China tyre maker Aeolus banking on green message

ERJ staff report (TB)

By Jeff Yip, Crain news (TB)

Chinese tyre maker Aeolus Tyre celebrated major environmental initiatives and product announcements in Jiaozou, China, in July.

The east is green. That was the overarching message Chinese tyre manufacturer Aeolus Tyre Co. Ltd. wanted to convey to dozens of VIPs, including government and industry officials and global business partners, invited in July to a conference in Jiaozuo on its environmental initiatives.

But the Chinese, who revere family and relationships, also wrapped the serious stuff in a joyous party to celebrate what amounts to three new “children” that could hold a key to the company's future:

• A sprawling new factory;
• A new line of truck tyres Aeolus claims deliver up to 7-percent better fuel economy; and
• The addition of passenger tyres to its portfolio, both for export and China's booming consumer market.

The manufacturer's new Aeolus Green Tyre-branded (Agt) tyres - targeted initially at the European market - will be kinder to the environment in several ways.

Not only will tyres bearing the Agt label comply with the European Union's REACH limitations on toxic polycyclic aromatic oil, they will feature lower rolling resistance that will pay off in improved on-road fuel economy, Aeolus executives said.

US customers could see the improved products by next summer, according to Alliance Tire Americas Inc., the Chinese firm's exclusive US distributor for its truck and OTR tyres.

“I anticipate we will see green production truck tyres in the US by mid-year 2012, with more sizes and patterns released throughout the year,” said John Hull, Alliance national tyre sales manager. The tread patterns, he added, will probably not be the same as the Euro-spec tyres.

Alliance Tire likely will preview the line at the upcoming Specialty Equipment Market Association trade show in Las Vegas.

The Agt is made using state-of-the-art methods and technology that are safer for plant workers, conserve resources, and reduce noise and harmful emissions, according to Aeolus. Some specific changes include preprocessing of chemicals into pellets and wet pelletising carbon black to reduce dust emissions.

Aeolus' “green” approach tackles environmental concerns on several fronts. More automation and low-temperature processes will reduce energy consumption, gas emissions and waste water, thanks to an enclosed water recycling system.

The manufacturer has set lofty goals for the new line of tyres, including 30-percent longer lasting tread life through new tread compounds and design, optimising the tyre's footprint and pressure distribution. Behind updated styling will be materials that help the tyre run cooler and vector balancing of green tyres during curing that will improve uniformity and balance. Part of the green tyre program means tyres receive rigorous inspections, including X-ray and dynamic testing.

The truck products also will be more suited for retreading, Aeolus said, because of the use of oxidation-resistant sidewall compounds, 100-percent bromobutyl innerliners and a four-steel-belt construction. Aeolus also touts partnerships with Bekaert S.A. for steel cord and Cabot Corp. for carbon black.

Wang Feng, Aeolus' charismatic vice president and general manager, said through an interpreter the company is out to shatter what he calls pervasive, and in Aeolus' case, unfair perceptions in the US that Chinese tyres are synonymous with lower quality and lumped in with fourth-tier suppliers.

“It is Aelous' intention to be one of the top 10 manufacturers in the world. We're focusing on overseas markets,” he said. While going green means higher production costs, Wang hinted that prices would remain competitive. “We don't want to give burdens to our customers,” he said. “We will have promotions to teach dealers how to sell the added value of their green tyres.”

Wang, who has an engineering background, said the REACH (Registration, Evaluation, Authorisation and Restriction of Chemical substances) regulations aren't the only reasons why Aeolus is very “willing to take the social responsibility to go green.

“You can see all the workers and the staff on the production lines have very tough work. …We think that human beings, wherever they work, should have a clean environment. You can see things opening and the reforms taking place in China. The national view for the environmental protection and focus on healthy protection has increased a lot. People know that every factory should be human-being oriented.”

It should be noted the US Environmental Protection Agency said it “does not have, nor is it developing regulations or guidelines to limit the amount of polycyclic aromatic hydrocarbons (PAHs), which may be present in tyres or extender oils used in the manufacture of tyres.”

