October 7, 2009

Chinese tire tariff impacts two Korean tire manufacturers in US

One tire tariff misfortune could be another manufacturer's treasure. Kumho, a Korean tire manufacturer just announced a 3 year delay in building a factory in Macon, Georgia. Kumho had initially based this delay on the fact that the recession has diminished demand for light truck tires.

Meanwhile in Detroit, another Korean tire maker, Hankook, is reconsidering their options for supplying truck tires to Ford. Hankook supplies Ford with tires produced in their China-based manufacturing facilities which would be subject to the new 35% tire tariff on Chinese produced tires.

Meanwhile in Seoul, South Korea, Kumho management is expressing a commitment to build the Macon tire plant - eventually.
The Seoul, South Korea-based company went through an “in-depth analysis of all its global manufacturing capabilities and projected demand of its products” before it came to the decision that a North American manufacturing plant was still what the company needed and that it needed to put the facility here, Cherry said. - article at Macon.com

The decision to delay construction of this North American manufacturing plant was determined in May. Considering the impact of the new tire tariff, it may be time for Kumho to readdress this factory construction timeline - and Ford may be reconsidering suppliers.
Ford would not comment specifically about how the tariffs might impact its relationship with Hankook or its margins on the F-150.
"We're certainly continuing to look at the situation and determine the impact," said Ford spokesman Todd Nissen. "We're not going to speculate on any potential actions we may or may not take."

He said Hankook is one of five companies that supply tires for the F-150. - article at Detroit News

Of course the tariff could be lifted as quickly as it was created, but maufacturers like Kumho should act quickly to take advantage of the opportunity while it is present.

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