middle East and to recessionary economic conditions resulting in lower demand.
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4.3. Goodyear Revenues by region
Goodyears revenues by region unit: share in %
Goodyears change in revenues by region unit: annual % change North Ameri can Tyre 42.8% Europe, Mi ddl e East and Afri ca Tyre 35.6% Lati n Ameri can Tyre 11.1% Asi a Paci fi c Tyre 10.5%
-25% -15% -5% 5% 15% North American Tyre Europe, Middle East and Africa Tyre Latin Amer ican Tyre Asia Pacific Tyre 2009/ 2008 change in % 2008/2007 change i n %
Goodyear makes the most part of its sales -42.8%- in North America, and is the leading tyre maker in the region. Another significant proportion of its sales are made in the EMEA (Europe, Africa, Middle East) region, 35.6%, while sales in Latin America and Asia Pacific stood at 11.1% and 10.5% in 2009. Chart 2:
North American Tyre unit sales in 2009 decreased 8.4 mn units or 11.9% from the 2008 period, Europe, Middle East and Africa Tyre unit sales in 2009 decreased by 7.6 mn units or 10.3%. The decline in the Asia Pacific tyre unit was partially offset by increased growth in vehicle production in China.
World Tyre Manufacturers Market analysis Corporate strategies October 2010
Operating income in 2009 reflected the impact of a sharp drop in units of tyres sold and was below 2008 levels by more than half, reaching 267 mn. In addition, high raw materials cost put more pressure on the companys profitability. Chart 2:
Despite a steep decline in operating income, especially due to the contraction of sales in its main markets of N America and the EMEA, Goodyear managed to maintain a 2.3% margin in 2009, but lower than the 4.1% margin in 2008.
World Tyre Manufacturers Market analysis Corporate strategies October 2010
Goodyear is one of the leaders of technological innovation in the tyre industry, and research and development is important to maintain this position. Although the R&D expenses were 7.9% lower than 2008 with a total of 241 mn, the R&D ratio stood at an unchanged rate of 2.1% of total revenues. Chart 2:
Goodyears R&D ratio has changed little over the past five years. It was maintained at around 2% of revenues in 2009 as well. Goodyear is a market maker in terms of innovation (it launched 79 new products in 2009-2010), together with Michelin and Bridgestone.
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4.3. Goodyear Statistical data Year Sales Change in % Volume 2005 12.9 -1.4% 226.4 2006 13.4 3.6% 215 2007 14.0 4.8% 201.7 2008 13.9 -0.8% 184.5
Goodyears net sales unit: bn euros ; annual % change ; million of tyres
Source: Xerfi Global with Goodyear annual reports.
2009 11.6 -16.4% 167
Segment % of sales Change in % (2009/2008) Change in % (2008/2007) Replacement Units 76.6% -4.5% -5.5% OE Units 22.3% -22.6% -15.7%
Goodyears volumes by activity unit: share in %; annual % change
Source: Xerfi Global with Goodyear annual reports.
Total -9.5% -8.5%
Region % of sales Change in % (2009/2008) Change in % (2008/2007) North American Tyre 42.8% -15.5% -6.8%
Europe, Middle East and Africa Tyre 35.6% -20.7% 1.4% Latin American Tyre 11.1% -13.1% 11.5%
Goodyears revenues by region unit: share in %; annual % change
Source: Xerfi Global with Goodyear annual reports.
Asia Pacific Tyre 10.5% -6.6% 8.0% Year Operating profit Operating margin 2005 23.0% 6.4% 2006 -32.5% 4.2% 2007 56.5% 6.3% 2008 -34.6% 4.1%
Goodyears operating profit unit: annual % change; share in %
Source: Xerfi Global with Goodyear annual reports.
2009 -53.7% 2.3% Year R&D expenses R&D ratio 2005 8.9% 3.0% 2006 9.1% 2.9% 2007 0.0% 2.6%
Goodyears R&D expenses unit: annual % change; share in %
Source: Xerfi Global with Goodyear annual reports.
2008 7.5% 2.9% 2009 -8.0% 3.3%
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4.4. Continental Company Overview
Fiscal year ended December 31 st , 2009 Headquarters Hanover, Germany
Key figures Net consolidated sales 20 bn Operating income -1,040 mn Net consolidated profit -1,606 mn Staff 134,434
The company was founded in 1871, in Hanover, Germany and is among the five largest automotive suppliers in the world and the second largest in Europe. Acquisitions in the fields of brakes and chassis of Teves in 1998 as well as of Temic in 2001 in the field of electronic technologies have turned Continental from a pure rubber based manufacturer into a leading automotive technology supplier. The company comprises a total of six divisions, developing products ranging from brake systems to passenger car and truck tyres. It owns nearly 190 production and R&D sites in 39 countries.
International presence Germany 29% of net sales Rest of Europe 34% of net sales NAFTA region 18% of net sales Asia 14% of net sales
Other countries 5% of net sales Continental 20 bn net sales Automotive Group 60% of net sales Chassis 22 % of sales Powertrain 17% of sales Interior 21% of sales Rubber Group 40% of net sales Passenger Tyres 23 % of sales Commercial Vehicle Tyres 5 % ContiTech 12 % of sales
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4.4. Continental Business segments
DIVISION % OF SALES OPERATIN G MARGIN OPERATIONS MAIN CUSTOMERS CONTINENTAL PASSENGER LIGHT TRUCK TYRES 23% 11.4% It consists of the following units: Original Equipment Replacement Business Europe & Africa Replacement Business, The Americas Replacement Business, Asia Pacific Two-Wheel Tyres
The division develops and manufactures tyres for compact, standard-size and full-size cars, vans, motorcycles and bicycles.
Worldwide brands: premium Continental brand, budget Barum brand Regional brands: Uniroyal, Semperit, General Tyre, Viking etc. Consumers and companies CONTINENTAL COMMERCIAL VEHICLES TYRES 5%
-4.7% The truck division comprises the following units: Truck Tyres, Europe the market leader Truck Tyres, The Americas Truck Tyres, Asia Pacific Industrial Tyres Consumers and companies CONTITECH 12% 7% The ContiTech division is one of the worlds largest specialists in rubber and plastics technology. It develops and produces functional parts, components, and systems for the automotive and other industries. Companies Source: Xerfi Global with Continental.
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4.4. Continental Corporate strategy
Leading market positions
The Continental Group aims to be at least among the top three suppliers in every market it is running operations. This is a central criterion for the group in the decision on whether or not to enter a market.
Balance of sales between the automotive industry and other sectors
Currently, around 67% of sales come from vehicle manufacturers primarily via business in the Automotive Group. The production of passenger cars and light and heavy trucks depends on factors such as economic conditions, consumer spending and consumer preferences. To cushion the negative effects of the cyclical automotive sector on business, Continentals goal remains to generate at least 40% of consolidated sales from outside the automotive industry, essentially from the tyre replacement market and ContiTechs various industries.
Taking advantage of growth opportunities
Continentals strategy in the coming years involves developing new products, particularly in the European ultra high performance segment (UHP). This portion of the tyre market is expected to grow by more than 6% in the following years. Moreover, the Central and Eastern European markets, as well as expanding operations in Asia, continue to be of long-term importance to its passenger car and light truck division. As far as the truck tyre division is concerned, the key regions for the companys future growth will be the Near and Middle East as well as Russia, Asia and Latin America. The opening of a new representative office in Dubai, as well as the cooperation agreement with an Indian partner are, among others, actions meant to prop Continentals growth strategy.
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4.4. Continental Recent events
Date Event May 2009 Continental started a European tour with six new premium commercial vehicle tyres launched. May 2009 Continental Tyre North America announced its cooperation with Marangoni Tread North America (MTNA) in The US and Canada for fleet customers. In Mexico, a total retreading business model is underway. Continental has acquired the remaining 34 percent of shares in Continental Matador Rubber, Puchov (Slovakia). Continental is now 100% shareholder of Continental Matador Rubber. This action is in line with the groups long-term strategy to address Eastern European markets from Puchov, Slovakia. September 2009 Continental confirms entering the Indian truck tyre market, where around 12 mn commercial vehicle tyres are required annually and high growth rates of around 7 percent have been forecast for the region. Its Indian partner, Modi Tyres Company (New Delhi), produces and distributes around one million commercial vehicle tyres each year. Continental continues the expansion of its production capacity in its passenger car and light commercial vehicle tyre plant in Timioara, Romania, also leading to the creation of around 200 new jobs. In the next two years Continental will allocate a two digit million euro amount for this project. November 2009 Continental announced the opening of the new Asia headquarters and R&D center in Shanghai. All of the corporation's divisions will be represented at the headquarters under one joint roof: Continental Automotive Systems, Continental Tyres and ContiTech. This represents a significant landmark for the growth of Continental in the China, a market that has become crucial for all tyre manufacturing companies. February 2010 Continental became the exclusive tyre partner and the official sponsor of 2014 FIFA World Cup in Brazil. March 2010 Continental announced price increases for its commercial vehicle tyres. This comes as a reaction to a sharp rise in the cost of raw materials since the fall of 2009 which has affected all tyre companies. J uly 2010 Continental holds machinery installation ceremony for its new tyre plant in Hefei, China. The first phase of the 185 million euro investment project was considered to be successfully accomplished. Source: Xerfi Global. Primary source: business press.
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4.4. Continental Key data
Continental Rubber groups net sales unit: mn euros; annual % change
In 2009, sales in the passenger and light truck tyre division and the commercial vehicle tyre division amounted to 4.7 bn and 1.1 bn respectively, leading to a total of 5.8 bn. Net sales declined due to lower tyre volume sold in mature markets such as Europe, Continentals main region. Chart 2:
Capital expenditure amounted to 4.1% of sales. Investments in the passenger and light truck tyres division focused on cost reduction. Important additions were made in the commercial vehicle tyres division as a result of quality enhancement for truck tyre production at the plants in Puchov, Slovakia, and Mount Vernon, USA.
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4.4. Continental Revenues by segment
Continental Tyres revenues by segment unit: share in %
Continental Tyres revenues by segment unit: annual % change in revenues Passenger and l i ght truck tyres 82% Commerci al vehi cl e tyres 18%
-30% -25% -20% -15% -10% -5% 0% 5% Passenger and l ight truck tyres Commerci al vehicl e tyres 2009/ 2008 change in % 2008/ 2007 change in %
Continental makes 82% of its revenues in the passenger and light truck tyre division and the remaining 18% in its commercial vehicle tyre operations, a segment whose share of revenue has been gradually declining from its 23.7% level in 2005. Chart 2:
Sales in the passenger and light truck tyre division fell by 7.9% to 4,696.4 mn in 2009 compared with 2008, and by 24.1% to 1,065.6 mn in the Commercial Vehicle division.
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4.4. Continental Revenues by region
Continental Tyres revenues by region unit: share in %
Continental Tyres change in revenues by region unit: annual % change in revenues Other Countries 5% Germany 20% Rest of Europe 50% NAFTA 20% Asi a 5%
-3% -2% -1% 0% 1% 2% 3% Germany Rest of Europe NAFTA Asi a Other Count ri es 2009/2008 change in % 2008/2007 change in %
The biggest share in Continentals revenues is held by the European zone, while NAFTA comes in second with 20%. The remaining 10% of net sales are recorded in Asia and other countries. Chart 2:
Overall sales in Continentals tyre business fell in Europe in line with declines in vehicle production, but recorded a slight growth in The Americas region in contrast to the market trend.
