Yokohama to Delay China Facility Expansion
It seems likely that Yokohama Rubber’s plans to expand output in China may be delayed by several months due to reduced demand and a potential oversupply of tyres. In an interview with Reuters, company president Tadanobu Nagumo discussed the company’s current position, warning that stocks and currencies losses would cut into Yokohama’s net profit in the first financial year half. To then boost profit margins, Nagumo said he would consider eliminating OE contracts with some vehicle manufacturers.
Production at the company’s facility in Hangzhou, China was scheduled to increase in November. Now it seems likely this will not occur up to another four months. “The auto market looks set to plateau, defying prior expectations for growth of 3 to 4 per cent a year,” Nagumo said. “Tyre makers have been boosting output. Inventories are swelling and there is a risk that prices will collapse.”
Yokohama is projecting a sharp fall in profit this business year, the result of a weak US automotive market and the continued high cost of rubber and other raw materials. And while the company needs to maintain relationships with vehicle manufacturers because of the sharing of technological and manufacturing know-how, Nagumo said Yokohama may consider keeping only those that prove more profitable. This would be in keeping with Nagumo’s efforts to place a greater emphasis on profitability instead of blindly chasing market share, a strategy typical of Japanese companies in the past. “Up until now there was a tendency to put a priority on sales and market share in the belief that it would translate into profits in the future,” he said. “But in this day and age there is no way to go about business without a clear focus on profit.”