Bonus Feature - Vredestein adapts to new environment

By David Shaw, ERJ staff

Amtel-Vredestein is a company under construction, according to Rob Oudshoorn, chief executive of Vredestein and until recently board-member of Amtel-Vredestein. He said the combined company has been growing fast in many different directions, some of that is through investment and some is through organic growth. Most of that growth has been financed through debt, he said. However, the debt has grown and the company is now seeking to reduce debt by selling off some assets.

Oudshoorn said, "We did not lose control. That is not the right word." He said the priority now is to get some cash back into the business. One way to do that is to sell of the chain of retail stores the company has been building for the last few years. By buying individual shops and small chains, Amtel-Vredestein has built up a chain of 120 tyre shops in Russia and this is a valuable resource, he said.

Oudshoorn said that people who have lived all their lives in Western Europe find it difficult to understand Russia. "In Russia there is always something new: something important that is new." He said people in the stable countries of Western Europe might experience a few important governmental changes or economic changes each decade, but in Russia in 2007, the changes are all big and all important and they are happening all the time.

This environment is conducive to acting quickly and making decisions rapidly, he said.

He said that of all the tyre makers in Russia today, "no other Russian maker has the assets of Amtel-Vredestein in terms of product, technology. "

Part of the spending programme at Amtel-Vredestein has been on tyre factories. Currently, said Oudshoorn, the company has brought a factory at Kirov on stream and is in the process of constructing a second plant at Voronezh. Both are essentially Vredestein factories in low-cost regions, said Oudshoorn.

He said Voronezh II was built to Vredestein specifications. He said the plant will make its first tyres by the middle of 2007 with series production beginning in early 2008. This is a little behind the original schedule, but, according to Oudshoorn, "it goes according to Russian circumstances. The scheduling is different from what we do. The equipment is being installed."

Oudshoorn said Vredestein's approach is typically Dutch: plan everything and then finish the project according to the plan. However, in Russia there is the expectation that things will develop as the project progresses. "They want to adapt the plans as they go along, but there are implications to that." said Oudshoorn, suggesting that the delays have been caused by changes of plan.

Changes at Enschede

Oudshoorn said the Vredestein part of Amtel-Vredestein is stretched in terms of management resources. He said it is not over-stretched, but the company has always run a lean management team and the amount of time senior managers now spend away from the Enschede headquarters has forced them to recruit people who can manage the company in Enschede, while the more experienced Vredestein people find themselves spending a lot of time in Russia helping the Amtel organisation to adapt to a different way of working.

He said that the Enschede plant has increased output to 5 million units/year, up from 4 million. This was done by going from two shift teams to five. Simultaneously, Vredestein has been launching many new products into international markets. So the company in Enschede is going through significant changes over and above the changes wrought through the merger with Amtel.

In common with the rest of the tyre industry, Vredestein has seen the number of fitments and geometries grow from around 300 to over 500 in the last decade. With the proliferation of sizes, the production run of each size has reduced.

At Enschede, said Oudshoorn, the company has put great emphasis on making its equipment more flexible and reducing the downtime at each change-over. He said a typical short run is around 500 units, though with high-value items such as 24-inch tyres, the company might go as low as 200 units in a production run.

Oudshoorn said the large-diameter tyres are no longer a speciality in North America. "I look at Ocean Drive in Florida, and all those cars are on 24-inch wheels with spinners and it is no exception any more. It is the main market. We want to be there and we are strong for our [corporate] size in the US."

He added that all those large-diameter tyres are currently made in Enschede. Other tyres, including winter tyres are made in Russia, he said. Until the Voronezh plant is built, the Kirov plant is making large numbers of Vredestein brand tyres, said Oudshoorn, and this has allowed Vredestein to change the types of tyres made in the Enschede factory. Most of the Kirov-made tyres are shipped back into Europe where they are needed in the established markets, said Oudshoorn.

Russian market.

Oudshoorn said the tyres for the Russian market are very different from the tyres needed in either western Europe or the United States. "There is very little influence from Russia to markets in the west, but also the other way around," said Oudshoorn. "We might have the products that suit the US and Europe, but these are not always the right products for Moscow and St Petersburg," he continued.

Oudshoorn added that the retail environment in Russia is also different from the countries in western Europe. In Europe, he said, there is a well-established chain from tyre maker to wholesaler to dealer to customer. Like other tyre makers, Vredestein wants to promote its brand strength, so it tries to attract the dealers. Oudshoorn said "We work with retailers. We tell them our story. The retailer then sells that to the customer. If he believes the story, then he tells the csustomer and everyone is happy." Oudshoorn emphasised that the story needs to get to the customer if the marketing effort is to have any effect.

He said that in Russia, "It is totally different from the way we do it. They work with wholesalers, but if we work with wholesalers, then the story only gets half way."

Part of the story Vredestein wants to sell to customers is the relationship between Vredestein and the Italian design house of Giugiaro. That relationship is over 10 years old now and both sides are very happy with it, he said.

The latest project there is a colour-matched tyre for an orange Mustang developed by Giugiaro. The tyre is Vredestein's latest Sessanta pattern, and at the bottom of the tread pattern, the rubber is coloured orange to match the car (just visible in picture above). While the colour-matched tyre is not a commercial product, the Sessanta design is a striking design that is already in in commercial production.