U.S. tire maker betting on China

Topeka Capital-Journal, The, Apr 30, 2006 by Julie M. McKinnon

By Julie M. McKinnon

TOLEDO BLADE

FINDLAY, Ohio - With one $70 million acquisition, Cooper Tire & Rubber Co. is reaching nearly half its goal of $1 billion in sales in China by decade's end.

And buying that majority stake in the third-largest Chinese- owned tire maker this year is just the latest in the company's strategy to boost sales by turning to Asia, both to import low-end tires and to build various products primarily for China, as competitors do.

By the time the local firm and a joint-venture partner open a $200 million tire plant near Shanghai, the Findlay company will have spent $270 million on ventures in Asia, said chief executive Thomas Dattilo.

The plant, to start production this summer, eventually will make up to 12 million tires a year for North America and Europe.

Although the goal remains $1 billion in Chinese sales by decade's end, additional foreign opportunities are likely to have to wait, Dattilo said.

"We're always, always, always looking," he said. "For right now, we want to manage the things that we have."

Cooper Tire, which also has a tire factory in England, sold its auto parts operations for nearly $1.2 billion in late 2004 so it could focus on tires. Last year, without revenues from auto parts made in Bowling Green and elsewhere, the company had $2.2 billion in sales and was dropped from the Fortune 500 list.

Still, given all the bankruptcies and other turmoil in the auto industry, getting out of making parts was a good move, said Dattilo, also the firm's chairman. "I think it was the right decision for our company," he said.

"It really gives us that foothold to take advantage of the emerging market in China itself," Dattilo said.

The northwest Ohio firm is designing a complete line of Cooper- brand tires especially for the Chinese market .

Other tire makers have long had similar export and sales strategies in China to take advantage of lower labor and other costs, and Cooper Tire may be able to attain its $1 billion sales goal, said James Barnett, dean of the University of Akron's College of Business Administration.

"It's kind of a consensus that you're going to be in China," said the former Goodyear Tire & Rubber Co. executive. "Not just the tire industry, but all industries."

In the last half-dozen years, the number of passenger tires made in the United States has declined from 223 million to 176 million, and imports mostly have been on the rise.

Nearly 102 million passenger tires were imported into the United States last year, estimates the Rubber Manufacturers Association.

And although $7.7 billion worth of rubber tires and tubes were imported into the United States last year, only $2.8 billion worth were exported, according to the U.S. Census Bureau.