Tyre

World Tyre Manufacturers
Market Analysis 2010-2015 Trends Corporate Strategies

Report code: 0XCHE09
Analyst: Petra Frent
Publication: October 2010

World Tyre Manufacturers Market analysis Corporate strategies October 2010

2

The 5 phases of Xerfi Globals
Global Markets and Competition reports

Phase 1: Identification of the playing field
At Xerfi Global, we believe that international classifications are not the only valid definition of
a market. It is the companies that make the sector and not vice-versa. During our first
brainstorming session, we strive to give a clear-cut definition of the scope of the report.

Phase 2: Identification of market leaders
During the second phase, Xerfi Globals analysts identify the players who will be studied in
the report. Our aim is not only to classify by total sales, but also to detect tomorrows movers
and shakers, especially those from emerging markets

Phase 3: Identification of the main market indicators
Using the best and most up to date international sources, Xerfi Globals experts handpick the
most relevant indicators pertaining to both supply and demand.

Phase 4: Identification of corporate strategies
During a further brainstorming session, the Xerfi Global team aims to decipher the main
corporate strategies and key future trends.

Phase 5: Identification of the key conclusions
Thanks to a final brainstorming session, drawing on the knowledge of all the members of Xerfi
Global, the main conclusions are debated and ultimately summed up in no more than a dozen
slides. Concision, precision and accurate forecasts are our main aims.

This report was written under the
supervision of:

Petra Frent

Other main contributors include:

Alberto Balboni
Alexander Law
Aurlien Duthoit
Hlne Alary
Laurent Marty


3

Table of contents

0. CONCLUSIONS 9
1. MARKET FUNDAMENTALS 21
1.1. Key characteristics ________________________________________________________________________________________ 22
Key characteristics 22
1.2. Tyre industry overview ____________________________________________________________________________________ 23
What is the business? 23
What are the products? 24
1.3. Supply and demand _______________________________________________________________________________________ 25
Who are the suppliers? 25
Who are the customers? 26
1.4. Market leaders ___________________________________________________________________________________________ 28
Who are the key players? 28
1.5. Geographic data __________________________________________________________________________________________ 29
Where are activities located? 29
2. MARKET ENVIRONMENT AND PROSPECTS 30
2.1. Overview of the market ____________________________________________________________________________________ 31
Pestel analysis 31
2.2. Supply __________________________________________________________________________________________________ 34
Raw materials 34
Production and exports 35
Raw material prices 36
Production prices 37
2.3. Demand _________________________________________________________________________________________________ 38


4

Automobile production 38
Global vehicle fleet 39
Online retailing 40
2.4. International Trade _______________________________________________________________________________________ 41
Exports 41
Ranking 42
2.5. Regional overview_________________________________________________________________________________________ 43
3. CORPORATE STRATEGIES AND COMPETITION 44
3.1. Competitive environment __________________________________________________________________________________ 45
Driving forces of the industry 45
Global market share 48
Small-scale players 49
3.2. Business models __________________________________________________________________________________________ 50
Diversification 50
Strategic alliances 52
Vertical integration 53
3.3. Geographical presence _____________________________________________________________________________________ 54
Presence on the main geographic markets 54
Operations in emerging markets 55
3.4. Brand strategy ___________________________________________________________________________________________ 56
Multi-brand versus single-brand 56
3.5. Differentiation strategies ___________________________________________________________________________________ 57
Case studies 57
3.6. Outlook _________________________________________________________________________________________________ 60
Investments 60
3.7. Ranking _________________________________________________________________________________________________ 61
Net sales 61
Ranking by operating margins 62
4. COMPANY PROFILES 63


5

4.1. Bridgestone ______________________________________________________________________________________________ 64
Company Overview 64
Business segments 65
Corporate strategy 66
Recent events 67
Key data 68
Revenues by business segment 69
Revenues by region 70
Operating margin 71
Research and development 72
Statistical data 73
4.2. Michelin_________________________________________________________________________________________________ 74
Company Overview 74
Recent events 77
Key data 78
Revenues by segment 79
Operating margin 81
Statistical data 83
4.3. Goodyear ________________________________________________________________________________________________ 84
Company Overview 84
Recent events 87
Key data 88
Segment volumes 89
Operating margin 91
Statistical data 93
4.4. Continental ______________________________________________________________________________________________ 94


6

Company Overview 94
Recent events 97
Key data 98
Operating margin 101
Statistical data 103
4.5. Pirelli ___________________________________________________________________________________________________ 104
Company Overview 104
Recent events 107
Key data 108
4.6. Sumitomo________________________________________________________________________________________________ 114
Recent events 117
Key data 118
4.7. Yokohama _______________________________________________________________________________________________ 124


7

Recent events 127
Key data 128
4.8. Hankook ________________________________________________________________________________________________ 134
Recent events 137
Key data 138
4.9. Cooper __________________________________________________________________________________________________ 144
Recent events 147
Key data 148
Product lines 149
4.10. Maxxis _________________________________________________________________________________________________ 154


8

5. STATISTICAL APPENDIX 155
6. INFORMATION SOURCES 166
International organisations 167
Press 167
Corporate websites 168
7. ANNEXES 169
7.1. Overview of the market ____________________________________________________________________________________ 170
2009 sales 170
2010 sales 171
7.2. Demand _________________________________________________________________________________________________ 172
Market breakdown 172
Profile of the leading companies 175
Net sales 177
Operating margins 178
7.3. Presence in main geographic segments________________________________________________________________________ 179
Asia 179
India 181
South America 182
North America 184
Europe 185
7.4. Differentiation strategies ___________________________________________________________________________________ 186
7.5. Regional overview_________________________________________________________________________________________ 188
Asia-Pacific 188
Latin America 189
North America 190
Europe 191
Africa and Middle East 192
Statistical framework 193
Data 194


9

0. Conclusions


10

Key trends by 2015

Tyre manufacturers have a major goal: further global expansion of their operations. Although
demand in mature economies will pick up, the immense growth opportunities in emerging markets have
led tyre companies to decide on investing in boosting capacity in already established plants or building
new ones.
Tyre manufacturers profitability is to a great extent dependent on raw material prices: they are
expected to remain highly volatile, thus putting more pressure on companies operations. In order to secure
procurements, tyre makers are highly vertically integrated structures: groups such as Michelin own and run
several natural rubber plantations in the rubber belt countries.
Small-scale players will continue to take market shares of the Big Three: Michelin, Bridgestone
and Goodyear have held the greater proportion of total industry sales, but their share is gradually
decreasing as companies from emerging countries and China in particular, are expanding their sales and
operations.
Groups are to increase their focus on their core business: diversified groups have been divesting
their other businesses, and generate more than three quarters or revenues from tyre operations.
Furthermore, top-notch players are multi-specialists, manufacturing tyres in all market segments (from
passenger cars to aviation, from premium brands to private brands).
In making and marketing their products, tyre manufacturers pursue either differentiation (the Big
Three are trend-setters in all aspects of innovation in the industry, dominating the ultra-high performance
and premium tyre segment) or cost leadership strategies (the large majority of such players are companies
from China and Taiwan).


11

Tyre production continues to expand globally

Total tyre production worldwide
unit: 1,000 tons of rubber

Recently, weak economic conditions,
troubled financial markets, and
detrimental exchange rates resulted in a
drop in rubber tyre sales volumes in
North America and Europe. Some
companies recouped their losses by
increasing sales in the emerging
markets and expanding production in
developing countries where production
costs are lower.
Over the next decade the economic
landscape will improve, as overall
market indicators strengthen and global
economic activity picks up: strong
(China and India) to moderate GDP
growth, increased industrial production
and improved consumer activity and
freight movement.
The demand in the automotive industry
is also picking up pace, driving demand
for tyres and growth is foreseen in both
industries for the years ahead.

800
950
1,100
1,250
1,400
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010-
2015
CAGR

Source: Xerfi Global. Primary source: JATMA.


12

Raw material prices are set to remain volatile

Prices for main raw materials main trading indexes
unit: %
Tyre production is the biggest
consumer of synthetic and natural
rubber. The industry uses the majority
of natural and synthetic rubber output.
The sharp price volatility for natural
rubber and petroleum-based materials
contributes to the difficulty in
managing the costs of raw materials.
The cost of raw materials represents
the largest component of total cost of
goods sold or approximately 50
percent on average, with variations
from one company to another.
While the industry will continue to
grow, material shortages and price
increases are evident. Raw material
volatility has been and remains an
issue, with price increases expected to
be announced by all companies in
2010.