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4.4. Continental Operating margin
Continental Tyre Divisions operating income unit: bn euros
Compared with 2008, the passenger and light truck tyres division reported a decrease in EBIT (operating result) of 90 mn, or 14.4%, to 536.4 mn, while the commercial vehicle tyre division reported a decrease in EBIT of 79.6 mn, or 269.8%, to 50.1 mn, an overall 565.9 mn for the tyre operations in 2009. Chart 2:
In 2009, Continental tyre businesses recorded one of the highest operating margins in the industry, thanks to the passenger and light truck tyres division which offset the impact of the negative margin in the commercial vehicle business.
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Research and development expenses increased by 3.1 mn or 2% year-on-year to 160 mn. The greater proportion of expenses goes to the passenger tyre segment, 119.5 mn compared to 40 mn in the Commercial tyre division. Chart 2:
Research and development expenses stand at 2.8% of sales, a higher ratio than in previous years, when it stood at 2.4%, below the Big Three average of 3%.
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4.4. Continental Statistical data Year Sales Change in % 2005 5.8 3.9% 2006 6.1 5.8% 2007 6.4 4.3% 2008 6.5 1.2%
Continental Tyre Divisions net sales unit: bn euros ; annual % change ;
Source: Xerfi Global with Continental annual reports.
2009 5.7 -11.4% Segment % of consolidated sales Change in % (2009/2008) Change in % (2008/2007)
Passenger and Light Truck tyres 23% 3.10% 1.00%
Continental Tyres revenues by activity unit: share in %; annual % change
Source: Xerfi Global with Continental annual reports.
Commercial Vehicle Tyres 5% -3.10% 1.00%
Region % of sales Change in % (2009/2008) Change in % (2008/2007) Germany 20% -1.1% -0.5% Rest of Europe 49% -1.0% 2.5% NAFTA 20% 0.7% -1.1% Asia 5% 1.0% 0%
Continental Tyres revenues by region unit: share in %; annual % change
Source: Xerfi Global with Continental annual reports.
Other Countries 5% 2.0% 0% Year Operating profit Operating margin 2005 - 14.1% 2006 -4,2% 12.8% 2007 9,6% 13.4% 2008 -33,2% 8.9%
Continentals operating profit unit: annual % change; share in %
Source: Xerfi Global with Continental annual reports.
2009 -1,8% 9.8%
Year R&D expenses R&D ratio 2005 6.4% 2.5% 2006 2.4% 2.4% 2007 4.1% 2.4%
Continentals R&D expenses unit: annual % change; share in %
Source: Xerfi Global with Continental annual reports.
2008 1.8% 2.4% 2009 1.9% 2.8%
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PIRELLI PIRELLI TYRE (100%) PIRELLI AMBIENTE (51%) PIRELLI & C. ECO TECHNOLOG Y (51%) PIRELLI BROADBAN D SOLUTIONS PIRELLI REAL ESTATE (68%) PIRELLI LABS (100%)
4.5. Pirelli Company Overview
Fiscal year ended December, 31 st 2009 Headquarters Milan, Italy
Pirelli Group Key figures Net consolidated sales 4.4 bn Operating income 217 mn Net consolidated profit -23 mn Staff 29,750
Pirelli Tyre has been the core business of the Pirelli Group for over a century: after its foundation in 1872 by a young engineer named Giovanni Battista Pirelli, the company diversified from insulated telegraph cable (1879) to the first bicycle tyres (1890). The first automobile tyre came off the line in 1901. Pirelli tyre designs, develops, manufactures and markets tyres - for motor vehicles, industrial vehicles and motorcycles - and steel cord. The Group runs 20 plants in 11 countries throughout the world. Pirelli Tyre International presence Italy 9% of sales Rest of Europe 33% of sales North America 8% of sales Central and South America 34% of sales
Africa, Asia, Pacific 16% of sales
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4.5. Pirelli Business segments
SEGMENT % OF SALES OPERATING MARGIN OPERATIONS MAIN CUSTOME RS BUSINESS CONSUME R 70% 8.3% The Consumer line includes tyres for vehicles generally used by private individuals: for example, tyres for cars, SUVs, vans and motorcycles. Consumers PIRELLI TYRE INDUSTRI AL BUSINESS 89.5 % 30% 9.6% The Industrial line is for vehicles for the professional transportation of goods or passengers. Products of this line include tyres for trucks, buses, earth-moving equipment and farm machinery. The Industrial line also includes the production of steel cord, the technological component used to produce high-performance radial tyres. Companies PIRELLI REAL ESTATE SGR 6.1%
3% The Pirelli Broadband Solutions portfolio consists of three main product lines: residential and small business broadband access routers, IP set-top-boxes, "extenders" (products to create home broadband networks), solutions for fixed-mobile convergence and remote management platforms. Consumers and companies - Pirelli Ambiente: production of quality fuel from waste (CDR-Q); photovoltaic energy - Pirelli Labs are the core of advanced research for the entire business of the Pirelli group OTHER BUSINESSES 1.4% -4% Pirelli Eco Technologies is specialised in the creation of technologies that can reduce emissions from diesel vehicles and heating plants. Companies Source: Xerfi Global with Pirelli.
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4.5. Pirelli Corporate strategy
Strengthening its leadership in the tyre industry
The Pirelli Group prioritises its core business of tyres and the similar business of particulate filters brought together in the Tyre and Parts Division. In this sense, the group disposed of nonstrategic assets, including the stake held in Alcatel Lucent Submarine Networks, a sale completed in March 2009 and the stake held in Telecom Italia S.p.A..
Green performance
In accordance to its three-year plan for 2009-2011, Pirelli is aiming to increase the green proportion of its products from 20% to 40% over the period. All the new tyres of the Cinturato line, a historic Pirelli Tyre brand, recently relaunched, are in keeping with the companys green performance strategy, as are the tyres of the Winter family.
I nvesting in growth markets
Investing in new or increased production capacity in Russia, China, Romania, Brazil and Italy (especially due to the new industrial hub of Settimo Torinese, which will be completed in 2010 and be fully operational at the beginning of 2011) is a priority for Pirelli. In keeping with the 2009-2011 business plan, in the three-year period the group is to devote about 200 million dollars for capacity expansion in South America, in addition to the 100 million dollars already invested in the previous year. This strategy of reinforcement in the area aims to consolidate Pirelli Groups leadership in the South American market. The new investments in this region will enable a 20% increase in car and motorcycle tyre production.
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4.5. Pirelli Recent events
Date Event J anuary 2009 Brembo, Magneti Marelli and Pirelli announced the start of technological cooperation aimed at developing avant-garde solutions for the Italian and international automotive industry. March, 2009 Pirelli Tyre launched Cinturato P7, the first environment-friendly high-performance tyre for the high end of the market. Pirelli signed a "Memorandum of Understanding" with the Hixih Group (formerly the Yinhe Group), a partner of the group since 2005 in the production of tyres, for the creation of a filter production plant at Yanzhou, in the province of Shandong (China). September 2009 In keeping with the strategy and the objectives of the 2009-2011 business plan of focusing on the core business, the company decided to simplify its organisational structure and bring together all the activities in direct support of the core business in the new "Tyre and Parts" Division, responsibility which was entrusted to Francesco Gori, who also maintains the position of Chief Executive Officer of Pirelli Tyre S.p.A.. November 2009 The European Investment Bank (EIB) and Pirelli Tyre S.p.A. signed a financing agreement for 100 million euros granted by the EIB to support Pirelli Group projects in the area of research and development for the 2009-2012 period. Pirelli and Russian Technologies signed an agreement for the implementation of the Memorandum on Terms. The agreement provides for an extension of the collaboration begun in the context of the joint venture for the production of tyres and steel cord in Russia. December 2009
The European Investment Bank (EIB) and Pirelli Tyre S.p.A. signed a 50 mn euro loan agreement. The loan is to be used to increase the production of tyres for cars and light commercial vehicles at the Pirelli factory in Slatina, Romania, and will be a part of the investments of 250 mn euros announced by the group for its Romanian business for the three years 2009-2011. February 2010 Pirelli Tyre announced a 4 to 6 % price increase in European markets for car, motorcycle and truck tyres. May 2010 The Board of Directors approved plan for separation of its real estate divison, Pirelli Re. This demonstrates Pirellis engagement to focus on its core business: tyres. J une 2010 Pirelli confirmed as exclusive Formula One tyre supplier from 2011 to 2013. Source: Xerfi Global. Primary source: business press
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4.5. Pirelli Key data
Pirelli Tyres net sales unit: mn euros; annual % change
Net sales in financial year 2009 came out at 3,992.9 mn euros, down 2.6% compared to 2008. This drop is explained by a negative change in volumes (-5.8%) and an adverse effect of the exchange rates (-1.6%) Chart 2:
The Pirelli group generated a considerable amount of cash flow from its operating activities in 2009, thanks to the positive contribution of the Pirelli Tyre cash flow (395 mn euros) and income from the disposal of nonstrategic assets.
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4.5. Pirelli Revenues by segment
Pirelli Tyres revenues by segment unit: share in %
Pirelli Tyres change in revenues by segment unit: annual % change in revenues Car tyres 63% Motorcycle tyres 8% Tyres for industrial vehicles 27% Steelcord / other tyres 2%
-3% -2% -1% 0% 1% 2% 3% 4% Car tyres Tyresfor i ndust rial vehicles Mot orcycl e tyres St eelcord / other t yres 2009/2008 change i n % 2008/ 2007 change in %
As the distribution of net sales by product shows, Pirelli Tyre makes most of its revenues (63%) from its car tyre operations. Additionally, its industrial tyre operations bring 29% of all income and the motorcycle tyres comprise 8% of net sales. Chart 2:
The contraction of sales was more abrupt in the Industrial segment (-10.3%), while in the consumer segment (cars and motorcycle tyres) there was slight overall growth (+0.9%). 2008).
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4.5. Pirelli Revenues by region
Pirelli Tyres revenues by region unit: share in %
Pirelli Tyres change in revenues by region unit: annual % change in revenues Afri ca, Asi a Paci fi c 16.0% Ital y 9.0% Rest of Europe 33.0% North Ameri ca 8.0% Central and South Ameri ca 34.0%
-4% -2% 0% 2% 4% 6% Italy Rest of Europe North America Cent ral and South America Africa, Asia, Pacific 2009/ 2008 change in % 2008/ 2007 change in %
Chart 1: Pirelli Tyres has, above all, managed to establish a strong presence in the emerging markets of Central and South America, a region that makes up for 34% of its revenues. Europe accounts for 41% and the Africa, Asia pacific regions for 16% of its sales. Chart 2: 2009 was a year with a market scenario of recession above all in the mature markets. Consequently, the proportion of turnover in Europe fell from 45% in 2008 to 42%, owing chiefly to the reduction of volumes in the Original Equipment channel. Nonetheless, light growth was achieved in its other markets.
World Tyre Manufacturers Market analysis Corporate strategies October 2010
2009 operating income was up compared to the previous year, amounting to 344.5 mn, a result of Pirelli Tyres effort to increase its efficiency (namely the 15% reduction of workforce in Western Europe) by improving the industrial framework and adjusting the overheads structure to the new market scenarios.
