Hankook postpones plans for sixth factory

By Vera Linsalata, ERJ staff

Los Cabos, Mexico -- Hankook Tire Co. Ltd. has postponed plans to construct a sixth tyre factory due to the slowdown in original equipment and replacement tyre demand.

Greg Pae, president of Hankook Tire America Corp., told ERJ at Hankook's dealer meeting in Los Cabos that the parent company had decided that the timing wasn't right for another tyre factory. He said about 25 percent of Hankook Tire's business is from OE customers, and slumping US car sales coupled with record raw material costs have affected the parent company's profit margins.

Last month the South Korean tyre maker said it saw its 2008 operating earnings halved to $103.6 million and recurring profit had dropped 98 percent to $3.1 million despite a global sales increase of 26 percent to $3.69 billion.

At Hankook Tire's 2008 dealer meeting in the Bahamas, the company had said a location for a sixth plant had been chosen and would be announced later in the year, but that announcement never occurred. Hankook has two South Korean factories in Keumsan and Daejeon; two in China in Jiangsu and Jiaxing; and one in Dunaujvaros, Hungary.

In Los Cabos, Mr. Pae said it was “difficult to say” when the proposed factory would be revisited, but he hoped that economic conditions would improve in two years.

When asked about Hankook Tire America's profitability in 2008, Mr. Pae said the Wayne, NJ-based tyre marketer's business model is “simple” and its costs are lower compared with the parent firm and therefore its profitability wasn't affected in the same way.

From Tire Business (A Crain publication)