-60%
-40%
-20%
0%
20%
40%
60%
2008 2009 2010
Natural rubber Synthetic rubber

Source: Xerfi Global. Primary source: International Rubber Study Group.


13

Most tyre companies are vertically integrated

Vertical integration of tyre companies

Rubber and tyre manufacturing companies
tend to be highly vertically integrated.
There is a growing trend in the industry to
own rubber plantations because it creates a
strong competitive advantage. Michelin for
instance, owns and operates six rubber
plantations (one located in Latin America
and the others in West Africa and Asia),
while Goodyear Tyre and Rubber Company
has recently invested in two new synthetic
rubber plants.

Further down the line, many tyre
companies own and operate their own
distribution networks: Cooper has five
distribution centres and five sales offices in
Europe and Michelin has two integrated
tyre distribution and service networks,
Euromaster and TCI. The Korean Regional
Headquarters of Hankook operates over
2,100 direct-run and franchised dealerships.

Source: Xerfi Global.

Raw material suppliers

Tyre production facilities

Distribution networks


14

New players have been cutting into the Big Threes market share

Change in market share of the global players
unit: %

For most of the history of the tyre
industry, the top three leaders have
remained unchanged, with Bridgestone
and Michelin battling for first position.
The results for fiscal 2009 and the first
half of 2010 confirm Bridgestones
supremacy in the industry.
Although in 2000 the Big Three held
almost 60% of the whole market share,
this proportion has gradually declined
over the last decade, reaching 46% in
2008. This trend is likely to continue,
as smaller players competing on
volume and low-pricing strategies
continue to increase their market
shares. Such is the case in emerging
countries or China, where domestic tyre
manufacturers have doubled their sales
both in volume and value over the past
decade, and this development is set to
continue.

0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2000 2001 2002 2003 2004 2005 2006 2007 2008
Mi chel i n Goodyear Bri dgestone Others

Source: Xerfi Global. Primary source: Bridgestone.

43%
54%


15

Asian manufacturers dominate the top 10

Tyre companies ranking
GROUP COUNTRY
GROUP NET
SALES (2009)
PRODUCTS
Bridgestone

19.8 bn
Tyres, chemical
products, others
Michelin

14.8 bn Tyres
Goodyear

11.9 bn Tyres
Continental

20 bn
Tyres, automotive
parts
Pirelli

4.4 bn Tyres
Sumitomo

3.9 bn Tyres, sport goods
Yokohama

3.5 bn
Tyres, industrial
products
Hankook

2.9 bn Tyres
Cooper

1.9 bn Tyres
As far as the top three are
concerned, the picture has
remained unchanged for years
with Bridgestone, Michelin and
Goodyear setting the trends for
product innovation in the industry.
These are players present in all
market segments and geographical
regions.
The 10 largest tyre manufacturers
account for about 80% of the
worlds tyre sales, while the
leading three companies,
Michelin, Bridgestone, and
Goodyear, accounted for 46%.
To compete with the Big Three,
smaller manufacturers have
tended to focus on a specific niche
(specialty tyres) or in regional
markets. Moreover, this trend will
continue.

Maxxis

1.8 bn Tyres
Source: Xerfi Global with companies annual reports.


16

The Big Three are multi-specialists, present in every market segment

Market segments of main tyre companies
Types of tyre
Company
Passenger car
and light truck
Heavy truck
and bus
Two-wheel
Off-the-road
vehicle
Aircraft
Civil
engineering
Agricultura
l
Bridgestone
Michelin
Goodyear
Continental

Sumitomo

Pirelli
Yokohama

Hankook

Cooper


The tyre industry is a highly competitive one, especially in the passenger vehicle and truck tyre segments, where top-notch players
face fierce competition from low-cost producing companies. However, specialty tyres (agriculture, aviation, two-wheel, earthmovers)
which require extensive R&D resources and specific know-how, is a field where flagship brands such as Michelin, Bridgestone or
Goodyear are prominent.
The specialty segment represents 15% of the total revenues of Michelin or 20% of Goodyears annual sales. The Big Threes
diversified array of distribution channels includes specialty tyre wholesalers and dealers. Michelin is the market leader in earthmover
and aircraft radial tyres, the European market leader in agricultural tyres and one of Europes leading motorcycle tyre brand, a segment
where top positions belong to Pirelli and Bridgestone.


17

Main customers of the tyre
industry
ORIGINAL
EQUIPMENT
MANUFACTURE
RS

25bn
TYRE
DISTRIBUTION
for replacement of
original tyres

75bn

The replacement market will remain the largest market segment
Customers of the tyre industry

Global tyre market value: estimated at 100 bn in
2008 (of which light-vehicle tyres accounted for
60% and truck tyres for nearly 30%).

Global tyre market volume: estimated at around
1.1 bn tyres for cars and light trucks and 125 mn
for trucks and buses in 2008.

Vehicle manufacturers or OEMs
In the wake of the recent financial crisis, there has been a noteworthy change in
demand for tyres in mature markets, where increasing orders for vehicles with high
fuel economy led to a shift to smaller size passenger tyres light truck tyres, products of
lower profitability to the industry.

Replacement
In order to boost sales in the replacement market, tyre companies pursue extensive
marketing campaigns using tremendous resources and budget.
The global visibility guaranteed through extensive media interest, has made tyre
makers strike exclusive supply deals in Formula One or other motor sports: Pirelli is
currently the sole supplier for the GP3 series, the World Rally Championship and has
been chosen as the exclusive supplier for Formula 1 between 2011 and 2013;
Bridgestone is the official tyre supplier of the MotoGP and GP2 series.
Another company intensively working on building a premium brand image is
Hankook: since 2005, Formula 3 in Germany has been racing exclusively on Hankook
tyres.


18

Leading players are planning to expand their presence in emerging markets

Bridgestone is set to invest $540 mn between 2010 and 2013 to build a car and truck
tyre plant near Pune, India, to support growing demand for radial tyres in Asia and an
additional $142 mn over two years to expand capacity for passenger tyres at its plant in
Poznan, Poland, by nearly a third.

One of the industry leaders, Michelin, plans to invest $870 mn to build a truck and off-
the-road tyre plant in Tiruvallur, near Channai in southern India in the upcoming years.

Sumitomo is another major player with an eye on the Chinese tyre market: it will spend
$297 mn to build a passenger tyre plant in Changsha, China, with production expected
to start by July 2012.

The Pirelli Group intends to reinforce its presence and to invest heavily in Brazil. The
300 mn US dollars of total investments in the 2008-2011 period are destined one third
for research and development and the remainder for increasing production capacity.
The new investments will enable a 20% increase in car and motorcycle tyre production.
Pirelli aims to increase tyre production in eastern Europe, namely at its factory in
Slatina, Romania: the 250 mn investment is to be carried out between 2009 and 2011.

Enjoying rapidly increasing demand, Hankook is completing a plant expansion project
in Hungary, which is scheduled to start operations in 2011, when annual output will
total 10 mn units (from 5 mn currently). Another project to build a new plant capable of
producing five mn tyres a year by 2013 is seriously being considered.


19

Top tier companies dominate the premium tyre segment

Tyre industry mix in mature economies
unit: %
Competition in the tyre industry
unfolds around either product
differentiation or cost domination
strategy.
The market is divided into the premium
and economy segments: the former
consists of two tiers, with tier 1 as a
market with flagship brands such as
Bridgestone, Goodyear, and Michelin
and tier 2 as a market segment with
secondary or former tier 1 brand tyres
such as BFGoodrich, Uniroyal, and
General.
The tier 3 segment is characterised by
economy or mass-market tyres that
consist of private brands and lower
level associate brands owned by
major producers. Small players or
domestic companies in emerging
countries make up the bulk of tier 3.
In developed economies, consumers
favour companies with higher
technology and brand strength, while in
emerging countries economy and mid-
tier tyre producing companies are
dominant.

Premium
Mid-tier
Economy
0%
20%
40%
60%
80%
100%

Source: Xerfi Global estimations. Primary source: annual reports.