Chart 2:
Pirelli Tyres high operating margins are a result of the positive trend in the costs of factors of production, in particular thanks to the reduction in the cost of raw materials. This prompted an improvement in the results achieved in 2008, more than offsetting the negative effect of the reduction in sales volumes.
World Tyre Manufacturers Market analysis Corporate strategies October 2010
In 2009, R&D expenditures amounted to 133 mn euros. Traditionally, Pirelli Tyres R&D activity is focused on sustaining improvement and innovation of the product portfolio (UHP, Winter, Runflat, SUV and motorcycle tyres). Chart 2:
In 2009, a year which required closer attention to costs, Pirelli reduced the ratio of research and development expenses to net sales, from 3.5% to 3.3%, but this level still keeps the company at the top in the industry worldwide in terms of process and product innovation, which have always been central elements for the competitive position in the sector.
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4.5. Pirelli Statistical data Year Sales Change in % 2005 3.6 11.6% 2006 3.9 8.7% 2007 4.1 4.3% 2008 4.1 -1.4%
2009 3.9 -2.6% Segment % of sales Change in % (2009/2008) Change in % (2008/2007) Car tyres 63% 3% -1%
Motovelo tyres 8% -1% 1%
Tyres for industrial vehicles 27% -2% 1%
Pirelli Tyres revenues by activity unit: share in %; annual % change
Source: Xerfi Global with Pirelli annual reports.
Steel Cord / other tyres 2% 0% -1% Region % of sales Change in % (2009/2008) Change in % (2008/2007) Italy 9% 0% -1% Rest of Europe 33% -3% -2% North America 8% 1% -1% Central and South America 34% 1% 5%
Pirelli Tyres revenues by region unit: share in %; annual % change
Pirellis operating profit unit: annual % change; share in %
Source: Xerfi Global with Pirelli annual reports.
2009 37.8% 8.6% Year R&D expenses R&D ratio 2005 1.4% 4.0% 2006 0.7% 3.7% 2007 0.7% 3.6%
Pirellis R&D expenses unit: annual % change; share in %
Source: Xerfi Global with Pirelli annual reports.
2008 -2.0% 3.5% 2009 -8.3% 3.3%
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4.6. Sumitomo Company Overview
Fiscal year ended December, 31 st 2009 Headquarters Kobe, Japan
Sumitomo Group Key figures Net consolidated sales 3.99 bn Operating income 219 mn Net consolidated profit 69.8 mn Staff 20,797
The company is part of the Sumitomo group, one of Japan's largest keiretsu, or conglomerates and was established as Dunlop Rubber (Far East) Ltd. in 1909, and later on in 1917 became Sumitomo Rubber Industries, Ltd. The Sumitomo Rubber Group manufactures and sells tyres in brands such as Dunlop, Falken and Goodyear as well as vibration control damper, artificial turf, printing blankets, fine rubber, rubber gloves and others. Sumitomo Tyre International presence Japan 55.4% of net consolidated sales North America 14.2% of net consolidated sales Europe 4.5% of net consolidated sales Asia 12.5% of net consolidated sales
Other areas 13.4% of net consolidated sales
SUMITOMO
Tyre Business 82.7%
Sports Business 12.4%
Industrial and Other Products Business 4.9%
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4.6. Sumitomo Business segments
SEGMENT % OF SALES OPERATING MARGIN OPERATIONS MAIN CUSTOMERS TYRE BUSINESS
82.6%
-1.7%
Operations in the tyre segment involve the production and sale of a wide range of tyres for a variety of vehicles and applications such as passenger cars, trucks, buses, motorcycles and industrial applications.
Consumers and companies SPORTS BUSINESS
12.5% 7.2% Operations in the Sports segment involve the production and sale of a variety of sporting goods, principally golf balls, golf clubs, golf bags and tennis balls. Consumers and companies INDUSTRIAL AND OTHER PRODUCTS BUSINESS
5.1%
4.3%
Operations in the Industrial and Other Products segment involve the production and sale of a variety of rubber and rubber-based products, including vibration- control products, flooring for gymnasiums, all-weather tennis courts, track and field facilities, marine fenders, precision rubber parts for office machines, and blankets for offset printing presses. Consumers and companies Source: Xerfi Global with Sumitomo.
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4.6. Sumitomo Corporate strategy
Further development of fuel-efficient tyres
Anticipating a growing demand for better-performing fuel-efficient tyres in the original equipment market, the Sumitomo Tyre is dedicated to improving their capabilities in material development and production technology and to accelerate the development and commercialisation of eco-friendly tyres, including those that are fuel-efficient and fossil resource free. A specific instance of such initiatives is the Material Development Headquarters, established in 2010.
Optimal global tyre production structure
In order to pursue future growth. Sumitomo Tyre launched sales subsidiaries and commenced full-scale sales activities in areas such as Russia, Latin America and the Middle East, where demand expansion is anticipated. In North America, Sumitomo strives to reinforce the marketing capabilities of Falken Tyre Corporation, while establishing Falken Tyre Europe GmbH in Germany seeking to bolster sales under the Falken brand in Europe. Another focal point lies in the Asian replacement market, where Sumitomo Tyre plans to double sales by 2015, a target underpinned by enhanced production at its factory in Thailand.
Stable procurement of natural rubber At the end of 2009, Sumitomo Tyre decided to jointly establish a natural rubber plantation and a processing factory with a local company in Thailand. This is expected to further accelerate our R&D activities for eco-friendly tyres, including the development of new rubber materials for fuel-efficient tyres.
Cost reduction
Sumitomo Tyre intends to cut costs dramatically for small-inch tyres, which are expected to achieve growth in Japan and the rest of Asia.
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4.6. Sumitomo Recent events
Date Event April 2009 Sumitomo Rubber received "Environmental Achievement of the Year" award for developing 100% fossil resource free tyres at Tyre Technology Expo 2009 in Hamburg, Germany, and for its ambition to start sales of 100% free of fossil resource materials by 2013. May 2009
Sumitomo Rubber produced its 100,000,000th tyre on Monday, April 27, 2009 at its facility in Indonesia.
J uly 2009 Falken Tyre Europe was established in order to expand sales of Falken and Ohtsu branded replacement tyres in Europe: Sumitomo Rubber Industries, Ltd., Japan, announced the foundation of a tyre selling company named Falken Tyre Europe GmbH in Offenbach, Germany as part of its global sales strengthening activities. September 2009 Sumitomo Rubber Tyre technical centre opened in Kobe on the occasion of the companys 100th anniversary. Sumitomo Rubber Industries announced its Dunlop's 4th Generation Runflat tyres: with its new thermal control technology, the company has succeeded in developing the 4th generation runflat tyres which provide ride comfort equivalent to or better than standard tyres, while maintaining runflat performance of the tyre. October 2009
SRI Tyre Trading announced an increase in overseas tyre prices: Dunlop, Falken, Sumitomo and Ohtsu brand tyres for passenger cars, light trucks, trucks and buses and motorcycles in Asia, Middle East, North America, Europe, Central and South America, Africa and the Pacific region. March 2010 Sumitomo Rubber received "Tyre Technology of the Year" award for its 4th generation Runflat tyre technology at the Tyre Technology Expo 2010. May 2010 'FALKEN' tyre entered the Nurbrugring 24-hour race: the Sumitomo Rubber group set up the 'Falken motorsports' team, and entered the 'Nurbrugring 24- hour race taking place in Germany, in order to enhance the image of FALKEN branded tyres. J uly 2010 Sumitomo Rubber announced its plan to establish a second tyre plant in China to produce and sell radial passenger car tyre in China. Construction is set to begin in September 2010, with a total investment of 297 million dollars. The companys decision to establish the new plant is driven by Chinas surging car production. Source: Xerfi Global. Primary source: business press
World Tyre Manufacturers Market analysis Corporate strategies October 2010
Significantly affected by weak private-sector consumption and a slump in corporate capital investment in the Sports and Industrial businesses, and a decline in the Japanese automobile production in the tyre segment, Sumitomo Rubbers consolidated net sales for 2009 fell by 13.3% to 4027 mn. Chart 2:
In addition to a 30% year-on-year decrease in the Japanese automobile production that had a major impact on the sales of original equipment tyres, demand in the replacement tyre market also dropped substantially both in Japan and overseas, leading to a 13.5% decline in the Tyre business in 2009.
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4.6. Sumitomo Revenues by segment
Sumitomo Rubbers revenues by segment unit: share in %
Sumitomo Rubbers revenues by segment unit: annual % change in revenues Tyre 83% Sports 12% Industri al 5%
-20% -10% 0% 10% 20% 30% Industrial Sports Tyre 2009/ 2008 change in % 2008/ 2007 change in %
In 2009, Sumitomos tyre operations accounted for 83% of consolidated sales. The sports and industrial segment shares in the groups revenue were 12% and 5% respectively. These proportions are relatively unchanged from previous years. Chart 2:
Confronted with a business environment of unparalleled severity, Sumitomo Group recorded a negative performance in each segment of its activity (-13.5%, -11.7 and -10.3 in its tyre, sports and industrial operations respectively).
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4.6. Sumitomo Revenues by region
Sumitomo Rubbers revenues by region unit: share in %
Sumitomo Rubbers change in revenues by region unit: annual % change in revenues Other areas 16.0% Japan 55.4% North Ameri ca 14.2% Europe 4.5% Asi a 12.5%
-40% -30% -20% -10% 0% 10% 20% 30% Japan North America Europe Asia Other areas 2009/ 2008 change i n % 2008/ 2007 change in %
Sumitomos sales are largely concentrated in Japan and countries in the Asian zone (67.9%), and to a milder extent in North America (14.2%), Europe (4.5%) and other zones (16%).
Chart 2:
Although managing to expand its sales in all regions in the 2008 fiscal year, in 2009 the Groups sales were on a downhill trend. The weakest performance was recorded in Europe with sales declining by 28.7%.
World Tyre Manufacturers Market analysis Corporate strategies October 2010
Although consolidated net sales for fiscal 2009 fell 13.3% year on year on the consolidated earnings front, operating income grew 12.0% to 220.6 million. Chart 2:
In 2009, Sumitomo Tyre accomplished a better performance in its operating margin which stood at 5.2% compared to 3.2% in 2008, despite challenging economic environment with high raw materials price volatility.
World Tyre Manufacturers Market analysis Corporate strategies October 2010
In its tyre business, Sumitomo Rubber Industries has pursued technology exchange based on a global alliance with the Goodyear Tyre & Rubber Company since 1999. In fiscal 2009, R&D expenses in the tyre business totalled 114.3 mn. Chart 2:
The Sumitomo Rubber Group devotes more than 3% of its revenues to research and development (R&D) activity. In 2009, the ratio was at 3.4%, as the group completed its Tyre Technical Centre in 2009, the key facility of the Groups R&D activities for tyre technology.
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4.6. Sumitomo Statistical data
Year Sales Change in % 2005 3.0 -2.8% 2006 3.3 8.1% 2007 3.6 11.1% 2008 3.8 4.7%
Sumitomo Tyre net sales unit: bn euros ; annual % change ;
Source: Xerfi Global with Sumitomo annual reports.
2009 3.3 -13.5%
Segment % of sales Change in % (2009/2008) Change in % (2008/2007) Tyre 82.6% -13.5% 4.7%
Sports 12.5% -11.7% 24.8%
Sumitomo Rubber revenues by activity unit: share in %; annual % change
Source: Xerfi Global with Sumitomo annual reports.