Aeolus, whose parent firm is China National Chemical Corp. (ChemChina), had speeches and a panel discussion on its Agt program.

The VIPs on the panel discussion included Sun Likun, Jiaozuo mayor; Fan Rende, president of the China Rubber Industry Association; Zhou Xianhui deputy secretary of the China Petroleum and Chemical Industry Federation; Manoj Mehta, general manager of Goodyear global sourcing; Manny Cicero, president of Alliance Tire Americas; Robert Sherkin, CEO of Dynamic Tire Corp.; and Jan Heuver of Heuver Tyre Wholesale.

Alliance Tire has been Aeolus' US distributor since 2010, when it bought the assets of bankrupt GPX International Tire Co. Alliance markets the Aeolus-brand tyres through its wholesale and full-service dealers, said John Hull, a truck tyre veteran who runs Alliance's Aeolus truck tyre program.

Dynamic Tire Corp. of Brampton, Ontario, handles the brand in Canada.

Hull said he has been impressed with Aeolus' product quality as well as the responsiveness of the company's research-and-development staff. Comparisons of different Chinese tyre cross-sections have shown that the Aeolus products' belt packages have good uniformity and consistency, which help preserve the integrity of the casings.

“Seeing is believing, even when you are talking about tyres,” Hull said. “Ultimately, performance is measured on the truck, but it sure helps to give confidence to the salespeople that Aeolus is a cut above the competition.”

One performance aspect that officials from Alliance and its European counterpart, Heuver Tyre Wholesale, said they will be monitoring is the fuel economy of the Aeolus' Agt line. Aeolus claims testing shows that its HN369 Agt tyre, in size 315/80R22.5, showed about 24-percent less rolling resistance than the company's conventional tyre. The manufacturer says that should result in 5- to 7-percent gains in fuel economy. Comparisons with competitor tyres were not given.

“The best thing we can do for Aeolus is give them good market data so we can stay competitive,” Hull told Tire Business. “This, along with solid performance data, is critical. We have worked with R&D on new tread patterns and a few new applications, as well as rolling-resistance testing for SmartWay certification.”

Aeolus' new $150 million tyre factory in Jiaozuo already is at full production, making 80,000 radial OTR tyres annually. Production of radial passenger tyres will start early next year, with a rated annual capacity of 8 million tyres. Employment will hit 3,000 at full capacity.

Aeolus' original factory, built in 1965 and staffed with about 5,000 employees, produces up to 5 million radial truck/bus tyres and 600,000 bias OTR tyres per year.

Together, the plants encompass about 14 million square feet of space.

Moving into car tyres is a logical move for Aeolus, since China has become the world's largest market for new autos and is still growing exponentially.

China will require 660 million tyres annually by 2015, said Kerry Zhao, an analyst with China Research and Intelligence (CRI).

“More and more people plan to purchase cars for family use,” he said. Some predict China soon will be the world's largest tyre market, said Zhao, who led the team that wrote CRI's 2011-2012 research report on the tyre industry.

The rub? Imported vehicles usually get imported parts, including tyres, Zhao said.

“Tyre manufacturers must build up brands and improve the technologies to survive the competition,” he said, “but shouldn't depend on low labor costs or low raw material costs.

“They should change the focus from cost advantages to technology and brands, because cost advantages are vanishing as regulations are implemented by the USA. and EU. Mergers and acquisitions will see many small- and medium-sized tyre makers be acquired or go bankrupt.”

Zhao pointed to tyres from South Korea as an example of where the Chinese tyre industry might be headed. “They used low labor costs like China and developed their own concept and technology to enter the world's market. Low price and public relations made them successful.”

As for exporting the new passenger tyre line, Aeolus is still formulating its strategy.

Alliance Tire Americas Inc., Aeolus' exclusive partner for the US on the truck and OTR tyre side, is evaluating its options regarding the firm's passenger car program.

“It will be late next year before they would have tyres available for the US in any quantity, so we will look at it in our planning for next year,” said John Hull, national truck tyre sales manager for Alliance Tire.

Jeff Yip is a Houston-based freelancer who regularly writes for Tire Business.

From Tire Business (A Crain publication)