20

Manufacturers in countries such as China are focusing on low-cost products

Prices for 215/70 R15 tyres in the United States
unit: dollars
TYRE BRAND PRICE
Primewell PS850
$ 52.10
Triangle TR928
$ 52.20
GT Radial Wingpro 70 $ 55.80
BCT S600 $ 62.20
Cooper CS4 Touring $ 72.10
Goodyear Assurance $ 74.50
BF Goodrich Radial T/A $ 75.40
Goodyear Assurance FuelMax $ 82.60
Bridgestone Turanza EL 400 $ 87.20

Companies have shown continued
selectivity with respect to their markets
(replacement versus original
equipment, branded versus private
label). Largest players made significant
strategic business decisions to shift
production toward higher-value tyres
and capitalise on consumer brand
loyalty.
Most flagship brands such as Michelin,
Goodyear or Bridgestone have put
more emphasis on their ultra-high
performance, touring, and winter tyre
offerings during the last few years,
leaving low-cost production to overseas
manufacturers.
There have been shifts in demand
involving lower-profile brands, such as
BF Goodrich and Yokohama and
economy brands from China and other
developing markets, but no significant
swings in the private brand market.

Michelin HydroEdge $ 107.40
Primary source: Tyre-easy.
Chinese
brands


21

1. Market fundamentals


22

1.1. Key characteristics Key characteristics

The tyre global market is dominated by The Big Three

Diverse products
The major product segments are original equipment tyres and replacement tyres
primarily for passenger cars, trucks, two-wheelers, aircrafts, and off-the-road vehicles.
Sales driven by the replacement market
Roughly 75% of tyre production is sold to the replacement market with only 25% going
to the original equipment manufacturers (the automotive industry). A fluctuation in the
production of vehicles is correlated with a decrease or increase in the tyre industry
revenues.
Higher margins in the specialty segments
Tyres are largely a commodity, thus profitability depends on cost-efficient operations.
Small companies can compete by producing tyres or tyre-related products for niche
markets, such as bicycles or agriculture equipment. Large companies can afford the
research to develop tyres from technologically advanced materials, and can invest in
high-margin segments such as radial tyres (for trucks, aviation, and motorcycle), civil
engineering or agricultural tyres.
A highly concentrated sector
55% of global market share is held by the Big Three tyre manufacturers: Bridgestone
(Japan), Michelin (France) and Goodyear (United States). The major players in the
industry are highly specialised and competition is intense in major market segments
(passenger car and truck tyres in particular).
Raw material costs for manufacturers continue to go up

The primary raw materials used to make tyres are synthetic rubber, carbon black (for
traction), natural rubber, various chemicals and reinforcing components such as steel
wire, steel cord, and polyester. Both synthetic rubber and carbon black are derived from
petroleum or natural gas. Hence, rubber prices have increased in line with oil prices,
leading to a higher cost of production and an overall price boost of all tyre products.


23

1.2. Tyre industry overview What is the business?

Tyre sales in the replacement market account for more than 7O% of sales

Breakdown by market of tyre sales
unit:%
The tyre industry sells its products in two
main markets:
25% in the original equipment market
(automotive industry);
75% in the replacement market
(distributors who sell tyres to
companies or clients to replace original
equipment tyres).

Passenger car and light truck tyres together
with truck tyres correspond to almost 90%
of the total tyre market both by volume and
value.

Replacement
75%
Original
equipment
manufacturers
25%

Source: Xerfi Global. Primary source: companies annual reports.


24

1.2. Tyre industry overview What are the products?

Tyres for the passenger car segment are predominant

Main products of tyre industry

Companies in the tyre industry essentially
manufacture new tyres, but they can also
produce other rubber goods, such as inner
tubes or materials for tyre repair and
retreading (a process that extends the life
of a used tyre).
Tyre manufacturers may specialise by type
of vehicle or size of tyre, such as for cars,
motorcycles, trucks, air planes, farm
equipment, or bicycles.
There are manufacturers present in all
market segments (Michelin, Bridgestone,
Goodyear or Sumitomo). Most of the
companies concentrate only on selling
tyres for passenger cars and trucks
(Continental or especially domestic players
in emerging markets such as China for
instance). However, some tyre
manufacturers have a strategic focus on a
certain market (Cooper produces only light
vehicle replacement tyres in the North
American market).


TYRES

PASSENGER CAR
AND LIGHT TRUCK

Around 60% of the
value of sales
TRUCK AND BUS

Around 25% of the
value of sales
SPECIALTY
Civil engineering
Agricultural
Two-wheel
Aircraft

Around 15% of the
value of sales


25

1.3. Supply and demand Who are the suppliers?

The tyre industry relies mostly on natural and synthetic rubber

Main raw materials used in tyre manufacturing

Raw material usage
unit: % of total input value
Natural rubber
Rubber
Synthetic rubber
Vulcanizing agents
Antioxidant
Filler
Compounding ingredients
Softener
Carbon black
Reinforcing agents
Silica
Steel cords
Tyre cords
Textile cords

Other, 17%
Chemicals,
13%
Reinforcing
fillers, 16%
Synthetic
rubber, 26%
Natural
rubber, 28%

Source: Xerfi Global. Source: Michelin.

Raw materials cost represent close to 40% of total purchases (according to 2009 data for Michelin, but with variations from one
company to another). Thus, optimising raw material usage is essential for securing rubber and staying profitable.
More than 100 raw materials are used in the production of tyres. Approximately half of the materials, including synthetic rubber, are
chemical products based on petroleum. As a result, the tyre industry is highly dependent on petroleum.
More than 90% of the natural rubber supply comes from Southeast Asia. Rubber trees grow only in the Rubber Belt, an equatorial
zone that stretches through Thailand, Indonesia, Malaysia, India, and China, accounting for 89% of the worlds natural rubber.


26

Main customers of the tyre
industry
ORIGINAL
EQUIPMENT
MANUFACTURE
RS

25bn
TYRE
DISTRIBUTION
for replacement of
original tyres

75bn

1.3. Supply and demand Who are the customers?

The industry sells tyres mostly for the replacement markets
Main customers of tyre industry

Global tyre market value: estimated at 100 bn in
2008 (of which light-vehicle tyres accounted for
60% and truck tyres for nearly 30%).

Global tyre market volume: estimated at around
1.1 bn tyres for cars and light trucks and 125 mn
for trucks and buses in 2008.

Vehicle Manufacturers or OEMs
The demand from the Original Equipment Manufacturers is derived and directly
correlated to the level of automotive production. Tyres are sold directly to the
automotive industry. Generally, one tyre company can supply several automobile
manufacturers (Hankook makes tyres for Ford, GM, Volkswagen or Audi).

The replacement market
The demand in the replacement market depends on the size of the vehicle fleet, the level
of economic activity, the price of tyres and the quality of road infrastructure. The
replacement market offers higher margins and is therefore extremely competitive.
The size of the replacement market is determined by the interplay of several factors:
economic activity slow-downs account for longer replacement intervals and lower
business mileage
retreading (or applying a new tread), a process that can extend the life of tyres at a
significantly lower cost, thereby lowering replacement demand. Retreads are made
only in segments such as truck, bus and commercial aviation tyres. A tyre can be
retreaded several times.
radial technology for passenger car, truck and bus tyres increases operating
efficiency by delivering better mileage and minimising wear and tear. Radial tyres
represent roughly 90% of all tyres in developed economies, whereas their proportion
is significantly smaller (under 60%) in emerging countries, leaving room for growth.


27

1.3. Supply and demand

Tyre are sold through multiple distribution channels

Tyre industry distribution channel
Multiple efforts are made in order to
secure various distribution channels on a
global scale.

Customers can purchase a certain
brand of tyres directly through a
companys own shop (flagship stores,
exclusive direct-run and franchise
shops), prime locations for promoting
products and essential for building
brand image.
Other distribution channels include
multi-brand retailers, wholesalers (a
major UK-based European tyre dealer,
ATS, sells Michelin, Pirelli or Cooper
tyre brands to retail or business
customers) or independent dealers
who generally sell multiple tyre
brands.

.


