Cooper Tires: An Evolving China Strategy

Cooper Tires: exploring new markets. (Jim Motavalli photo)

Cooper Tires, the fourth largest tire manufacturer in the U.S. and the ninth largest globally, has always focused on the replacement market. But now, it’s making its first move into supplying original equipment to automakers…in China. The company’s aim is to build brand awareness in a fast-moving Asian market where consumers are driving their very first car — and have never actually bought tires before.

Selling tires is a tough business, and there’s not even much profit in landing a contract with an automaker — with so much competition, it’s a buyer’s market, and the profit margins are thin. The tire vendor’s aim as an OEM supplier is to retain the customer’s loyalty when it’s time to buy the first set of replacements. Cooper’s got enough of a name to do $2.8 billion in sales of 30 million tires last year.

Cooper may not be the first tire brand name consumers can summon, but it’s in the second tier, gaining points as a long-established, mainly Made in U.S.A. brand, though it does also have plants in England (where it absorbed the Avon brand), Mexico and (through joint ventures) in China. From a base in the heartland town of Findlay, Ohio, Cooper has 13 percent of the light vehicle tire replacement market.

Automakers and parts suppliers can’t afford to ignore the Chinese market, which outpaced U.S. sales in 2009 and 2010. Both General Motors and Kentucky Fried Chicken did more business in China last year than they did in the U.S.

According to Phil Caris, vice president of sales and marketing at Cooper, the company now makes 78 percent of its tires in the U.S., but its short-term growth plan (envisioning a six percent revenue gain) targets China, where it has two joint operation plants in Rongcheng City and Kunshan. “We have no plans to be a major player in the European market,” Caris said. “Our expansion will be in the U.S. and Asia.” The company jumped into the Chinese market in 2006,with CEO  Thomas A. Dattilo proclaiming, “This country will be very important to our future plans.”

According to Caris, speaking at a small media gathering in Texas, “The Chinese consumer is very brand conscious, and we have a lot of brand building to do. We don’t expect customers to just come into the small, independent tire stores that dominate the Chinese market and ask for Cooper Tires.” But if their car has Cooper covers on it already, he said, the chances of that happening are considerably enhanced.

Cooper has a strong reputation for building cutting-edge SUV and off-road tires, which could have some appeal in Chinese markets not yet reached by the country’s fast-track road-building program. Off-roading as a sport may take a while to catch on there.

If anything, Chinese automakers are likely to be even more brutal than their American counterparts in seeking price advantages from their tire vendors. And there are other dangers in the Chinese market, including the fact that designs get pirated for the export market — Caris told me that Cooper had to intervene when a blatant copy of one of its tires was found to be headed for tire store in Australia. Quality control is also a constant issue, so Cooper has its own inspectors stationed permanently at its Asian plants.

That’s just par for the course when doing business in China, where there’s a wealth of both opportunity and risk.

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