Industrial 5.1% -10.3% 1.1%
Region % of sales Change in % (2009/2008) Change in % (2008/2007) Japan 55.4% -11.6 % 1.6% North America 14.2% -13.2% 12.6% Europe 4.5% -28.7% 24.2% Asia 12.5% -10.2% 24.5%
Sumitomo Rubber revenues by region unit: share in %; annual % change
Source: Xerfi Global with Sumitomo annual reports.
Other areas 13.4% -16.6% 2.7% Year Operating profit Operating margin 2005 20.7% 10.0% 2006 -33.6% 6.1% 2007 36.1% 7.5% 2008 -55.8% 3.2%
Sumitomo Tyre operating profit unit: annual % change; share in %
Source: Xerfi Global with Sumitomo annual reports.
2009 42.1% 5.2% Year R&D expenses R&D ratio 2005 2.4% 3.3% 2006 8.0% 3.3% 2007 6.2% 3.2%
Sumitomos R&D expenses unit: annual % change; share in %
Source: Xerfi Global with Sumitomo annual reports.
2008 6.0% 3.2% 2009 -6.9% 3.4%
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4.7. Yokohama Company Overview
Fiscal year ended March, 31 st 2010 Headquarters Tokyo, Japan
Key figures Net consolidated sales 3.5bn Operating income 97.6mn Net consolidated profit -43mn Staff 17,566
The company was established in October 1917, in Yokohama, Kanagawa Prefecture, with a joint investment from Yokohama Cable Manufacturing Co., Ltd. (currently Furukawa Electric Co., Ltd.) and BF Goodrich, of the United States. With 9 factory and plants located in Japan, and overseas subsidiaries located in countries such as Canada, Australia, Philippines, Vietnam, Thailand, Yokohama is the worlds 7 th largest tyre manufacturing company. Yokohama employs more than 17,000 people.
International presence Japan 69.5% of net sales The Americas 19.4% of net sales Europe 4.7% of net sales Others 6.4% of net sales The Yokohama Rubber Company, Limited Net sales 2009: 3.5 bn euros Tyre Group
78.8 % of sales Multiple Business group
21.2% of sales
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4.7. Yokohama Business segments
SEGMENT % OF SALES OPERATING MARGIN OPERATIONS MAIN CUSTOMERS TYRE GROUP 82.8% 5.6% Tyres for passenger cars, trucks and buses, light trucks, mining and construction equipment and industrial vehicles, aluminium alloy wheels and automobile-related components Consumers and companies MULTIPLE BUSINESS 17.2% 1.0% Conveyor belts, rubber plates, various hoses, marine fenders, oil spill containment booms, marine hoses, air springs, highway joints, rubber support, anti-seismic laminated rubber sheets for buildings, water-repellent materials, water-proof materials, sound and vibration-proof materials, adhesives, sealants, golf-related products, fuel tanks for aircraft, aircraft seals, acoustic materials, bathroom units and drinking water tanks for commercial aircrafts, various honeycomb products, metal tanks, oil tanks, thermal insulation materials, couplings, sealing compounds, V-band couplings, flex couplings, electromagnetic shielding materials, information processing services, real estate and others Consumers and companies Source: Xerfi Global with Yokohama.
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4.7. Yokohama Corporate strategy
Enhance presence in the global marketplace
Yokohama wishes to increase its global presence through a top-of-the-line product in fuel-saving tyres, the dB super E-spec (marketed in Japan as the DNA dB super E-spec). The product was launched in the United States in July 2009. Also, the company is investing in the promotion of high-performance tyres under the ADVAN name, Yokohama Rubbers global flagship brand.
Respond flexibly to demand in each market
Following an expansion in the production capacity for tyres in accordance with regional circumstances, Yokohama is building a plant to produce passenger car tyres in south-western Russia in the Lipetsk special economic zone. The plant, scheduled to begin operation in 2011, will have an initial yearly production capacity of 1.4 million tyres. Furthermore, the company plans to restart the temporarily suspended expansion project at Yokohama Rubbers subsidiary Hangzhou Yokohama Tyre Co Ltd in China and increasing its production capacity to 4.1 mn tyres a year, from 3 mn currently.
Globalise operations more thoroughly
Yokohama Rubber is considering outsourcing some tyre production to local partners in emerging markets to better respond to demand in different regions.
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4.7. Yokohama Recent events
Date Event Yokohama announced organisational changes aiming to improve its business efficiency and speed by reorganising itself around six functional centres: sales & marketing, production, technical, quality assurance, product planning, and logistics. May 2009 Yokohama Rubber decided to retreat from aircraft tyre business, since it saw no strong growth potential for the future. November 2009
The next-generation eco tyre technology "AIRTEX Advanced Liner" is released. It is a new material both impermeable (airtight) and flexible, and can substantially reduce the volume of air naturally leaking from a tyre. February 2010
Yokohama Rubber released "C.drive2," a new high-performance eco tyre for family cars in all classes, from small to large. April 2010
Yokohama Rubber held a groundbreaking ceremony for a new tyre plant in Russia. The construction of the new tyre plant is aimed at delivering high quality tyres to the Russian market in the fastest delay. Yokohama Rubber And Itochu Corporation established a tyre sales company, Yokohama Russia, in 2005 in Moscow. Yokohama Russia has increased sales at a steady pace, making Russia an important market for Yokohama Rubber. May 2010
The opening ceremony for its natural rubber processing factory in Thailand was held in Surat Thani province. Teck Bee Hang has been Yokohamas largest Thai supplier of natural rubber, however the processing factory location at the Malaysian boarder area was considered insecure. The new factory area Surat Thani Province alleviates this concern. J une 2010 Yokohama announced its passenger car and light truck tyre plant in Thailand would undergo expansion. The plant had an annual production capacity of 1.4 million tyres. The production capacity is going to be expanded to 4 million tyres by April 2011. Source: Xerfi Global. Primary source: business press
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4.7. Yokohama Key data
Yokohamas net sales unit: mn euros; annual % change
Yokohama Rubber posted lower sales in FY 2009. Its sales were down nearly 10% from 3.9 bn in 2008 to 3.5 bn. This result is due mainly to the declining demand in mature markets such as Japan, where Yokohama sells most of its products. Chart 2:
The Groups overall decline in sales is also shown by the Tyre business results in 2009. Revenues fell to 2.8 bn from the 3bn recorded the year ending in March, 2008.
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4.7. Yokohama Revenues by segment
Yokohamas revenues by segment unit: share in %
Yokohamas change in revenue by segment unit: annual % change in revenues Tyres 79% Mul ti pl e Busi ness 21%
-15% -10% -5% 0% 5% 10% 15% Tyre Diversified products 2009/ 2008 change i n % 2008/ 2007 change in %
Net sales in the tyre segment totalled 2.8 billion euro, an 8.1% decrease from fiscal 2008. Tyre operations account for 79% of the groups revenues, compared to 77.3% in 2008.
Chart 2:
The recent economic downturn and the appreciation of the yen contributed to a decline of net sales for two years in a row, in both segments of the Yokohama Group. Nonetheless, the drop was milder in the tyre group (-8.1%/ -4.8% in 2009/2008) versus the multiple business group (-15.9% and -10.7% in 2009/2008).
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4.7. Yokohama Revenues by region
Yokohama Rubbers revenues by region unit: share in %
Yokohama Rubbers change in revenues by region unit: annual % change in revenues Japan 69.5% North Ameri ca 19.4% Asi a 4.7% Others 6.4%
-15% -11% -7% -3% 1% 5% 9% 13% Japan Nort h America Asia Ot hers 2009/2008 change in % 2008/2007 change in %
Yokohama Rubber has a strong foothold in Asia and especially Japan, where it concentrates 70% of sales. The North American region and Asia contribute by 19.4% and respectively 4.7% to the Groups 3.5 bn revenues.
Chart 2:
In 2009, Yokohama Rubbers progression has declined in all geographical segments, markedly in Japan and North America, the markets hardest hit by the economic slump and where the company captures 90% of its profits.
World Tyre Manufacturers Market analysis Corporate strategies October 2010
Yokohama Rubber posted a 156 million operating profit for 2009, more than the half of the figure recorded the previous year, showing improved operational efficiency. Chart 2:
Yokohamas operating margin has been dropping since 2007. It stood at 4.1% in 2008 and at 2.9% in 2009. The weak performance is due to the increase in raw material prices during the recent economic crisis.
World Tyre Manufacturers Market analysis Corporate strategies October 2010
Research and development expenses for the year ending March 31, 2010, were 101 million, 13% less than in 2008, reaching its lowest level in 5 years.
Chart 2:
Yokohama devotes around 3% of its revenues to research and development. In 2009, the ratio stood at 2.8%, down from the 3% in 2008.
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4.7. Yokohama Statistical data Year Sales Change in % 2006 3,4 11.4% 2007 3,7 11.1% 2008 4,2 13.3% 2009 3,9 -4.6%
Yokohamas net sales unit: bn euros; annual % change ;
Source: Xerfi Global with Yokohama annual reports.
2009 3,5 -19.7%
Region % of sales Change in % (2009/2008) Change in % (2008/2007) Japan 26.2% -21.3% -8.1% The Americas 43.3% -19.9% -6.3% Europe 13.9% -23.6% -8.0%
Yokohamas revenues by region unit: share in %; annual % change
Source: Xerfi Global with Yokohama annual reports.
Others 16.7% -12.5% 12.8%
Year Change in Operating profit Operating margin 2005 - 4,9% 2006 -4,0% 4,2% 2007 57,2% 6,0%
Yokohamas operating profit unit: annual % change; share in %
Source: Xerfi Global with Yokohama annual reports.
2008 -61,3% 2,5% 2009 67,5% 4,6%
Year R&D expenses R&D ratio 2005 8,9% 3,2% 2006 0,6% 2,9% 2007 4,3% 2,8%
Yokohamas R&D expenses unit: annual % change; share in %
Source: Xerfi Global with Yokohama annual reports.
2008 -0,1% 3,0% 2009 -13,0% 2,8%
Segment % of sales Change in % (2009/2008) Change in % (2008/2007) Tyres 82.8% -18.0% -4.6% Yokohamas revenues by activity unit: share in %; annual % change Source: Xerfi Global with Yokohama annual report Diversified products 17.2% -27.1% -4.4%
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4.8. Hankook Company Overview
Fiscal year ended December 31, 2009 Headquarters Seoul, South Korea
Key figures Net consolidated sales 2.9 bn Operating income 349.8 mn Net consolidated profit 211.9 mn Staff 14,300
Hankook Tyre was established in 1941 as the first tyre maker in Korea. Today, Hankook is the domestic industry leader, ranked 8 th globally and 3 rd in the Asian region. Hankooks global distribution network consists of four regional headquarters and 80 subsidiaries and sales offices mainly in Korea (37 sales offices) and China (14 sales offices). More than 70 percent of Hankooks revenue is earned outside Korea, with Europe being its most important overseas market.