TYRE
MANUFACTURERS

Original Equipment
Manufacturers

Replacement
Distributors :
Tyre wholesalers and retailers
Proprietary/ franchised shops
Automobile part retailers
Large fleet users (business)

Automotive industry


28

1.4. Market leaders Who are the key players?
The market has been dominated by the Big Three for over a decade
Largest groups in the tyre industry
GROUP COUNTRY
GROUP NET
SALES (2009)
PRODUCTS
Bridgestone

19.8 bn
Tyres, chemical
products, others
Michelin

14.8 bn Tyres
Goodyear

11.9 bn Tyres
Continental

20 bn
Tyres, automotive
parts
Pirelli

4.4 bn Tyres
Sumitomo

3.9 bn Tyres, sport goods
Yokohama

3.5 bn
Tyres, industrial
products
Hankook

2.9 bn
Tyres

Cooper

1.9 bn Tyres
It was status quo for the top 10 in
2009, except for Taiwans Cheng
Shin Rubber (Maxxis) slipping past
Japans Toyo Tyre & Rubber Co. Ltd.
to come in 10
th
in the industrys
ranking.
China has the most companies of any
country (Triangle, Giti, Double Coin,
Double Star etc...). Hangzhou
Zhongce Rubber Co. Ltd. of
Hangzhou is the largest of these,
ranked 11th. The Chinese firms
combined sales are more than 10
percent of the estimated world total.
Apollo and JK Tyre are two of the
main Indian companies in the
rankings, but MRF Ltd. is the largest
Indian tyre maker.
The U.S. has six companies, followed
by Taiwan with five (Kenda,
Nankang, etc), Japan and Russia
(Sibur etc) with four each, South
Korea (Hankook, Kumho, Nexen)
with three.

Maxxis

1.8 bn Tyres


29

1.5. Geographic data Where are activities located?

Tyre production sites are chiefly based in Asia
Global tyre production (volume) breakdown by geographical area
unit: million tyres

Source: Xerfi Global with JATMA (2007 and 2008 data).
ASIA &
OCEANIA
MIDDLE
EAST &
EUROPE
SOUTH &
CENTRAL
AMERICA
NORTH
AMERICA
Commercial vehicle tyres
Passenger vehicle tyres
2007 2008
167
41
182
46
2007 2008
49
33
49
34
2007 2008
303
86
326
93
2007 2008
38
17
38
17
2007 2008
437
214
424
204


30

2. Market environment and
prospects


31

2.1. Overview of the market Pestel analysis

Growth is picking up in the industry

PESTEL analysis of the tyre industry

+
-
Politics Economy Society Technolo Environme Legislatio
Widespread
support for the
automotive
industry as a
major provider of
employment
Political unrest in
rubber supplying
countries.
End of car
scrappage
schemes (Europe)

Securing raw
material

Price volatility of
raw materials

Increased
mobility needs

The challenges
of sustainable
mobility

Longer tyre
life impacts
demand
Requires
intensive R&D
spending
Road
infrastructure
development in
the emerging
economies

Scrapping of
end-of-life tyres

Environment
regulations
Employment
regulations
Legislation on
chemical
substances
+
-
+
-
+
-
+
-
+
-
+
-
An upbeat
business
environment
Emerging
markets

E-business
New type of tyres
for electrical
vehicles
Higher margins for
specialty tyres


32

2.1. Overview of the market
An upbeat business environment

During the global recession, the results of 8 out of the top 10 companies showed
a double digit drop. However, by mid 2010 the tyre market is on the rise again, a
trend that will continue for the years ahead.
backed by growing demand in
emerging markets

Of course, there have been regional variations in the rise and fall of local tyre
markets - with China bouncing back much faster than other economies.
Although China experienced a downturn in 2008, it ended up with a 20% growth
in 2009, while other regions were still in recession. Emerging markets will drive
industry sales in the years to come.
and meeting with increased mobility
needs

To date, there are nearly 800 million vehicles on the road worldwide, a figure
that is likely to double by 2030. In both mature and emerging markets, the road
transport sector is faced with increasingly demanding requirements that call for
higher tyre performance standards.
enhanced by road infrastructure
improvement in developing economies

The development of road infrastructure in developing economies is driving a
faster shift from bias to radial tyres, which is the case in the Indian truck tyre
market, for example. Radial tyres offer enhanced durability and fuel economy
compared to bias tyres, and higher margins for tyre manufacturers.
more than ever, companies with
technological edge will secure higher
profits

Tyre manufacturing is a capital-intensive industry with long investment payback
periods. Added to this, the pace of technological innovation is slow. However,
there are higher margins from selling differentiated products as the tyre has
become a focus for OEMs (original equipment manufacturers).


33

2.1. Overview of the market

Nonetheless,
the price of raw material decides the
margins

Most of the components used in tyre manufacturing are synthetic and obtained
from crude oil - and this situation is not likely to change, although the quest for
natural alternatives continues. With increases in oil and natural rubber prices, a
growing number of tyre manufacturing companies will try to shift to these types
of alternative materials.
and securing raw material can be
problematic

Raw materials such as oil, which is used to make synthetic rubber, and other
non-renewable raw materials are becoming increasingly scarce and will remain
expensive in the years ahead, notably due to strong demand from China and
other emerging markets. With the new demand, there will be a frantic need to
replenish inventories.
the cost of R&D is elevated

Specialised tyres are likely to become more commonplace - with consumers in
mature economies choosing to spend more money on products with specific
attributes.
managing end-of-life tyres is
essential

It is estimated that one billion tyres reach the end of their lives every year, on a
global scale. Minimising the environmental impact of end-of-life tyres (ELTs)
will remain a high priority goal of the tyre industry. Various efforts by public
authorities and the tyre industry are currently underway to address the issue of
ELTs.
complying with environmental
regulation is challenging

Road transport accounts for 18% of all fossil-based CO2 emissions due to
human activity, with tyres representing 4% from the fuel used to overcome their
rolling resistance. Producing tyres which limit green house gas emissions is
essential in complying with ongoing legislation, considering that the tyre-
labelling system becomes mandatory in 2012.


34

2.2. Supply Raw materials

Production of both natural and synthetic rubber is concentrated in Asia

Total production of rubber (natural and synthetic)
unit: % of total tonnage

Rubber production by type and region
unit: mn tons
Asi a/ Oceani a
71%
Afri ca
2%
European
Uni on
14%
Lati n Ameri ca
4%
North
Ameri ca
9%

0 5 10 15 20
Africa
Lat in America
North America
Europe
Asia/ Oceania
Nat ural Synthetic

Source: International Rubber Study Group, 2009 data. Source: International Rubber Study Group, 2009 data.

Asia is the worlds leading supplier of both natural and synthetic rubber, with a 71% share of the world rubber production, but also
the largest consumer (industry growth in China and India has triggered higher demand for rubber). It is followed by the European
Union with 14% and North America with 9%.
Thailand, Indonesia and Malaysia retain over 70% of the global natural rubber reserves and rubber production facilities are
concentrated in these countries.
Brazil is also a small-scale producer of natural rubber where Michelin runs a large plantation facility.
Europe and North America hold a significant role in production synthetic rubber, but they dont posses any natural rubber resources.


35

2.2. Supply Production and exports
China exports roughly half of its tyre production

Tyre production and exports
unit: million tyres
China is the leading tyre producing
country in the world, with exports
amounting to 235 million tyres
(according to latest available data), an
equivalent of 8 million. The past 4
years, Chinese producers annual
capacity increased from 93.2 million
tyres to 235.2 million tyres, with a 53.8
million increase in tyre capacity taking
place between 2006 and 2007 alone.
Similarly, exports expanded at a
skyrocketing pace and this trend is
likely to continue.

Exports by U.S. producers, as a share
of total shipments, increased from 12.3
percent in 2004 to 14.1 percent in 2008.

0
50
100
150
200
250
China Japan USA
Producti on Exports

Source: Xerfi Global with CHELEM, latest available data.


36

2.2. Supply Raw material prices

Raw material prices are volatile, impacting profitability

Prices for main raw materials main trading indexes
unit: % change
The sharp pricing volatility for natural
Tyre production is the biggest
consumer of synthetic and natural
rubber. The industry uses the majority
of natural and synthetic rubber output.
On the supply side, the synthetic
rubber industry is being clutched by
high petroleum costs and butadiene,
the tyre industry's major chemical raw
material used for producing synthetic
rubber, is not easily available.
High raw material prices impact the
competitiveness of the tyre industry
and securing raw materials will remain
a critical issue in the tyre industry for
the years ahead.

