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Silent running

By Li Fangfang (China Daily)
Updated: 2008-09-15 07:21

It's a good year for Goodyear Tire & Rubber Co, and the US tire giant expects to roll for more in the China market.

On June 26, the company announced that it was making an initial investment of about $500 million for a new plant in Dalian, Liaoning province, where it is setting up its first mainland commercial vehicle tire manufacturing facility in conjunction with the closure of its old passenger car tire plant.

"It's the biggest investment Goodyear has plunged into a single plant worldwide, which shows our long-term commitment to the China market," says Pierre E Cohade, president of the Goodyear Asia-Pacific region.

It's also the biggest one-off foreign investment in China's tire industry.

The new facility will be finished in 2010 and will help boost Goodyear's business in the world's biggest commercial vehicle market.

Since 1994 when it entered the Chinese market with a passenger tire plant in Dalian, to transferring its focus from the OE (original manufacturing) market to the replacement market in 2005, Goodyear has built a positive brand image in China and strengthened its foothold as one of the country's top three tire brands.

Its new entry in the commercial vehicle tire segment is driven by China's booming logistics industry.

In September 1994, Goodyear became the first international company to invest in the mainland when it established the Goodyear Dalian Tire Co Ltd.

That year the number of private cars in China was 2.05 million units, which accounted for 21 percent of total passenger cars, and the local auto market was just beginning to boom.

"At that time we focused on the OE market and supplied international and local carmakers with high quality tires," says Cohade.

And as more global automakers have set up manufacturing facilities here the demand for tires has soared.

As a world leader, Goodyear provides tires for nearly all international vehicle brands. "When they come to China one by one, our business grows," says Cohade.

Its global rival French-based Michelin invested in its first joint venture in Shenyang, capital of Liaoning province, in 1995 while another competitor Bridgestone, from Japan, inaugurated its China plant in the same city in 1999.

In 2004, "when I made the first decision for Goodyear with my boss, to choose a new location for Goodyear Asia-Pacific headquarters (which had been in the US), the question came: where is the future (of the tire industry)?" recalls Cohade.

"We visited Singapore, and Hong Kong. But we found the future is here - Chinese mainland," he adds.

And after traveling to Beijing, Shanghai and Dalian, a new question arrived: "Where is the marketplace?" says Cohade. "I quickly answered: 'Shanghai'."

Cohade says he was impressed by Shanghai's growth and still remembered when he first visited Shanghai in 1996, "the only tall building in Pudong was the Shangri-la Hotel". However three years later upon his second visit, "many buildings stood there, and one couldn't even see the Shangri-la".

Goodyear made the final decision in 2004, and on April 1, 2005 officially transferred its Asia-Pacific headquarters to Shanghai as part of a major initiative to reinforce its presence in China and the region.

Shifting focus

China's auto industry exploded in 2002 and 2003, with production hikes of 39.27 and 36.68 percent respectively.

That was good news for Goodyear, which figured that by 2005 millions of those vehicles would need new tires, and the company expects the demand to grow.

On July 5, 2005, Goodyear announced a new development strategy of building a network of retail stores and service centers and the first Goodyear authorized service center was opened in Shanghai.

"As the market changed at the beginning of the new millennium we adjusted our strategy and put more emphasis on the replacement market to become more consumer focused," says Cohade.

The company hired former executives from Eastman Kodak as its president, Asia-Pacific president and China president.

Its retail expansion grew fast and at one point during a short period Goodyear was opening two stores daily. Currently it has 50 dealerships and more than 800 retail stores nationwide.

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