International presence
Korea 16% of tyre net sales The Americas 25% of tyre net sales Europe 30% of tyre net sales Asia Pacific 18% of tyre net sales
Middle East and Africa 11% of tyre net sales Hankook Tyre Group
Net sales 2009: 2.9 bn euros Hankook Tyre
90.3% of net sales ATLASBX
7.2% of net sales Daehwa Engineering and Machinery f l emFrontier
1% of net sales
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4.8. Hankook Business segments
SEGMENT % OF SALES OPERATIN G MARGIN OPERATIONS MAIN CUSTOMER S HANKOOK TYRE 90.3% 12.1% A full range of tyre-related services. Consumers and companies ATLASBX CO., LTD. 7.2% - Makes batteries for cars and trucks. Over the years, the operation has expanded into marine batteries and industrial batteries to lead Koreas battery industry Consumers and companies DAEHWA ENGINEERING & MACHINERY CO., LTD 1.5% - Established in 1992 to build essential machines used in tyre manufacturing Consumers and companies EMFRONTIER CO., LTD 1% - Provides e-Business-based IT solutions that include system building and operation. Companies
Source: Xerfi Global with Hankook.
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4.8. Hankook Corporate strategy
Brand value-up
Hankook wants to grow into a respected global company and is working aggressively to improve the quality of its products and ensure a sustainable growth by :
Increasing product quality (the groups brand portfolio consists of three individual names: Hankook, Aurora and Kingstar). Improved competitiveness in the original equipment market by enhancing R&D focus on tyres with low rolling resistance. Global operation excellence
Hankook intends to achieve world wide operational excellence. To this end it implements several measures: rationalization of resources; increased operational efficiency: Hankook reformed the global supply chain planning unit to maximise efficiency in supply chain management (SCM). Moreover, a new unit has been established to attend to the strategic operations of all logistics activities. At the same time, the strategic and support organizations at Regional Headquarters outside Korea were separated for improved efficiency; integration of corporate social responsibility management (CSR).
Global growth acceleration
The group was among the few industry players to register growth in 2009, despite challenging market conditions due to the sharp economic activity slowdown. Hankook has been strengthening its global production capacity by:
Establishing two factories, at Jiangsu and Jiaxing, China; Expanding its facilities in Hungary to provide better access to European markets; Beginning construction of its third expansion facility at Geumsan (Korea).
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4.8. Hankook Recent events
Date Event J anuary 2009 Hankook Tyre announced sales records in fiscal 2008 despite a difficult economic climate. Its global sales increased by approximately 26%, while larger tyre manufacturers saw their sales declining sharply. May 2009
Hankooks "Made in Europe" tyres were chosen as original equipment fitment for Volkswagen Transporter, Caravelle, Multivan and California. This represents the first delivery to Volkswagen from Hankook's Hungarian factory. J une 2009
Hankook has been appointed as original equipment supplier to Audi. This is a significant event for Hankook, one of the few medium-scale players in the industry whose strategy is to become a leader in the premium tyres segment. Audis A3 models will be rolling off assembly lines with Hankooks Ventus S1 evo ultra-high performance tyre. September 2009
Hankook announced factory extension in Hungary, one of its main production locations in Europe. Hankook Tyre plans to focus on the European market with additional investment in its Hungary plant: the amount devoted to this project is 230 million euros. The company announced its plans to reach a production capacity of ten million tyres per year by 2011. Hankook Tyre announced record global sales and operating profit in 2009. Its global sales increased by 18% year- on-year and the global operating profit rose five-fold on a year-over-year base. Hankook is among the few companies that generated improved sales in 2009 compared to 2008, in the context of a general economic recession. J anuary 2010
Hankook Tyre rolled its 10 millionth tyre off the production line in Hungary, two and a half years following the opening of its manufacturing plant in Rcalms, Hungary. May 2010 Hankook Tyres new European Factory received A qualification on Volkswagen Audit. Volkswagen is one of the major European car manufacturers using Hankook tyres. The A mark allows Hankook to manufacture all kinds of original equipment tyres for the Volkswagen group. J une 2010 Hankook tyre announced it would start supplying its original equipment tyres to Lincoln MKT, Fords luxury vehicle.
Source: Xerfi Global. Primary source: business press.
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4.8. Hankook Key data
Hankook consolidated net sales unit: mn euros; annual % change
In 2009, Hankooks global operations generated net sales of 2,902 mn on a consolidated scale, 15% higher year on year. This was among the industrys highest growth rates and above the Big Threes performance. Chart 2:
Revenues from tyre sales have been on an uphill trend for the past years, standing at 2621, 17.5% higher than in 2008, and represent more than 90% of Hankooks consolidated revenues.
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4.8. Hankook Revenues by segment
Hankooks revenues by segment unit: share in %
Hankooks change in revenues by segment unit: annual % change in revenues IT sol uti ons 1% Machi nery 2% Battery 7% Tyres 90%
-60% -40% -20% 0% 20% 40% 60% Battery Machinery IT Solutions Tyres 2009/ 2008 change i n % 2008/ 2007 change in %
Hankooks consolidated net sales for 2009 are divided as follows: 90% the share of tyre operations, 7% the battery segment (AtlasBX), 2% the engineering and machinery operations and the smallest share of 1% belongs to the IT solutions division, emFrontier. Chart 2:
The Hankook Tyre operations are expanding quickly, with sales growing by over 20% from 2007 to 2008. Moreover, despite lower sales growth for the main actors of the tyre industry, Hankook managed to increase its revenues by 17% in 2009 compared to the previous year.
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4.8. Hankook Revenues by region
Hankook Parent Companys revenues by region unit: share in %
Hankooks change in revenues by region unit: annual % change in revenues Mi ddl e East and Afri ca 11% Korea 16% The Ameri cas 25% Europe 30% Asi a Paci fi c 18%
-40% -20% 0% 20% 40% 60% 80% 100% North America Sout h and Central America Asia, except Korea Europe Local export Domesti c 2008/ 2007 change in % 2009/ 2008 change in %
In 2009, Hankook sold a large share of its tyres in the Asian region (34%) and Europe (30%). The Americas and the Middle East-Africa zones were next with a share of 25% and 11% respectively. Chart 2:
Hankooks global performance in 2009 was driven by an increase in sales in South and central America. Nonetheless, in its other markets, mainly Asia and Europe, its sales declined in 2009 from 2008.
World Tyre Manufacturers Market analysis Corporate strategies October 2010
While the entire tyre industry showed lacklustre performance, Hankook posted a year-on-year growth in operating profit (197%), which amounted to 349 mn. Chart 2:
Also, Hankooks operating margin in 2009 was among the highest in the industry (12.1%), an improvement from the 4.7% in 2008.
World Tyre Manufacturers Market analysis Corporate strategies October 2010
In terms of R&D, Hankook spent more than 50 mn in 2009. The amount allocated to its R&D activities has increased gradually for the past five years.
Chart 2:
Hankooks R&D ratio stood at 1.9% in 2009, remaining unchanged from 2008, but slightly lower than in years previous to 2008, in line with Hankooks commitment to build a reputation in the high-premium tyre segment.
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4.8. Hankook Statistical data
Year Sales Change in % 2006 1.6 11.8% 2007 1.7 9.1% 2008 2.0 13.0% 2009 2.5 24.4%
Hankooks net sales unit: bn euros ; annual % change
Source: Xerfi Global with Hankook annual reports.
2009 2.9 14.3%
Region % of sales Change in % (2009/2008) Change in % (2008/2007) North America 19.7% 11.2% 34.6% South and Central America 5.5% -24.4% 85.1% Asia, except Korea 16.4% 0.3% 86.0% Europe 22.0% 26.0% -14.1% Local export 6.3 -25.8% 3.4%
Hankooks revenues by region unit: share in %; annual % change
Source: Xerfi Global with Hankook annual reports.
Domestic 30 12.5% 4.1%
Year Change in Operating profit Operating margin 2005 16.5% 10.7% 2006 -15.2% 8.3% 2007 5.0% 7.7%
Hankooks operating profit unit: annual % change; share in %
Source: Xerfi Global with Hankook annual reports.
2008 -24.3% 4.7% 2009 197.1% 12.1%
Year R&D expenses R&D ratio 2005 19.5% 2.5% 2006 3.0% 2.3% 2007 12.0% 2.3%
Hankooks R&D expenses unit: annual % change; share in %
Source: Xerfi Global with Hankook annual reports.
2008 3.1% 1.9% 2009 10.9% 1.9%
Segment % of sales Change in % (2009/2008) Change in % (2008/2007) Tyre 90.3% 17.6% 25.9% Battery (Atlas) 7.2% -8.7% 32.0% Machinery (Daewha) 1.5% 41.6% -43.5% Hankooks revenues by activity unit: share in %; annual % change Source: Xerfi Global with Hankook annual report IT Solutions (emFrontier) 1.0% 3.1% 16.7%
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4.9. Cooper Company Overview
Fiscal year ended December, 31 st 2009 Headquarters Ohio, USA
Key figures Net consolidated sales 1.99 bn Operating income 112.16 mn Net consolidated profit 92.1 mn Staff 12,568
Cooper was incorporated in the state of Delaware in 1930 as the successor to a business originally founded in 1914. Cooper is the 4th largest tyre manufacturer in North America and 9th largest globally. Cooper places a strategic focus on light vehicle replacement tyres in North America, but it supplies tyres for small original equipment contracts in China and Europe. Based in Findlay, Ohio, Cooper operates 7 manufacturing facilities and 38 distribution centres in 9 countries and employs 12,568 persons worldwide.
International presence North America 71% of net sales Europe 9.3% of net sales Asia 21.2% of net sales
The Cooper Tire and Rubber Company Net sales 2009: 1.99 bn euros
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4.9. Cooper Business segments
SEGMENT % OF SALES OPERATIN G MARGIN OPERATIONS MAIN CUSTOMERS NORTH AMERICAN TYRE OPERATIONS 71% 5.6% Produces passenger car and light truck tyres, primarily for sale in the United States replacement market. The segment does not sell its products directly to end users, except for three company-owned retail stores, and does not manufacture tyres for sale to the automobile original equipment manufacturers (OEMs).
Consumers and companies INTERNATIONAL TYRE OPERATIONS 29% 1.0% In the United Kingdom, the segment produces passenger car, light truck, racing and motorcycle tyres and markets these products primarily to dealers in the replacement markets in the United Kingdom, continental Europe and Scandinavia. The segment does not sell its products directly to end users nor manufactures tyres for sale to OEMs in Europe, other than several small contracts with specialty vehicle manufacturers in the United Kingdom. The segment has two joint venture manufacturing facilities, Cooper Chengshan and Cooper Kenda, in the Peoples Republic of China. These facilities produce passenger car, light and medium truck tyres, and off-the- road tyre for export to Europe, North America and other markets as well as marketed to dealers in the replacement tyre market within China. Consumers and companies Source: Xerfi Global with Cooper Tire and Rubber.
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4.9. Cooper Corporate strategy
Expanding global footprint
In order to achieve a sustainable, competitive cost position, Cooper plans to expand its operations in lower-cost countries. These initiatives include the Cooper Kenda Tire manufacturing joint venture in China, the Cooper Chengshan joint venture (China) and an investment in production operations in Mexico. Tyres from these operations will both provide a lower cost source of tyres for existing markets and allow the company to expand its market share in Mexico and China. Top line profitable growth
For the following years, Cooper intends to create a sustainable competitive cost position by reducing product costs by 10 to 15%. In this sense, Cooper plans to source 35-45% of its capacity to low-cost countries such as China. Cooper has undertaken a number of cost saving and profit improvement initiatives. These included a wide variety of projects in the areas of manufacturing, supply chain, selling and general administrative and logistics. The implementation of these projects had a favourable impact on the companys profitability in 2009.