-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
120%
2008 2009 2010
Natural rubber Synthetic rubber Crude oil Butadiene

Source: Xerfi Global. Primary source: International Rubber Study Group.


37

2.2. Supply Production prices

Operational efficiency is key to staying competitive

Tyre production prices
unit: % ( quarterly change)
Prices are the most important factor in
successfully competing for the sale of
tyres.
The pricing volatility for natural
Increasing costs for raw material
supplies amplify companies
production prices and affect its
margins if they are unable to pass the
higher production costs on to
customers in the form of price
increases.
The milder change in production prices
in the European Union can be
explained by a stronger euro offsetting
input prices (as opposed to a weaker
dollar in the United States).

-10%
-5%
0%
5%
10%
15%
2000 2002 2004 2006 2008 2010
United States European Monetary Union

Source: Xerfi Global. Primary source: Fed, Eurostat.


38

2.3. Demand Automobile production

Changes in tyre production are correlated to automotive industry output

World vehicle production
unit: change in %

Tyre and motor vehicle production volumes United States
unit:% (annual change)
-35%
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010-
2015
CAGR

-70%
-50%
-30%
-10%
10%
30%
50%
70%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Motor vehicl es Tyres

Source: Xerfi Global with JATMA. Source: Xerfi Global. Primary source: Federal Reserve Board.

Global economy growth and expanding production in the automotive industry drive tyre production growth.
During the recent global recession, automobile production was down by over 30% and this led to a subsequent decrease in tyre
production levels.
While having been less affected by significantly lower economic activity in the sector, the newly developing countries remain markets
with remarkable growth potential for the automotive sector and consequently for the tyre industry.


39

2.3. Demand Global vehicle fleet

The tyre industry will benefit from the expansion in the global vehicle fleet

Projected number of vehicles on the road
unit: mn vehicles
With over 90 percent of the growth
derived from emerging economies
countries, the world vehicle fleet is
expected to triple by 2050 from the
current level. In terms of road
transport, more miles will be driven by
more vehicles, so the tyre industry can
take full advantage.

Both the number of vehicles and the
amount of travel are set to increase
substantially during the next few
decades. Overall, activity involving
heavy vehicles is expected to increase
more than activity involving light
vehicles, thus triggering increased
demand in commercial vehicle tyres
which ensure higher margins for
manufacturers.

0
500
1,000
1,500
2,000
2,500
3,000
1990 2010 2030 2050
Li ght vehi cl es Heavy vehi cl es

Source: Xerfi Global. Primary source: OECD.


40

2.3. Demand Online retailing

Internet sales are booming and will continue to do so

Tyres sold via the internet-Germany
Units: % of total sales
Customers are becoming increasingly
sensitive to prices when making a tyre
purchase. This could explain the boom of
tyre sales on the internet. Customers can
truly take advantage of modern e-
commerce: convenience in order placing,
quick, efficient delivery, cost information
(sites offer cost comparisons) and, last but
not least, low prices (15% to 20% cheaper).

Delticom, Europes largest online tyre
retailer delivers tyres in two business days
to any address/ professional fitting shop the
customer chooses. Its sales were up 20% in
2009 from the previous year, and they are
expected to keep growing at a similar pace.
In France and Germany, online tyre
retailing accounts for 7% of total
replacement sales, and will achieve more
significant proportions over the next few
years.

0%
2%
4%
6%
8%
2004 2005 2006 2007 2008 2009

Source: Xerfi Global. Primary source: ADAC.


41

2.4. International Trade Exports

Asia is by far the largest tyre exporter
Tyre exports between geographical regions
(Values over 1 bn USD - the width of the arrow is proportional to the value of exports)

Source: Xerfi Global. Primary source: CHELEM.
LATIN
AMERI
NORTH
AMERIC
EUROP
E
ASIA/
OCEANIA
AFRIC
A
MIDDL


42

2.4. International Trade Ranking

China has overtaken Japan to become the worlds largest tyre exporter

Tyre largest exporters in 2000
unit: mn USD

Tyre largest exporters in 2008
unit: mn USD
0 1,000 2,000 3,000 4,000
Belgium Luxemburg
Great Britain
China
Italy
Spain
Canada
South Korea
Germany
France
United States
Japan

0 2,000 4,000 6,000 8,000 10,000
Italy
Thailand
Slovakia
Spain
Belgium Luxemburg
Sout h Korea
Unit ed St ates
France
Germany
Japan
China

Source: Xerfi Global. Primary source: CHELEM Source: Xerfi Global. Primary source: CHELEM

The worlds largest tyre exporting countries ranking in 2008 reinforces the emergence of China as a leading global economic power:
in less than 10 years, China has become the number one tyre exporter in the world (from the 9
th
position occupied in 2000).
Since the Obama administration slapped antidumping duties on China-made tyres on September 26th, 2009, China's tyre exports to
the United States have tumbled. In October 2009, China's tyre exports to the U.S. dropped 37.5 percent year-on-year to $130 mn. The
figure was a record low from the preceding 44 months. China-made passenger vehicle and light truck tyres imported into the U.S.
were subjected to an additional 35 percent import duty for the duration of a year. The duty would be then lowered to 30 percent in its
second year and 25 percent in its third year.


43

2.5. Regional overview Trends 2010-2015

Emerging markets are poised for substantial growth
Production and demand trends in main geographical regions

Vehicle
production
Type of
tyre
Vehicles
per 1,000
inhabitant
s
Breakdown
of tyre sales

Demand trends
2010-2015

ASIA
PACIFIC
Passenger cars :
25.4 mn
Commercial vehicles :
5.1 mn
Radial: 52%
Bias: 48%
54
Passenger car tyres :
305 mn
Commercial vehicle tyres :
67 mn

NORTH
AMERICA
Passenger cars :
4mn
Commercial vehicles:
4.6 mn
Radial: 96%
Bias: 4%
750
325 mn
23 mn

LATIN
AMERICA
Passenger cars :
2.9 mn
0.6 mn
Radial: 65%
Bias: 35%
120
Passenger car tyres:
70 mn
Commercial vehicle tyres: 15
mn

EUROPE
Passenger cars :
15.1 mn
0.4 mn
Radial:79 %
Bias: 21%
550 (Western
Europe)
180 (Eastern
Europe)
368 mn
16 mn

AFRICA
AND
MIDDLE
EAST
Passenger cars:
12 mn
Commercial vehicles:
0.3 mn
Radial: 72%
Bias: 28%
45
80 mn
Commercial vehicle tyres:
16mn



44

3. Corporate strategies and
competition


45

3.1. Competitive environment Driving forces of the industry

The tyre industry: a highly competitive environment

Competitive forces of the tyre industry

0 1 2 3 4 5
New entrants
Substitutes
Customers
Suppliers
Competitive
Rivalry
2010
2015
In the emerging markets industry
leaders will face intense competition
from domestic players.
Top players in the industry are likely
to forge alliances with local tyre
manufacturers in developing countries.
In mature markets, buyers are more
sensitive to brand image and product
differentiation
There are no actual substitutes to
tyres.
Barriers to entry are high as the tyre
industry is capital-intensive.


46

3.1. Competitive environment

Competitive rivalry

The Big Three acquisitions and aggressive pricing strategy are geared towards raising
market shares and profits. In these conditions, smaller manufacturers encounter further
difficulties in generating profit margins. To compete with the leaders, smaller
manufacturers tend to focus on a specific niche (high performance or premium tyres) or
in regional markets, a trend that will continue to shape the industry environment.
New entrants
Barriers to entry such as the influence of brand loyalty or brand-building expenditures,
capital requirements related to building or modernizing manufacturing facilities, and
maintaining highly advanced research and development facilities will become more and
more encumbering as the industry faces further consolidation.
Substitutes
There are no real substitutes for tyres, but consumers can choose with respect to
replacement tyres and that can affect the demand for specific types of tyres. They have
a choice to purchase new or used tyres, high-performance tyres or have their tyres
retreaded. The demand for a specific type of tyre is elastic and more dependent on
price. More explicitly, higher prices for new tyres determine consumers to postpone
replacing worn tyres or to purchase used or retreaded tyres. Car tyres can be retreaded
once but truck tyres can be retreaded several times.


