Industry overview with Yokohama Tire’s Hamaya
In this Q&A, Takayuki Hamaya, Yokohama Tire Corporation’s (YTC) executive vice president and chief financial officer and chief operating officer, examines several industry hot topics and gives an overview of 2013.
Question: In your new position, what would be your strategic focus?
Takayuki Hamaya: Getting varied products in the right quantity and at the right time will be a strategic emphasis of mine. This will allow us to be truly responsive to the market while maintaining strong efficiency.
Question: What are some of the ways you see your strategy executed?
Hamaya: Forecasting, certainly, will be a critical component, and forecasting with greater precision than before. Looking at Yokohama’s supply and demand on a global level would be another. This would create unprecedented level of flexibility for YTC as we consider what to produce, where and when.
Yokohama has plants worldwide – in Japan, Thailand and the Philippines for example – that we’ll capitalize on to bring to the market an even stronger flow of products. The Phase I expansion in Yokohama Philippines, in particular, announced in 2011, has started operation in February of this year. It is projected to have an annual production capacity of 3 million tires, most of which will be slated for the U.S. market. Further increases will come online with the factory’s Phase II expansion, announced last month. When completed in 2015, that expansion will enable Yokohama Philippines to add another 2.5 million tires in its production capacity.
We’ll draw production strength from our Salem plant as well. The cost structure is greater than our other plants, but without it, YTC would face higher costs. This is where pricing strategy becomes imperative. When we make key products, whether at our Salem plant or elsewhere, they will simply need to be priced right.
Lastly, Yokohama will heighten the integration between our sales and product planning functions to attack the market powerfully with products that meet the U.S. needs.
Question: Is the U.S. market different because of the huge diversity of products to sell?
Hamaya: The U.S. is unique compared to the Japanese and European markets. Fifty percent of the consumer tires are for trucks and SUVs, which is considerable than in any other country. The U.S. also has many requirements such as tires with all-season capability and long mileage.
The requirements in Europe are different because they drive very fast, especially in Germany. There, they may not care as much about how long a tire would last as they would about the tire’s performance at higher speeds. Overall, in terms of tire performance and technical requirements, producing the right tire for the U.S. market is more difficult than anywhere else.
Question: How does the consumer market look?
Hamaya: It’s a little weak right now. The competitive space is much more crowded and the diversity of the product and price range add to the volatility. This is yet another reason why getting the right product mix is so critical for long-term success.
At the beginning of 2012, the industry – including Yokohama – did well regarding supply and demand, and all were profitable. However, in the second half of the year, demand slowed down. That translated to lower prices and more price-war competition. Everybody’s business suffered. Companies were forced to spend more money to gain market share and that cut into profits.
Question: Has that been the case in 2013 so far? Will the tire market improve?
Hamaya: The overall market expects only slight improvements but at Yokohama, we have a very strong customer confidence so I’m highly positive on my outlook on our consumer, as well as our commercial and OTR, divisions. We’re rolling out aggressive growth and supply plans that will strengthen our position in the market in 2013 and beyond.
Question: What are your thoughts on Yokohama’s commercial and off-the-road or OTR divisions?
Hamaya: We are doing well in both. Both have well-trained people who are also well-ingrained in their respective industries. This shows in the close relationships we have with our dealers and in the customer satisfaction we achieve.
In our OTR division, we have not been able to supply to the level of market demand but our customers work with us because they know that what they get is a quality product. Yokohama tires perform as promised. We are putting this same commitment as we ramp up our efforts in giant OTR radial tires.
Question: How is Yokohama doing globally?
Hamaya: Fortunately, Yokohama is pretty strong in the Japanese domestic market. We’re established, but the competition continues to grow, so we’re looking for new opportunities elsewhere, like China, India, Russia, Europe…and the U.S. We look at the U.S. market as a prime opportunity because we haven’t hit our lofty goals here yet, so we’ll be sourcing more products from our recently-expanded factories in the Philippines. They are currently producing about seven million tires a year. We are excited about boosting production by another 10 million tires by 2017, and the majority of these will come to the U.S.
Hopefully, we won’t just be relying on production from the Philippines to get more tires as part of our new supply source strategy. We’d like to add even more new products and sources for the U.S. Then we’d also have the flexibility for more OE fitments and inventory control. Reducing inventory will give us a better financial position. Most recently, lower-than-expected costs of raw materials have also benefitted our financial position.
Question: Isn’t inventory reduction what your customers are doing as well?
Hamaya: Yes, the key to “just in time” inventory management – whether on the dealer customer or manufacturer side – is to make sure that you have the right product, in the right size, at the right time. If you don’t, that’s a lost opportunity and sale. It’s a challenge, but Yokohama is committed to doing it well to provide a positive impact to our customer’s and our own bottom line.
Question: Does Yokohama have a new inventory control system?
Hamaya: Yes, and it’s unique to Yokohama. It allows us to control our production based on sales, which makes it more efficient, direct and customer friendly.
Question: We’ve talked about your technology resources and production resources. How about human resources? How do you see those changing going forward?
Hamaya: Internally, all departments need to be more sales-focused. We’ll link other departments to sales so more information and new ideas will flow. It’s like running on all cylinders – all the departments will communicate and collaborate on new ideas and strategies.
In the U.S., employees get boxed in and feel responsible only for the department they’re working in. I want to encourage the exchange of new information between departments. I believe knowledge comes from experience. The more experience one has, the greater their knowledge becomes and the greater capacity, in turn, for wisdom. It is when you have wisdom that you have the greatest opportunity to break down walls and think outside the box.
Question: Is that how it works in Japan?
Hamaya: It’s not really a U.S. versus Japan or Europe way of working or thinking. In the U.S., the emphasis is on expertise, which makes it incumbent upon the specialists to learn how to educate, otherwise there’s no knowledge transfer and cross-functional collaboration. This stands in the way of wisdom. My philosophy is that people should not be afraid to speak outside their level of expertise because this can actually bring fresh thinking. Empower people to participate and don’t keep doing the status quo. Offer a different opinion and a different way of working with other people. Then the change of mindset happens.
Question: What do you feel is the greatest strength you bring to your new role of COO?
Hamaya: I have had the fortune of working many posts around the world. This enables me to have a broad and, at the same time, deep understanding, of Yokohama’s business globally. I also have the unique opportunity of having worked both in the sales and manufacturing environments.
Over my 21-year career at Yokohama, I have worked in accounting, sales, production and corporate strategic planning, as well as in various countries that include France, Sweden, Germany, Philippines, Japan and now the United States. I feel that I have a strong vantage point to make YTC a much bigger competitive force to contend with in the U.S. than even before.