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4.9. Cooper Recent events
Date Event February 2009 Cooper Tire brings new sizes to market announcing an expanded size offering for a wide variety of its passenger, sport utility vehicle (SUV) and light truck tyres. September 2009
Cooper Tire announced expansion of its Mississippi plant. The new expansion, which includes a mixer that is being installed, will enable the plant to be more competitive in an increasingly challenging market. November 2009
Cooper Tire announced its plans to increase capacity at its Findlay, Ohio tyre plant.
This represents an additional 10 million dollars investment in automation, cost improvements and retooling to support market trends. As a result, capacity will increase and up to 100 people will be hired. In 2010, the Findlay plant is to play a key role in Cooper Tire's launch of several new light truck, sport utility vehicles (SUVs) and premium winter tyre products. March 2010
Cooper Tire & Rubber company increased its ownership at the Cooper Chengshan Tyre Company - joint venture
Cooper received final approval from the government of the People's Republic of China to increase its ownership to 65 percent from the existing 51 percent at Cooper Chengshan Tyre Company (CCT). The cost of the additional shares is approximately 18 million dollars and the transaction will be concluded by the end of March 2010. May 2010
Cooper Tire & Rubber company reported improved results for the first quarter of 2010.
The company reported a significant increase of 32 percent in net sales, from the prior year, for the quarter ended March 31st, 2010. Source: Xerfi Global. Primary source: business press.
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4.9. Cooper Key data
Cooper Tire and Rubbers net sales unit: mn euros; annual % change
Cooper Tire Last Quarter Net Sales unit: mn euros 2,500 3,000 3,500 4,000 4,500 2005 2006 2007 2008 2009 -30% -20% -10% 0% 10% 20%
0 100 200 300 400 500 600 Q1 2009 Q1 2010
Source: Cooper Tire and Rubber annual reports. Source: Cooper Tire and Rubber annual reports.
Chart 1:
Consolidated net sales decreased by almost half a billion euros in 2009, primarily affected by lower volumes in the North American market, and the negative impact of exchange rates in its international operations. Chart 2:
For the first quarter of 2010, Cooper Tires reported a substantial increase in net sales of 32 percent, from the prior year. Operating profit was 23.8 mn for the quarter, a 35.4 mn improvement compared with a loss of 11.6 mn in 2009.
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4.9. Cooper Product lines
Cooper Tire and Rubber Rubbers performance by product line (North American operations) unit: annual % change in volumes Coopers North American tyre division produces passenger car and light truck tyres, primarily for sale in the replacement market. In the United States, the segments unit sales of passenger tyres and light truck tyres decreased 16% and 4% respectively in 2009 from 2008. The total decline in light vehicle tyre sales was 6%, exceeding the 2.8% decrease in total light vehicle sales for the total industry estimated by the American Tyre Association (RMA) for 2009. The industry decrease in units sold was primarily due to the overall economic circumstances in North America during the first half of 2009 as impacts of a global recession have affected tyre demand.
-20% -15% -10% -5% 0% Passenger tyres Li ght truck tyres 2009/ 2008 change i n % 2008/ 2007 change i n %
Source: Cooper Tire and Rubber annual reports.
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4.9. Cooper Revenues by region
Cooper Tire and Rubbers revenues by region unit: share in %
Cooper Tire and Rubbers change in revenues by region unit: annual % change in revenues North Ameri ca 69.6% Europe 9.3% Asi a 21.2%
-20% -15% -10% -5% 0% 5% 10% 15% North America Europe Asia 2009/ 2008 change in % 2008/ 2007 change in %
Source: Cooper Tire and Rubber annual reports. Source: Cooper Tire and Rubber annual reports.
Chart 1:
Cooper Tires sales are predominantly concentrated in the North American region. In 2009, its American operations encompassed 70% of all sales, leaving 21% and 9.3% for the Asian and European markets, respectively. Chart 2:
Sales of the Asian segment continued to grow in 2008 (6.8% from 2007) and 2009 (12.6% from 2008). On the other hand, in the European and North American operations, Cooper Tire sales continued to decline year-on-year.
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4.9. Cooper Operating margin
Cooper Tire and Rubbers operating profit unit: mn euros
Source: Cooper Tire and Rubber annual reports. Source: Cooper Tire and Rubber annual reports.
Chart 1:
The Company recorded operating profit in 2009 of 112.1 mn compared to an operating loss of -154.5.mn in 2008. Improved manufacturing operations contributed to the profit improvement from 2008 to 2009. Chart 2:
Coopers margin has changed in line with its operating profit: after a negative result of -7.5%, in FY2008, its margin stood at 5.6% the year that ended on December 31, 2009.
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4.9. Cooper Research and development
Cooper Tire and Rubbers R&D expenditures unit: mn euros
Cooper Tire and Rubbers R&D ratio unit: % 11 13 15 17 2005 2006 2007 2008 2009
Source: Cooper Tire and Rubber annual reports. Source: Cooper Tire and Rubber annual reports.
Chart 1:
Research and development expenditures were 15.8 mn, 16.5 mn and 16 mn during 2007, 2008 and 2009, respectively. Cooper conducts extensive testing of its tyre lines, as well as new concepts in tyre design, construction and materials. Chart 2:
For the past 3 years, Cooper Tire engaged 0.8% of its net sales in research and development activities. This figure is below the 3% industry average.
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4.9. Cooper Statistical data
Year Sales Change in % 2006 1.4 -2.2% 2007 1.8 26.5% 2008 2.1 13.9% 2009 2.0 -1.7%
Cooper Tire and Rubbers net sales unit: bn euros ; annual % change ;
Source: Xerfi Global with Cooper Tire and Rubber annual reports.
2009 1.9 -3.6%
Region % of sales Change in % (2009/2008) Change in % (2008/2007) North America 69.6% -5.9% -3.2% Europe 9.3% -14.3% -4.7%
Cooper Tire and Rubbers revenues by region unit: share in %; annual % change
Source: Xerfi Global with Cooper Tire and Rubber annual reports.
Asia 21.2% 12.6% 6.8%
Year Change in Operating profit Operating margin
2005 -60.2% 1.2%
2006 -279.9% -1.8%
2007 397.0% 4.6% Cooper Tire and Rubbers operating profit unit: annual % change; share in %
Source: Xerfi Global with Cooper Tire and Rubber annual reports.
2008 -261.2% -7.5%
2009 172.1% 5.6%
Year R&D expenses R&D ratio 2005 -14.1% 0.8% 2006 45.4% 0.9% 2007 -4.7% 0.8%
Cooper Tire and Rubbers R&D expenses unit: annual % change; share in %
Source: Xerfi Global with Cooper Tire and Rubber annual reports.
2008 4.5% 0.8% 2009 -3.4% 0.8%
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4.10. Maxxis Company Overview
Fiscal year ended December 31st, 2009 Headquarters Yuanlin, Taiwan
Key figures Net consolidated sales 1.8 bn Operating margin 20% Net profit margin 16.8% Staff 24,360
Cheng Shin Rubber Ind. Co., Ltd. is engaged in the manufacture and distribution of a whole range of tyres: radial tyres, automobile tyres, motorcycle tyres, tyres for agricultural and industrial vehicles, as well as bicycle tyres. Cheng Shin was founded in the 1960s and started out as a bicycle tyre producer. The companys five major factories are located in China, Thailand, Vietnam and Taiwan. The company is the sponsor of the World Enduro Championship and the British Drift Championship.
The Americas International presence
Asia Europe Middle East and Africa New Zealand and Australia CHENG SHIN RUBBER INDUSTRY CO., LTD
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5. Statistical appendix
World Tyre Manufacturers Market analysis Corporate strategies October 2010
2009 Net sales Operating margins Bridgestone 19,799.9 3.5% Michelin 14,807.0 5.8% Continental 20,100.0 9.8% Pirelli 4,462.0 8.7% Yokohama 3,555.6 4.6% Goodyear 11,699.8 2.3% Sumitomo 4,027.7 5.2% Hankook 2,902.3 12.1% Consolidated bet sales and operating margins in 2009 unit: mn euros and %
Source: Xerfi Global. Primary source: Company annual reports. Cooper 1,994.6 13.5%
Natural Synthetic North America 0 2,036 Latin America 228 601 Europe 0 3,112 Africa 446 60 Natural and synthetic rubber production by region unit: tons
Source: Xerfi Global with Goodyear annual reports.
2009 11.6 -16.4% 167
Segment % of sales Change in % (2009/2008) Change in % (2008/2007) Replacement Units 76.6% -4.5% -5.5% OE Units 22.3% -22.6% -15.7%
Goodyears volumes by activity unit: share in %; annual % change
Source: Xerfi Global with Goodyear annual reports.
Total -9.5% -8.5%
Region % of sales Change in % (2009/2008) Change in % (2008/2007) North American Tyre 42.8% -15.5% -6.8%
Europe, Middle East and Africa Tyre 35.6% -20.7% 1.4% Latin American Tyre. 11.1% -13.1% 11.5%
Goodyears revenues by region unit: annual % change; share in %
Source: Xerfi Global with Goodyear annual reports.
Asia Pacific Tyre 10.5% -6.6% 8.0% Year Operating profit Operating margin 2005 23.0% 6.4% 2006 -32.5% 4.2% 2007 56.5% 6.3% 2008 -34.6% 4.1%
Goodyears operating profit unit: annual % change; share in %
Source: Xerfi Global with Goodyear annual reports.
2009 -53.7% 2.3% Year R&D expenses R&D ratio 2005 8.9% 3.0% 2006 9.1% 2.9% 2007 0.1% 2.6%
Goodyears R&D expenses unit: annual % change; share in %
Source: Xerfi Global with Goodyear annual reports.
2008 7.5% 2.9% 2009 -8.0% 3.3%
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Year Sales Change in % 2005 5.8 3.9% 2006 6.2 5.8% 2007 6.4 4.3% 2008 6.5 1.2%
Continental Tyre Divisions net sales unit: bn euros ; annual % change
Source: Xerfi Global with Continental annual reports.
2009 5.7 -11.4% Segment % of consolidated sales Change in % (2009/2008) Change in % (2008/2007)
Passenger and Light Truck tyres 23% 3.10% 1.00%
Continental Tyres revenues by activity unit: share in %; annual % change
Source: Xerfi Global with Continental annual reports.
Commercial Vehicle Tyres 5% -3.10% 1.00%
Region % of sales Change in % (2009/2008) Change in % (2008/2007) Germany 20% -1.1% -0.5% Rest of Europe 49% -1.0% 2.5% NAFTA 20% 0.7% -1.1% Asia 5% 1.0% -0.01%
Continental Tyres revenues by region unit: share in %; annual % change
Source: Xerfi Global with Continental annual reports.
Other Countries 5% 2% 0% Year Operating profit Operating margin 2005 - 14.1% 2006 -4,2% 12.8% 2007 9,6% 13.4% 2008 -33,2% 8.9%
Continentals operating profit unit: annual % change; share in %
Source: Xerfi Global with Continental annual reports.
