Sumitomo Rubber eyes new North America tire plant amid ‘transformation project’

Tokyo – Sumitomo Rubber Industries (SRI) has announced that it is overhauling its operations and particularly its “tire business” over the next five years in a bid to increase profitability and performance.

The group has unveiled its ‘transformation project’, to be carried out between 2023 and 2027, which will see SRI addressing a Yen55.5 billion (€387 million) decline in business profit within its tire business during the period between 2016 and 2022.

The primary factors behind this decline, said SRI in a 14 Feb announcement, have been “worsening business profits in North America” as well as a worsening break-even point due to increasing fixed costs and variable costs.

SRI explained that over the past decade, it invested heavily in expanding manufacturing and sales bases with the aim of establishing a global business framework.

“However, these investments have yet to produce commensurate returns, resulting in a steady decline in our overall profitability,” said SRI in its mid-term plan presented 14 Feb.

The situation, it added, has been further compounded by the recent unforeseen changes in the business environment.

To address the decreasing profitability, SRI said it will be revamping its profit structure in North America and expanding local production in the region with the aim to become the number 1 mid-tier tire brand there in the medium term.

“With efforts to enhance our investment capacity already underway, we are actively looking into our options for a new production base in the region beyond 2026,” it added.

The tire maker went on say that it will seek to improve profitability by overhauling local production systems to mitigate, among other factors, the risks of tariffs and freight shipping costs.

While “continually working to improve profitability” at its US factory, SRI said it will “consider all possible options” to overhaul profit-structure in the region towards boosting earnings by 2025.

In addition to the planned moves in North America, SRI said it aimed to optimise its business portfolio through other measures, such as “selection & concentration”.

These, it said, will include a 30% reduction in the number of consolidated SKUs in order to achieve more efficient production, sales & inventory.

The group will also look to optimise raw material costs “to swiftly & flexibly cope with soaring market prices.”

Group-wide, SRI said it will revamp production allocation for optimised production & logistics: “shifting personnel and resources towards and actively investing in growing/profitable lines of business”.