Bonus feature: Hankook's CEO reveals global strategy

Akron, Ohio - Seung Hwa Suh was the man in charge of the construction of Hankook Tire Co. Ltd.'s first European tyre plant, a $650 million project. In March he took on an even bigger role as global CEO of the fast-growing South Korean tyre maker.

He has spent 11 years in many posts with the company, including a stint with its US operation.

As president and chief operating officer for Hankook in Europe, Mr. Suh led a reorganisation that paid off with a 15-percent increase in sales last year.

In the following edited article, Mr. Suh answered questions from Ed Noga, editor of Rubber & Plastics News, a sister publication of European Rubber Journal, about the firm's past achievements, plans for the future and his role in both.

You spent much time in the company's export business and as vice president of Hankook Tire America Co. Ltd. Does that experience give you a special perspective of the US tyre market?

Certainly. We view America as a top priority market we must break into.

While Hankook is very successful in Korea and other parts of the world, America is very brand loyal, and it takes a longer time to establish a brand name there that represents quality and trust. That is what we are in the process of doing.

What opportunities do you see for the company in North America?

In North America we hope to increase the brand presence of Hankook tyres. One out of every two cars in Korea has a Hankook tyre, one out of four in China, but our brand is less known in other markets.

I think there is a huge opportunity for us to show the American public that we produce excellent, quality tyres that are as technologically advanced as our competitors and still reasonably priced. We have an exciting proposition for the American public.

The company expects US sales to reach $672 million this year. Do you expect that rapid growth to continue?

Most definitely. In 2001, Hankook Tire was the 11th largest tyre manufacturer in the world. Now, just five years later, we've climbed to the No. 7 position and posted a 20-percent growth rate.

Considering Hankook's strong sales growth in the US and ties to automotive original equipment (OE) companies, what is the possibility of opening a tyre plant in North America?

By the second half of 2007, Hankook Tire will manage five production facilities in China, Hungary and Korea. We might consider building a new plant some place in or near North America to target and satisfy consumers in this region. Although we don't have any specific plan yet, it might be put into consideration after the construction for the Hungary plant is finally over around 2010.

Must a certain level of business be met before a plant is needed, or will Hankook be content to import tyres into the US and Canada?

Generally, two sides of needs have to meet when we finally decide to build a new plant. One side is high demand of consumers in a certain market and the other side is obviously our expected business profit.

A good example is our Hungary plant. We continuously received reports that the demands of European consumers were increasing gradually in years, and through many years of research, we came to the conclusion that building a new plant in Europe would definitely give us higher profit because fundamentally, we can satisfy our dealers and consumers by providing them faster delivery time through local production sites, which ultimately result in an increase of our sales.

Similarly, we keep our eyes on the North American market, but at the moment, we would have to hold on our decision and put efforts on satisfying our consumers by importing our products from other plants until our ongoing construction is over.

Is the Dunaujvaros (Hungary) plant project still on schedule to start operating in the second half of this year, and reach full capacity of 10 million units by 2010?

Yes, the Dunaujvaros plant project is still on schedule. We invested 500 million euros to build a state-of-the-art production site with a starting quantity of 1.2 million units, growing to 5 million units by 2008, reaching the full capacity of 10 million units of car and light truck tyres by 2010. We are actually conducting the testing phase, and we will start the operation this summer.

Are the passenger and light truck tyres that will be produced there destined for customers in Eastern and/or Western Europe, or is the site a base for exporting to other regions, such as North America?

These tyres will primarily be destined for European customers. The European market is currently very important for Hankook, making up 35 percent of our total export. Generally production volumes are distributed according to local market needs.

It is my understanding Hankook is the strongest foreign brand in China's replacement passenger tyre market, that its tyres are priced somewhere between Michelin and the better Chinese-brand tyres and are considered good quality and a reasonable price. Would you say that's a true statement?

Definitely. Our investments in Chinese production facilities in Jiangsu and Jiaxing as well as in our Chinese research and development centre have helped us to deliver products more in tune with the demands of the Chinese marketplace-reasonable price for a superior quality product.

We have a long relationship with China dating back to 1996, and this has also helped us establish the largest logistics network (we have 16 logistics centres, more than any other tyre manufacturer), which helps us ensure and provide quality service for our Chinese customers.

Does the company design tyres much differently for the market in China, as compared to that in South Korea, Europe or North America, because of the different driving conditions? What particular differences do you find in these regional markets, in regards to consumer preference, road conditions, etc.?

We established the China Technical centre at Jiaxing, Zhejiang Province, China, in 1998 and it recently was upgraded in May 2006. The China Technical centre is part of our global strategy to produce tyres that meet the demands of consumers in different regions.

We have established five international R&D centres to meet varying local demands. The China Technical centre ensures China receives superior quality and high-performance tyres adopted for the particular weather and road conditions in China. Likewise, the Akron Technical centre helps us produce tyres for the US weather and road conditions.

With the expansions last year at the plants in Jiaxing and Jiangsu, is Hankook in good shape in China now, with enough production capacity?

As you point out, due to the global demand for Hankook tyres, both plants are undergoing ongoing expansion, which is still in progress. The current capacity is 25 million units annually, and this will increase to 28 million by the end of 2007.

Hankook certainly has grown under Choong Hwan Cho's leadership, and you have some big shoes to fill. What are your ambitions for the company now that you are CEO? Do you hope or expect Hankook to advance even higher among the world's largest tyre companies?

My goals are to continue to lead and mature Hankook as a world leading tyre manufacturing company with a reputation for producing superior quality and high-performance tyres. I also hope to help the company realise some of the great opportunities on its horizon, such as our growth in the North American market.

All tyre makers, and rubber companies in general, have been hit hard by raw materials cost increases in recent years, including 2006. Do you expect that problem to stabilise?

Luckily we have been able to remain profitable in spite of the rising cost of raw materials. I think that, like any market, you will see upturns and downswings, but yes, it will eventually level out....

Although it is early to say, it is my opinion that the market is already showing signs of recovery to some degree.

From Rubber & Plastics News (A Crain publication)