2009 -1,8% 9.8%
Year R&D expenses R&D ratio 2005 6.4% 2.5% 2006 2.4% 2.4% 2007 4.1% 2.4%
Continentals R&D expenses unit: annual % change; share in %
Source: Xerfi Global with Continental annual reports.
2008 1.8% 2.4% 2009 1.9% 2.8%
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Year Sales Change in % 2005 3.6 11.6% 2006 3.9 8.7% 2007 4.1 4.3% 2008 4.1 -1.4%
Pirelli Tyres revenues by activity unit: share in %; annual % change
Source: Xerfi Global with Pirelli annual reports.
Steel cord / other tyres 2% 0% -1% Region % of sales Change in % (2009/2008) Change in % (2008/2007) Italy 9% 0% -1% Rest of Europe 33% -3% -2% North America 8% 1% -1% Central and South America 34% 1% 5%
Pirelli Tyres revenues by region unit: share in %; annual % change
Pirellis operating profit unit: annual % change; share in %
Source: Xerfi Global with Pirelli annual reports.
2009 37.8% 8.6% Year R&D expenses R&D ratio 2005 1.4% 4.0% 2006 0.7% 3.7% 2007 0.7% 3.6%
Pirellis R&D expenses unit: annual % change; share in %
Source: Xerfi Global with Pirelli annual reports.
2008 -2.0% 3.5% 2009 -8.3% 3.3%
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Year Sales Change in % 2005 3.0 -2.8% 2006 3.3 8.1% 2007 3.6 11.1% 2008 3.8 4.7%
Sumitomo Tyre net sales unit: bn euros ; annual % change ;
Source: Xerfi Global with Sumitomo annual reports.
2009 3.3 -13.5%
Segment % of sales Change in % (2009/2008) Change in % (2008/2007) Tyre 82.6% -13.5% 4.7%
Sports 12.5% -11.7% 24.8%
Sumitomo Rubber revenues by activity unit: share in %; annual % change
Source: Xerfi Global with Sumitomo annual reports.
Industrial 5.1% -10.3% 1.1%
Region % of sales Change in % (2009/2008) Change in % (2008/2007) Japan 55.4% -11.6% 1.6% North America 14.2% -13.2% 12.6% Europe 4.5% -28.7% 24.2% Asia 12.5% -10.2% 24.5%
Sumitomo Rubber revenues by region unit: share in %; annual % change
Source: Xerfi Global with Sumitomo annual reports.
Other areas 13.4% -16.6% 2.7% Year Operating profit Operating margin 2005 20.7% 10.0% 2006 -33.6% 6.1% 2007 36.1% 7.5% 2008 -55.8% 3.2%
Sumitomo Tyre operating profit unit: annual % change; share in %
Source: Xerfi Global with Sumitomo annual reports.
2009 42.1% 5.2% Year R&D expenses R&D ratio 2005 2.4% 3.3% 2006 8.0% 3.3% 2007 6.2% 3.2%
Sumitomos R&D expenses unit: annual % change; share in %
Source: Xerfi Global with Sumitomo annual reports.
2008 6.0% 3.2% 2009 -6.9% 3.4%
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Year Sales Change in % 2006 3.4 11.4% 2007 3.7 11.1% 2008 4.2 13.3% 2009 3.9 -4.6%
Yokohamas net sales unit: bn euros; annual % change ;
Source: Xerfi Global with Yokohama annual reports.
2009 3.5 -19.7%
Region % of sales Change in % (2009/2008) Change in % (2008/2007) Japan 26.2% -21.3% -8.1% The Americas 43.3% -19.9% -6.3% Europe 13.9% -23.6% -8.0%
Yokohamas revenues by region unit: share in %; annual % change
Source: Xerfi Global with Yokohama annual reports.
Others 16.7% -12.5% 12.8%
Year Change in Operating profit Operating margin 2005 - 4,9% 2006 -4,0% 4,2% 2007 57,2% 6,0%
Yokohamas operating profit unit: annual % change; share in %
Source: Xerfi Global with Yokohama annual reports.
2008 -61,3% 2,5% 2009 67,5% 4,6%
Year R&D expenses R&D ratio 2005 8,9% 3,2% 2006 0,6% 2,9% 2007 4,3% 2,8%
Yokohamas R&D expenses unit: annual % change; share in %
Source: Xerfi Global with Yokohama annual reports.
2008 -0,0% 3,0% 2009 -13,0% 2,8%
Segment % of sales Change in % (2009/2008) Change in % (2008/2007) Tyres 82.8% -18.0% -4.6% Yokohamas revenues by activity unit: share in %; annual % change Source: Xerfi Global with Yokohama annual report Diversified products 17.2% -27.1% -4.4%
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Year Sales Change in % 2006 1.6 11.8% 2007 1.7 9.1% 2008 2.0 13.0% 2009 2.5 24.4%
Region % of sales Change in % (2009/2008) Change in % (2008/2007) North America 19.7% 11.2% 34.6% South and Central America 5.5% -24.4% 85.1% Asia, except Korea 16.4% 0.3% 86.0% Europe 22.0% 26.0% -14.1% Local export 6.3 -25.8% 3.4%
Hankooks revenues by region unit: share in %; annual % change
Source: Xerfi Global with Hankook annual reports.
Domestic 30 12.5% 4.1%
Year Change in Operating profit Operating margin 2005 16.5% 10.7% 2006 -15.2% 8.3% 2007 5.0% 7.7%
Hankooks operating profit unit: annual % change; share in %
Source: Xerfi Global with Hankook annual reports.
2008 -24.3% 4.7% 2009 197.1% 12.1%
Year R&D expenses R&D ratio 2005 19.5% 2.5% 2006 3.0% 2.3% 2007 12.0% 2.3%
Hankooks R&D expenses unit: annual % change; share in %
Source: Xerfi Global with Hankook annual reports.
2008 3.1% 1.9% 2009 10.9% 1.9%
Segment % of sales Change in % (2009/2008) Change in % (2008/2007) Tyre 90.3% 17.6% 25.9% Battery (Atlas) 7.2% -8.7% 32.0% Machinery (Daewha) 1.5% 41.6% -43.5% Hankooks revenues by activity unit: share in %; annual % change Source: Xerfi Global with Hankook annual report IT Solutions (emFrontier) 1.0% 3.1% 16.7%
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Year Sales Change in % 2006 1.4 -2.2% 2007 1.8 26.5% 2008 2.1 13.9% 2009 2.0 -1.7%
Cooper Tire and Rubbers net sales unit: bn euros ; annual % change ;
Source: Xerfi Global with Cooper Tire and Rubber annual reports.
2009 1.9 -3.6%
Region % of sales Change in % (2009/2008) Change in % (2008/2007) North America 69.6% -5.9% -3.2% Europe 9.3% -14.3% -4.7%
Cooper Tire and Rubbers revenues by region unit: share in %; annual % change
Source: Xerfi Global with Cooper Tire and Rubber annual reports.
Asia 21.2% 12.6% 6.8%
Year Change in Operating profit Operating margin 2005 -60.2% 1.2% 2006 -279.9% -1.8% 2007 397.0% 4.6% Cooper Tire and Rubbers operating profit unit: annual % change; share in %
Source: Xerfi Global with Cooper Tire and Rubber annual reports.
2008 -261.2% -7.5% 2009 172.1% 5.6%
Year R&D expenses R&D ratio 2005 -14.1% 0.8% 2006 45.4% 0.9% 2007 -4.7% 0.8%
Cooper Tire and Rubbers R&D expenses unit: annual % change; share in %
Source: Xerfi Global with Cooper Tire and Rubber annual reports.
2008 4.5% 0.8% 2009 -3.4% 0.8%
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6. Information sources
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I nternational organisations
IRSG
International Rubber Study Group 111 North Bridge Road, Singapore 179098 http://www.rubberstudy.com/
JATMA
Japan Automobile Tyre Manufacturers Association 3-8-12 Minato-ku, Tokyo, Japan 1050001 http://www.jatma.or.jp
OICA
Organisation Internationale des Constructeurs dAutomobiles www.oica.net
Press
Tyre business 1 725 Merriman Road, Suite 300, Akron, Ohio 44 313-5 283 www.tyrebusines.com
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Corporate websites
Bridgestone www.bridgestone.com
Michelin www.michelin.com
Goodyear www.goodyear.com
Continental www.conti-online.com
Pirelli www.pirelli.com
Sumitomo http://www.sumitomocorp.co.jp/english/
Hankook www.global.hankooktyre.com
Cooper www.coopertyre.com
Yokohama www.yrc.co.jp/english
ChengShin www.cst.com.tw
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7. Annexes
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7.1. Overview of the market 2009 sales
2009: a gloomy year for the industry
Global passenger car and light truck market in 2009 unit:% of change from 2008 The global economic slowdown gradually caught up with the tyre industry, and demand weakened in all economies, even in the emerging markets, except China.
Replacement markets declined by an overall 3.2% in 2009.
Original equipment markets around the world, except for China, fell by a steep 11.9% as carmakers slashed production due to collapsing demand. Demand picked up in the second half of the year, markedly in the mature markets that had taken measures to support the automobile industry (offering incentives such as the cash for clunkers program).
-35% -30% -25% -20% -15% -10% -5% 0% 5% Europe Nafta Asia South America Africa Middle East Total Original equipment Replacement
Source: Xerfi Global. Primary source: Michelin
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7.1. Overview of the market 2010 sales
2010 shows good signs of growth picking up its pace
Net sales - H1 2010 unit: 2010/2009 % change The first half of 2010 confirmed the predictions for growth in the industry. Net sale figures illustrated a clear rebound in the tyre markets: Continentals revenues increased by 29.5% in the first half of 2010 from the same period in 2009, Sumitomos by 22%, Pirellis by 21.4% etc. and this trend is expected to continue in the second half of the year, even though the pace of economic recovery will vary from one region to another.
While rising raw materials costs will have a negative impact on second-half consolidated results and reduce operating income, net sales are on the rise and the industry has returned to profitability
Source: Xerfi Global. Primary source: Company reports.
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7.2. Demand Market breakdown
Demand is on the whole drawn by Asian countries
Global passenger car and light truck tyre market by regions in 2009 unit:% of volume
Global truck tyre market by regions in 2009 unit:% of volume Asi a/ Oceani a, 27% Africa Middle East, 7% Europe, 35% Latin America, 6% North America, 26%
Africa Middle East, 11.2% Sout h America, 9.5% Asia, 50.0% North America, 14.9% Europe, 14.2%
Passenger car and light truck tyre units sold in 2009 was superior to 1,100,000,000. The main consumers were in the European market, followed by Asia and North America.
Chart 2:
As far as truck tyres are concerned, Asia makes for half of the volumes sold globally, by large the industrys biggest client.
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7.2. Demand
Two-wheel demand is concentrated in Asia, while aircraft demand is driven by North America
Global two-wheel motor vehicle possession by regions in 2007 unit:% of total fleet
Global aircraft tyre market breakdown in 2008 unit:% of volume Africa Middle East, 3% South America, 5% Asia, 77% North America, 3% Europe, 10%
Demand for two-wheel vehicle tyres is driven by Asia, where motorbikes offer enhanced mobility. As for the other markets, two- wheels are used especially for leisure. Chart 2:
Makers sell more than half of their aircraft tyres in the American markets. Globalisation and international tourism growing at a fast pace in the emerging countries will trigger a wider demand in aircraft tyres.
