As the situation in the automotive industry deteriorates further, the situation in the world tire industry became even more difficult in 2009, and tire companies are taking various measures to survive.
Deterioration of the automotive industry
Since September 2008, sales of General Motors, Chrysler Motors, and Ford Motor Co. have fallen by 38%, Honda and Toyota Motors have fallen by 32% and 31%, respectively, and Porsche Auto has fallen by 50%. Dennis, president of the American Automotive Information Group, predicts that this situation in the automotive industry may continue into early 2010. William Williams, president of Polymer Commercial Trading Consultants, believes that about 20% to 40% of North American automotive suppliers will face shutdowns in 2009, and the Detroit auto industry will reduce in size by at least one-third.
Tire manufacturers are generally bearish
Goodyear Tire & Rubber announced that the company is cutting back on several of its factories in the United States. Due to declining demand, the company's tire production plan in North America will be further reduced by 50% on the basis of the last announced figure. In 2009, it may reduce production of 17 million tires. Goodyear announced that in January some of its tire factories in North America began to stop production, and another part of the tire factory will continue to cut production in the next few months.
According to Michelin, its tire sales decreased by 2.9% in 2008, and its profit decreased by 53.8%. The company believes that the demand for the tire market in the first half of 2009 will be much lower than last year. At present, most of Michelin's plants in the world are under-employed, and most plants in North America are in a state of production stoppage or semi-discontinuation and continue to spread.
Bridgestone predicts that its sales revenue in 2009 will fall by 22% from 2008, and profits will fall by 71%. On February 21st, Bridgestone North American Tire Company laid off 158 people at the Lavergne, Tennessee plant. At the same time, it is further negotiating to shut down passenger tires and light truck tire production facilities. Many Bridgestone factories are similar to the Lavergne plant, and the company has also suspended Indonesian and Thai car tire production plans.
Kumho Tire Co. originally planned to build a tire factory in Georgia to supply tires for Ford Motor Company's Fuxing hybrid car. As Ford cancelled the plan, Kumho decided to postpone the project by one year.
The firm's situation is also very poor. The company has cut production at two of North America's four factories and the other two have closed.
Take all measures to survive
The primary task of tire manufacturers in 2009 is to ensure survival, and will adopt a series of measures such as reducing production, closing factories and laying off staff, and then preparing for future recovery.
On February 18, Goodyear announced a highly integrated plan that will continue to cut costs as it responds to shrinking market demand, reduced inventory, and regained market share. The plan is divided into three parts: Following the reduction of 4,000 jobs worldwide in the second half of 2008, it plans to lay off 5,000 people in 2009; freeze wages and bonuses globally; and further sharply cut capacity. In terms of procurement, Goodyear will also strive to reduce raw material costs. At the same time, Goodyear will cut capital expenditures to between 700 million and 800 million U.S. dollars, and reduce inventory levels. Inventory will occupy at least 500 million U.S. dollars. At the same time, it actively promotes the sale of non-core businesses.
Michelin will optimize its production planning and management to reduce capital expenditures and ensure company cash flow. He Liye, managing partner of the Michelin Group, said: “Michelin is strengthening management of production plans, improving the flexibility of its factories, strengthening inventory management, optimizing cash flow, and responding to the generally bearish market in the coming months. The company has decided to significantly reduce Capital expenditure in 2009, while ensuring the company's mid-term development strategy, strengthens its leading edge without sacrificing product value, and expands the company's business in growing regions. In this way, once the market improves, we can resume growth."
Bridgestone will further reduce tire production in North America to cope with the decline in demand and focus on the development of all-steel giant radial tires. Cooper plans to transfer North American production capacity to Asia as much as possible.
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