47


Suppliers
Natural rubbers physical properties make it irreplaceable in some market segments
such as truck tyres. Although natural rubber is a renewable resource, its sharp
fluctuations in prices could pose a threat to long-term supply.
Generally, procurement of natural rubber and petroleum is managed through multiple
arrangements, make use of the spot or the forward market. For other major raw
materials, possible combinations include supply agreements that entail formula-based
pricing according to commodity indices, multi-year agreements or spot purchases.
To ensure continuing supplies for operations and mitigate the risk of potential supply
disruptions, tyre makers acquire raw materials from various sources around the world.
They have purchasing offices in Southeast Asian rubber producing countries in order to
acquire natural rubber from producers. Top-line companies such as Michelin, own
several rubber production facilities. This enables them to work directly with producers
to constantly improve quality and to reduce the costs of materials or transactions.
Falling in line with increasing demand, companies sometimes prepurchased significant
amounts of raw materials, particularly natural rubber.
The rising demand for rubber (especially from emerging markets such as China) and
price fluctuations make raw material procurement one of the industry top priorities in
the years ahead.
Customers
Customers in developed nations are becoming increasingly attracted by performance
products offering tread longevity, reduced rolling resistance, improved handling,
durability, and safety. As technological progress speeds up, buyers will value more
these characteristics of tyres. In emerging markets, consumer expectations will remain
more related to prices than to any ecological attributes a tyre may present.


48

3.1. Competitive environment Global market share

New players have been eating into the Big Threes market share

Change in market share of the global players
unit: %

For most of the history of the tyre
industry, the top three leaders have
remained unchanged, with Bridgestone
and Michelin battling for first position.
The results for fiscal 2009 and the first
half of 2010 also confirm Bridgestones
supremacy in the industry.
Although in 2000 the Big Three held
almost 60% of the whole market share,
this proportion has gradually declined
over the last decade, reaching 46% in
2008. This trend is likely to continue,
as smaller players competing on
volume and low-pricing strategies keep
on increasing their market shares. Such
is the case of emerging countries,
especially China, where domestic tyre
manufacturers have doubled their sales
both in volume and value over the past
decade, and this development is set to
continue.

0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2000 2001 2002 2003 2004 2005 2006 2007 2008
Mi chel i n Goodyear Bri dgestone Others

Source: Xerfi Global. Primary source: Bridgestone.
43%
54%


49

3.1. Competitive environment Small-scale players

For instance, in China, domestic makers are increasing their market share

Domestic tyre manufacturers in China
unit: million euros
Company Net sales 2006 Net sales 2009 % change
Hangzhou Zhongce 703.4 1,747.7 148.5%
Triangle Group 825.4 1,325.7 60.6%
GITI Tyre 439.5 1,241.7 182.5%
Shandong Linglong 365.3 1,236.7 238.5%

According to the China Association of
Automobile Manufacturers (CAAM),
the Chinese automotive market is
heading for stable growth", predicted
to be at 16% for the years to come.
That's the market's average annual
growth rate in the 15 years before 2008.
Under these circumstances, tyre
demand is increasing. But international
players will have to face stiffer
competition from domestic
manufacturers, who have seen their
market share rise constantly over the
past years.
In line with growing tyre demand,
major tyre companies have announced
production capacity expansion plans:
Sumitomo Rubber Industries Ltd. plans
to build its second tyre plant in China
to meet rising demand for radial tyres.

Aeolus Tyre 323.8 580.6 79.3%
Source: Xerfi Global. Primary source: tyre press.


50

3.2. Business models Diversification

Most groups are focused on their core business

Tyre operations of diversified groups
unit: mn euros, % of net sales

The process of manufacturing tyres is
complex and capital intensive. Groups
such as Goodyear, Michelin or Cooper
are exclusively dedicated to their core
business: tyres.
A second category includes companies
that manufacture other rubber goods
except tyres, such as Yokohama and
Bridgestone, on the one hand, or
companies that operate in completely
different market, such as Pirelli who
owns real estate subsidiary.
Continental is a special case: the group
is a first-line supplier of parts for the
automotive industry (interior, power
trains etc.).
A companys facilities are generally
specialised by tyre product (passenger
car or tuck) and by type of tyre (bias
or radial) produced.

Source: Xerfi Global. Primary source: annual reports.

Hankook
Pirelli
Sumit omo
Cooper
Goodyear
Michelin
Bri dgest one
Cont inent al
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0 3,000 6,000 9,000 12,000 15,000 18,000
Tyre operations net sales
T
y
r
e

s
h
a
r
e

i
n

n
e
t

s
a
l
e
s
Over 80%
specialization


51

3.2. Business models

and leaders are present in every market segment
Market presence of leading tyre manufacturers
Types of tyre
Company
Passenger car
and light truck
Heavy truck
and bus
Two-wheel
Off-the-road
vehicle
Aircraft
Civil
engineering
Agricultura
l
Bridgestone
Michelin
Goodyear
Continental

Sumitomo

Pirelli
Yokohama

Hankook

Cooper


There are two different types of tyre: bias-ply constructed tyres or radial constructed tyres. Radial tyre construction allow more tread
contact with the road surface (providing increased safety) and also present less forward rolling resistance, thus improving fuel
economy. Radial tyres have a longer lifespan than bias-ply tyres, and the transition from bias to radial tyres, which began in the mid
70s, has been a factor in reducing growth of domestic demand for replacement tyres.
Most tyre production in the developed countries (North America, Western Europe, Japan) is of radial tyres: nearly all car tyres for
original equipment manufacturers and over 80% of truck and bus tyres are radial. In emerging economies, the radial-tyre proportion
does not exceed 60%.


52

3.2. Business models Strategic alliances

Leading players are looking to increase the value of their products
Partnerships and alliances in the tyre industry
WITH RETAIL CHAINS AND
TYRE DEALERS

Michelin with the fifth largest
independent truck tyre dealer Snider
Tyre Co.

WITH CARMAKERS

In the premium segment,
Hankook struck deals with
Porsche , Audi A4, Daimler E-
Class, Volvo XC60, Aston
Martin, BMW, Bentley
WITH OTHER TYRE COMPANIES

Sumitomo and Goodyear: joint
ventures for production and sales
activities in Europe and North
America.
Cooper and Kumho

PARTNERSHI
PS AND
ALLIANCES
TECHNOLOGICAL
PARTNERSHIPS

Pirelli with Brembo and
Magneti Marelli for the Cyber
Tyre
Pirelli runs a joint research
laboratory with Politecnico
University of Turin

The global rubber tyre manufacturing
industry is fairly concentrated, dominated
by large multinationals.

Competition in the industry is based on
factors such as the influence of brand
loyalty, capital requirements related to
building or modernizing manufacturing
facilities, and maintaining highly advanced
research and development facilities in order
to secure innovations that are increasingly
important to customers: in the original
equipment market tyre makers compete to
secure contracts, while in the replacement
segment consumers have multiple choices.

This is leading to an increasing number of
strategic alliances and partnerships intra
and extra-industry.

WITH STRATEGIC SUPPLIERS

Michelin in South America has a
technical
assistance partnership,
Michelin supports 52,000 hectares of
natural rubber plantations.

MARKETING
PARTNERSHIPS

Pirelli becoming official
sponsor of the Formula 1
starting 2011


53

3.2. Business models Vertical integration

Most tyre companies are vertically integrated
Vertical integration of tyre companies

Rubber tyre manufacturing companies tend
to be highly vertically integrated. There is a
growing trend in the industry to own rubber
plantations because it creates a strong
competitive advantage. Michelin for
instance, owns and operates six rubber
plantations (one located in Latin America
and the others in West Africa and Asia),
while Goodyear Tyre and Rubber Company
has recently invested in two new synthetic
rubber plants.

Further down the line, many tyre
companies own and operate their own
distribution systems: Cooper has five
distribution centres and five sales offices in
Europe and Michelin has two integrated
tyre Distribution and Service networks,
Euromaster and TCI. The Korean Regional
Headquarters of Hankook operates over
2,100 direct-run and franchised dealerships.