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7.2. Demand
Agricultural tyre demand poised for growth
Tractor and other agricultural machinery fleet in 2007 unit: % of the world fleet
Tractor and other agricultural machinery fleet in ASI A- 2007 unit: % Oceania 1% Asia 41% Central and South America 5% Northern America 17% Europe 34% Africa 2%
The total number of tractors and other machinery used for agriculture is estimated to be at around 33.7 million. The regional vehicle-inventory breakdown shows that most agricultural vehicles in use are in Asian countries and Europe, respectively. A closer look at Asias tyre demand shows that three Asian countries, namely India, China and Japan represent nearly 75% of the market volume.
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7.2. Competitive environment Profile of the leading companies
The crisis had a visible impact on company sales
Change in net sales of world tyre makers in 2005-2008(average growth) vs. 2009 unit: % In the fiscal year 2009, tyre makers recorded declines in sales and profitability. The global economic slump beginning at the end of 2008 was accompanied by sluggish demand.
All companies implemented various initiatives (reducing fixed costs, prioritizing investment, adjusting production to minimise inventories) in order to offset the impact of the crisis, still, the business environment significantly affected the performance of the top-notch players in the industry. The exception was Hankook, who managed to maintain the same growth level in 2009 as before the crisis.
-25% -20% -15% -10% -5% 0% 5% 10% 15% 20% 25% B r i d g e s t o n e M i c h e l i n C o n t i n e n t a l Y o k o h a m a G o o d y e a r S u m i t o m o H a n k o o k C o o p e r 2005-2008 average 2009
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7.2. Competitive environment
Operating margins affected by the recent economic slump
Operating margins of world tyre makers in 2005-2008 (average growth) vs. 2009 unit:% The only two companies that managed to secure better margins in fiscal 2009, in spite of the sharp economic downturn, were the American-based Cooper and South Koreas largest tyre maker, Hankook.
Continental, Hankook and Cooper have the largest operating margins in the industry, while Goodyear and Bridgestones operations in 2009 seem to have been significantly impacted by the crisis.
0% 2% 4% 6% 8% 10% 12% 14% 16% B r i d g e s t o n e M i c h e l i n C o n t i n e n t a l Y o k o h a m a G o o d y e a r S u m i t o m o H a n k o o k C o o p e r 2005-2008 average 2009
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7.2. Competitive environment Net sales
Sales are improving in the industry
Net sales in Q2 2010 (the period starting April 1st and ending J une 30th) unit: mn euros In light of the latest financial results, Bridgestone continue to be the worlds leading tyre maker, followed by Michelin and Goodyear.
In addition, all companies reported better sales in the second quarter of 2010, compared to the same period in 2009.
Improved results were impacted by: Price/mix offsetting higher raw material costs Volume growth Consumer original equipment recovery stronger than anticipated Commercial results strengthening
0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 B r i d g e s t o n e M i c h e l i n G o o d y e a r C o n t i n e n t a l S u m i t o m o P i r e l l i Y o k o h a m a H a n k o o k 2010 2009
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7.2. Competitive environment Operating margins
Margins are recovering
Operating margins Q2 2010 vs Q2 2009 (the period starting April 1st and ending J une 30th) Companies succeeded in significantly increasing their margins, according to the figures released for the period starting April 1st and ending June 30th: all of them reported positive operating results.
Hankooks margins stood at 13%, second only to Continental with almost 15%. In the meanwhile, Yokohama Rubber and Bridgestone are back in black, after a negative result in the same quarter of 2009.
Source: Xerfi Global. Primary source: company releases
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7.3. Presence in main geographic segments Asia
Passenger car production is growing at double digit pace
Vehicle production in Asia by type unit: thousands of vehicles Although the Asian population is five times larger than that of Europe and the US combined, in Asia (except Japan), there are only 90 cars per 1,000 people, compared with 570 in Western Europe and close to 800 in the United States.
Having risen by nearly 15% a year on average over the past four years, annual passenger car sales in Asia is an opportunity for increasing demand in the replacement tyre market.
0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 1998 2005 2009 Passenger cars Li ght commerci al vehi cl es Heavy trucks Buses and coaches
Source: Xerfi Global. Primary source: OICA
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7.3. Presence in main geographic segments
Asia: the extra legroom for growth
Asia vehicle production unit: number of vehicles
I ndia and China vehicle year on year market growth unit: % change 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 2004 2005 2006 2007 2008 2009 Chi na Indi a Other
0% 10% 20% 30% 40% 50% 60% 2005 2006 2007 2008 2009 China India
While mature markets such as Europe, North America and Japan experienced double-digit car sales declines, India and China saw sales increasing at an impressive rate (almost 50% in China and 12% in India). Thanks to demand in fast-growing countries, the number of vehicles in the world is expected to increase by more than 20% by 2015 and to double by 2030. More than half of the worlds automobiles will be produced in high-growth countries by 2014, with a subsequent effect on tyre replacement markets.
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7.3. Presence in main geographic segments I ndia
Domestic players dominate the market
Share in passenger car tyre market unit: %
Share in truck and bus tyre market unit: % Others, 4% Goodyear, 13% Ceat, 3% JK, 19% MRF, 19% Bridgestone , 23% Apollo, 19%
Source: Xerfi Global. Primary source: Apollo Source: Xerfi Global. Primary source: Apollo
In the main segments of the Indian tyre market, domestic producers (Apollo, MRF, JK Tyre, Ceat) hold the biggest share, while most international top tier players have a feeble presence, except for Bridgestone and Goodyear in the passenger car tyre market. In 2009, the majority of tyre manufacturers reported higher sales, driven by growth in both volumes and value. It is expected that the industry will continue to witness healthy growth, however facing the challenge of rising raw material price. The truck and bus segment is seeing a gradual rise in the proportion of radial tyres. While around 90% of the passenger car tyres are radial in India, the T&B tyre is the next major category with surging demand for radial tyres.
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7.3. Presence in main geographic segments South America
Mercosur region: growth potential is second only to China
South American vehicle fleet breakdown - 2009 unit: thousands of vehicles South America's main trading bloc Mercosur is set to attract significant new investments from global automotive manufacturers keen to benefit from the region's strong economic growth prospects and free trade tariffs.
Significant growth perspectives in the market are envisaged by tyre manufacturers, who have already begun expanding their operation by increasing plant capacity or building new plants.
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7.3. Presence in main geographic segments
Brazil is South Americas biggest and fastest growing market
Latin America and Brazil vehicle production unit: thousands of vehicles
Brazil vehicle market growth unit: % change 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 2004 2005 2006 2007 2008 2009 Brazi l Other Lati n Ameri can countri es
Brazil is Latin Americas growth engine, accounting for 80% of production of vehicles, the biggest and fastest growing market with car sales expected to continue to grow. Brazil, which currently leads the bloc's production, will receive 90% of the investment, experts said, as car makers are keen to profit from impressive sales forecasts driven by booming consumption rates (on the back of easy credit) and a stellar economic performance. Much of the investments will also go to improve the manufacturing quality in the bloc to keep the Mercosur product competitive with imports.
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7.3. Presence in main geographic segments North America
Goodyear is the leader in both passenger car and truck tyre segments
Passenger car tyre market share in North America 2009 unit: %
Truck tyre market share in North America 2009 unit: % Continental, 6% Cooper, 10% Bri dgestone/ Fi restone , 18% Michelin, 19% Others, 26% Goodyear/ Sumitomo, 21%
The last 2 years have not been stellar ones for the North American tyre industry, and the sharp economic plunge had a huge impact on tyre shipments and retail tyres. The competition in the market is intense: the adjacent graph for the passenger car tyre segment paints the bigger picture for all other segments (light truck, heavy truck, agricultural and off-the-road tyres) the top 3 leaders are the industry key players, medium size players (Cooper and Goodrich) occupy approximately 10% of the market and roughly half of the market share is divided between smaller players.
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7.3. Presence in main geographic segments Europe
Growth potential is immense in Eastern European countries
Passenger car tyre market share in Europe 2009 unit: %
Truck tyre market share in Europe 2009 unit: % Pirelli, 8.0% Bridgestone / Firestone , 11% Goodyear/ Sumitomo, 18% Michelin, 20% Others, 22% Continental, 21%
In Western Europe as well as in other mature markets, tyre companies have streamlined their manufacturing operations towards high performance tyres.
Around 10 % of the production is now located in new EU countries, such as Poland Slovakia, Romania and Slovenia, where the potential growth in demand is higher than in the Western part of Europe.
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7.4. Differentiation strategies Research and development
Innovation: essential for maintaining market share in developed economies
R & D expenses unit: million euros Companies such as Goodyear, Michelin and Bridgestone have always led the industrys innovation path. Besides, the value of resources they allocate for research and development are far greater than those of all other companies in the tyre business.
Tyre scientists are now exploring nanotechnology. Its applications could mean a significant drop in tyre weight, which will translate to greater fuel efficiency. Some of the materials companies are currently working on include nano clays, nano scale rubber gels and smart materials that can be adapted to the needs of a tyre.
Finally, micro-scientists in the industry have even gone as far as saying that, by using nanotechnology, tyres could be made to last for the life of the car.
0 100 200 300 400 500 600 700 B r i d g e s t o n e M i c h e l i n
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7.4. Differentiation strategies
High margins require intensive capital
R&D requirements by tyre segment Although Asian tyre makers tend to be referred to as simple low cost" manufacturers they are becoming increasingly aggressive in the export on classical tyre products. Presently, they are attacking other segments such as civil engineering tyres or OTR (off-the-road), the most lucrative products of the tyre market, which require costly equipment and pointed expertise.
Passenger replacement World market size Radial Truck (value) Passenger original equipment Agricultural Civil engineering Bias Bias Radial Radial Bicycle Motorcycle Aviation Motorcycle Aviation R&D value
Source: Xerfi Global. Primary source: Michelin
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7.5. Regional overview Asia-Pacific
Asia has the highest growth potential for the industry
CHINA INDIA JAPAN MAIN COMPANIES Hangzhou Zhongce Rubber South China Tyre & Rubber Qingdao Double Star Tyre MAIN COMPANIES Apollo MRF JK Tyre MAIN COMPANIES Bridgestone Sumitomo Yokohama
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Statistical framework
1353 codes of the ICB classification
This report analyses the tyre industry worldwide. The relevant ICB code is the 1353: Commodity Chemicals, which is included in the code 1350, Chemicals.
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Data
Analysed financial data
The main indicators and ratios used for analysis purposes are the following: Net sales;
Operating profit, which is the difference between operating revenues and operating expenses;
Operating margin, which the result of operating profit by net sales;
Net income (profit or loss after operating expenses. taxes and exceptional charges);
Net margin, which is the result of net income by net sales.
Exchange rates
Financial figures mentioned in the report are stated in euro. The conversion rates used for comparison purposes are the following: 1USD= 0.78 EUR (January 2009 December 2009) 100 JPY = 0.85 EUR (January 2009 December 2009) 1000 KRW= 0.67 EUR (January 2009 December 2009) 1 TWD = 0.02 EUR (January 2009 December 2009).
American Society of Anesthesiologists Consensus-Based Guidance on Preoperative Management of Patients (Adults and Children) on Glucagon-Like Peptide-1 (GLP-1) Receptor Agonists American Society of Anesthesiologists (ASA)