Source: Xerfi Global

Raw material suppliers

Tyre production facilities

Distribution networks


54

3.3. Geographical presence Presence on the main geographic markets

Industry leaders are still mainly focused on their domestic market

Geographical presence of companies
key: +++ = predominant presence in the region; ++ = important presence; + marginal presence

Geographic market
Company Country
Europe North America Latin America Asia-Pacific Africa Middle East
Bridgestone

++ ++ ++ ++ ++
Michelin

++ ++ ++ ++ +
Goodyear

++ ++ + ++ +
Continental

++ + + + +
Sumitomo

+ + + ++ +
Pirelli

++ + ++ + +
Yokohama

+ + ++ + +
Hankook

+ + ++ ++ +
Cooper

++ ++ + +
Source: Xerfi Global with companies annual reports and web sites


55

3.3. Geographical presence Operations in emerging markets

and are planning to expand their presence in emerging markets

Bridgestone is set to invest $540 mn between 2010 and 2013 to build a car and truck
tyre plant near Pune, India, to support growing demand for radial tyres in Asia and an
additional $142 mn over two years to expand capacity for passenger tyres at its plant in
Poznan, Poland, by nearly a third.

One of the industry leaders, Michelin, plans to invest $870 mn to build a truck and off-
the-road tyre plant in Tiruvallur, near Channai in southern India in the ucoming years.

Sumitomo is another major player with an eye on the Chinese tyre market: it will spend
$297 mn to build a passenger tyre plant in Changsha, China, with production expected
to start by July 2012.

The Pirelli Group intends to reinforce its presence and to invest more in Brazil. The
300 mn US dollars of total investments in the 2008-2011 period are destined one third
for research and development and the remainder for increasing the production capacity.
The new investments will enable a 20% increase in car and motorcycle tyre production.
Pirelli aims to increase tyre production in eastern Europe, namely at its factory in
Slatina, Romania: the 250 mn investment is to be carried out between 2009 and 2011.

Enjoying rapidly increasing demand, Hankook is completing a plant expansion project
in Hungary, which is scheduled to start operations in 2011, when annual output will
total 10 mn units (from 5 mn currently). Another project to build a new plant capable of
producing five mn tyres a year by 2013 is seriously being considered.


56

3.4. Brand strategy Multi-brand versus single-brand

Multi-brand strategies are dominant among global leaders

Tyre brands of global leaders.
Company Brands
Bridgestone Ecopia, Firestone
Michelin BF Goodrich, Kleber, Uniroyal , Warrior
Goodyear Kelly, Fulda
Continental Continental, General Tyre, Uniroyal, Barum
Sumitomo Dunlop, Falkon
Pirelli Pirelli
Yokohama Advan
Hankook Ventus, Smart

Brand loyalty is revealed when car
owners replace tyres on their cars with
the same brand as that originally
installed. As a result, tyre
manufacturers attempt to obtain
original equipment contracts. Original
equipment contracts are also attractive
to tyre companies because they reduce
distribution expenses and advertising
costs.
Most tyre groups pursue a multi-brand
strategy. This strategy allows them to
be present on different market
segments. Companies develop global
brands or regional brands; for instance,
Michelin sells Kleber tyres only in
Europe, Uniroyal in North America and
Warrior tyres in China.

Among the world leaders, only Pirelli
has implemented a single brand
strategy.

Cooper Cooper, Discoverer, Roadmaster, Mastercraft
Source: Xerfi Global with companies annual reports and web sites.


57

3.5. Differentiation strategies Case studies

Cooper: emphasises high quality tyres for the replacement market

U.S. Light Vehicle replacement tyre market
unit: %

A different strategy for competing in the
tyre industry is illustrated by one relatively
small firm in the sector. Cooper Tire of
Findlay, Ohio, emphasises high quality
tyres aimed at the replacement market in
North America (no original equipment),
where it holds a 13 percent market share,
according to the companys 2009 releases.

The success of the company is largely
explained by its cooperation with about
1,700 independent dealers rather than using
a chain of company-owned stores for
selling its tyres. Cooper encourages long
term relationships with each dealer rather
than cultivating transaction-based rapports.

Cooper has shown resilience despite the
crisis, and together with Hankook, it is the
only company that in 2009 secured margins
even higher than in 2005-2008 (see
annexes).

Others
87%
Cooper
13%

Source: Xerfi Global. Primary source: Cooper annual reports.


58

3.5. Differentiation strategies

Hankook: more than 70% of its sales are made abroad
Growth rates in the tyre industry
unit: % of change

-30% -20% -10% 0% 10% 20% 30%
Bri dgestone
Conti nental
Goodyear
Sumi tomo
Mi chel i n
Yokohama
Cooper
Hankook
2005-2008 2009

Another successful story in the tyre industry is
Hankook of South Korea, a company that has
not only survived the crisis, but managed 15%
growth in 2009. This has strengthened its
position as the worlds eight-largest tyre
manufacturer and laid the groundwork for a
further rise.
Hankook has followed a four-part strategy:
increased capacity, "product renovation,"
improved overseas distribution, and
reinforcement of sales and R&D efforts.
With five large-scale factories in three countries
(Korea, China and Hungary), about 70% of its
total sales come from overseas. The company
focuses on boosting sales in Korea (its home
market) and China (its second largest market)
where distribution channels exclusively handling
Hankook products were reorganised to expand
the sales of premium tyres.
The company has strengthened brand value by
introducing diverse new products and engaging
in aggressive marketing activities.


59


Michelin: securing rubber is at the core of its strategy
SWOT analysis of Michelin
STRENGTHS
Global brand recognition
Trend-setter in innovation
Natural rubber suppliers
and distribution system
integration

WEAKNESSES

Weaker presence in the
emerging markets

MICHELIN

Michelin takes vertical integration to a
new level: while natural rubber is subject
to sharp price fluctuations and rising
demand, developing and maintaining
rubber tree farms is a major priority for
Michelin, which uses nearly 10% of the
worlds natural rubber output.
Michelin is directly involved in the
production of natural rubber through its
three latex processing units in Brazil and
its 20% stake in SIPH (Socit
Internationale de Plantations dHvas),
which operates rubber plantations in West
Africa (Nigeria, Cote dIvoire, Ghana and
Benin).
Michelin remains the trend-setter in terms
of industry innovation. This positioning,
combined with a strong presence on global
markets, brand recognition and integrated
operations, is translated into elevated
operational margins (10%) and global
leadership in the high performance
segments.

OPPORTUNITIE
S
Presence in every
geographical region
Strong growth in the
emerging economies
Better economic outlook
in mature economies

THREATS
Financial performance
dependent on the state of
the economy (change in
raw material prices,
exchange rates)
Bridgestones aggressive
strategy in Europe


60

3.6. Outlook I nvestments

From cutting back on investment, to an infusion of capital planned for the years to come

I nvestments planned by tyre manufacturers for the period between 2010 and 2013
( Plans to boost capacity; Plans to build new plant)
Bridgestone
Cooper
Michelin
Goodyear
Pirelli
Yokohama
JK Tyre
(India)

Nexen (S
Korea)

Cheng Shin
Double
Coin
(China)

Hankook
Continental
Sumitomo
Toyo

United
States
Brazil Poland Romania Hungary Russia
Indonesi
a
Thailand India China Korea Japan


61

3.7. Ranking Net sales

All companies but Hankook recorded lower sales in 2009 compared to 2008
Net sales
unit: million euros
0 5,000 10,000 15,000 20,000 25,000 30,000
Cooper
Hankook
Yokohama
Sumitomo
Pirelli
Continental
Michelin
Bridgestone
Goodyear
2008
2009



62

3.7. Ranking Ranking by operating margins

Continental and the Japanese tyre manufacturers have the highest margins
Groups operating margins from tyre operations in 2009
unit: %
0% 2% 4% 6% 8% 10% 12% 14% 16%
Goodyear
Cooper
Pirelli
Michelin
Hankook
Sumit omo
Yokohama
Bridgestone
Continent al



63

4. Company profiles


64

4.1. Bridgestone Company Overview

Fiscal year ended March, 31
st
2010
Headquarters
Tokyo, Japan

Key figures
Net consolidated sales 19.7 billion
Operating income 577 million
Net consolidated profit 7.6 million
Staff 137,135

The roots of the Bridgestone Group date back to the establishment of Bridgestone
Tyre Co., Ltd. in 1931. Founder Shojiro Ishibashi used an English translation of his
surname to name the company.
Tyres account for about 80% of Bridgestone Group sales. Besides a wide variety of
tyres, Bridgestone also expanded its operations into chemical and industrial
products, sporting goods and bicycles, supply tyres for trucks and buses,
construction machinery and mining.
The Bridgestone Group sells its products in more than 150 countries around the
world and employs over 137,000 people.

International presence
Japan 26.2% of net sales
The Americas 43.3% of net sales
Europe 13.9% of net sales
Others 16.7% of net sales
Bridgestone
Net sales 2009: 19.7 bn euros
Tyre Business

83 % of sales
Diversified Products Business

17% of sales


65

4.1. Bridgestone Business segments

SEGMENT
% OF
SALES
OPERATIN
G MARGIN
OPERATIONS
MAIN
CUSTOMER
S
TYRE BUSINESS 82.8% 3.5%
Tyres: tyres and tyre tubes for passenger cars, trucks, buses,
construction and mining vehicles, industrial machinery,
agricultural machinery, aircraft, and motorcycles, retreading
materials and services, automotive maintenance and repair
services, tyre raw materials, and others.
Consumers and
companies
DIVERSIFIED
PRODUCTS
17.2% 0.1%
Chemical and I ndustrial products: Vehicle parts,
polyurethane foam and related products, electronic precision
parts, industrial materials-related products, civil engineering
and construction materials and equipment, and other.
Sporting goods: Golf balls, golf clubs, other sporting goods,
and other.
Bicycles: Bicycles, bicycle-related goods, and other.
Other: Finance, and other.
Consumers and
companies
Source: Xerfi Global with Bridgestone.


66

4.1. Bridgestone Corporate strategy

I mproved operational efficiency

2009 was a challenging year for the worlds leading tyre manufacturer, who saw its profit drop
by 19.7%. To enhance its competitiveness and operational efficiency, Bridgestone aims to
consolidate production at manufacturing sites that are the most competitive. In this view, one
restructuring measure taken was the closing of Bridgestone Australia Ltd.s Adelaide Plant and
Bridgestone New Zealand Ltd.s Christchurch Plant.

Focus on environmentally friendly
products in mature markets

In the mature markets of developed countries, where there is little anticipation for steady
growth, consumers are shifting their preferences to environmentally friendly products and
services. In line with this trend, the company has introduced enhanced environmentally friendly
products such as ECOPIA brand tyres in Europe and North America. In the same regions,
where retread businesses for buses and trucks accounts for roughly half of the tyre demand, the
company intends to expand its retread tyre operations.

Expanding manufacturing sites in strong
growth potential markets

In developing countries with anticipated economic development, Bridgestone has announced its
decision to:
- invest in increased production at its passenger tyre plant in Wuxi, China, in April 2009.
- start production of truck and bus radial tyres in India, where demand for these tyres will likely
increase as the countrys expressway network and as higher-performance trucks become more
prevalent.
- open a retread materials plant in Thailand in order to respond to the strong growth in the Asia
market, in July 2009.
Since the demand for ultra-large off-the-road radial tyres (specialty tyres) for construction and
mining vehicles remains strong, Bridgestone plans to increase its production capacity in this
segment by about 30% compared to 2009 levels


67

4.1. Bridgestone Recent events

Date Event
J anuary 2009 Bridgestone Americas Tyre Operations announced the suspension of passenger and light truck tyre manufacturing
at the LaVergne Plant in LaVergne, Tennessee (United States).
February 2009 Bridgestone started operations at its retread learning centre in Kodaira, Tokyo. Retreading prolongs the life of
tyres and is applicable for large-size tyres such as trucks, aviation etc.
April 2009 Bridgestone announced an increase in radial passenger tyre production capacity at its Wuxi Plant in Jiangsu
Province, China, in line with growing market demand.
May 2009 With the intention to set foothold into emerging European markets, Bridgestone officially opened its truck and
bus tyre plant in Stargard, Poland.
J une 2009 Bridgestone started production at its Kitakyushu Plant (where it manufactures large and ultra-large tyres): the
production capacity expansion project was finished 3 months ahead of schedule.
J uly 2009

Bridgestone announced it will build a plant for retread materials in Thailand: the retread business is mature in
both Europe and the United States for use on trucks and buses and rapidly growing in emerging markets.
Bridgestone announced that its aircraft radial tyres will be supplied as standard equipment on the Airbus A350
XWB.
October 2009

Bridgestone Australia announced the restructure of its operations: operations in Australia are no longer viable due
to increasingly difficult market conditions.
November 2009 Bridgestone announced it would cease supplying tyres to the FIA Formula One World Championship.
December 2009 Bridgestone announced that the Toyota Sienna would be the first vehicle to fit the third generation of runflat tyres
as standard equipment.
J anuary 2010

Bridgestone will produce truck and bus radial tyres at Indore, India plant: in India, demand for truck tyres is
expected to keep growing due to the expansion of the expressways and road infrastructure as a result of economic
growth in the nation as well as the introduction of higher-performance trucks.
March 2010

Bridgestone will establish new plant in India: the plant will begin passenger car radial tyre and truck and bus
radial tyre production in response to increasing demand in these segments in India.
May 2010

Bridgestone announces the expansion of Karawang tyre plant in Indonesia: the Karawang plant is already
undergoing an expansion project which started in August 2007 to increase its daily production capacity by 8,400
units. However, with global demand expected to continue growing, the Bridgestone Group determined that
further expansion of the plant is necessary to meet market demands.
Source: Xerfi Global. Primary source: business press


68

4.1. Bridgestone Key data

Bridgestones net sales
unit: mn euros; annual % change

Bridgestones tyre sales
unit: mn euros
15,000
18,000
21,000
24,000
27,000
2005 2006 2007 2008 2009
-30%
-20%
-10%
0%
10%
20%

0
5,000
10,000
15,000
20,000
25,000
2005 2006 2007 2008 2009

Source: Bridgestone annual reports. Source: Bridgestone annual reports.

Chart 1:

The decline in global automotive production and sluggish
demand in the replacement market sent sales down to 19.7 bn, a
19.7% decrease from fiscal 2008, partially impacted by a
stronger Japanese yen. After having peaked at 25.8 bn in 2007,
the groups revenues fell by 4.6% in 2008 and 19.7% in 2009.
Chart 2:

The slump in demand in the automotive industry affected results
of tyre companies who make approximately 25% of sales in the
original equipment market, Bridgestone being no exception. Its
tyre sales were down 18% compared to the previous year, a
21.7% decline from the pre-crisis level.


69

4.1. Bridgestone Revenues by business segment

Bridgestones revenues by segment
unit: share in %

Bridgestones change in revenues by segment
unit: annual % change in revenues
Tyres
83%
Di versi fi ed
products
17%

-30% -25% -20% -15% -10% -5% 0%
Tyre
Diversified
product s
2008/ 2007 change in %
2009/ 2008 change in %


Chart 1:

Net sales in the tyre segment totalled 16.4 bn euros, an 18%
decrease from fiscal 2008. Tyre operations account for 83% of
the groups revenues, or 2% more than in 2008.

Chart 2:

In 2009, the net sales in diversified products segment saw a
sharper fall than in the tyre segment, 27.1% versus 18%
respectively. This continued the declining trend in the 2008
revenues, which dropped 4.6% for tyres and 4.4% for
Bridgestones diversified operations in 2007.


70

4.1. Bridgestone Revenues by region

Bridgestones revenues by region
unit: share in %

Bridgestones change in revenues by region
Japan
26.2%
The Ameri cas
43.3%
Europe
13.9%
Other
16.7%

-30% -20% -10% 0% 10% 20%
Europe
United St at es
Ot her
Japan
2008/ 2007
change in %
2009/ 2008
change in %


Chart 1:

Bridgestone has maintained its global leader position in the tyre
business. Almost half of the companys revenues were generated
by its American operations in 2009. Also present in Europe,
Bridgestone derives about one quarter of its revenues from
Japan.
Chart 2:

The only region where Bridgestones sales saw an improvement
in 2008 was Japan, but that was not the case for 2009. The group
reported lower sales in all regional operations, markedly a more
than 20% drop in Japan and Europe. A slighter drop was noted
in emerging economies.


71

4.1. Bridgestone Operating margin

Bridgestones operating profit
unit: mn euros

Bridgestones operating margin
unit: %
500
1,000
1,500
2,000
2005 2006 2007 2008 2009

7.9%
2.9%
4.1%
7.4% 6.4%
0%
5%
10%
2005 2006 2007 2008 2009


Chart 1:

Bridgestone reported declining profits for the second consecutive
year. With a significant impact from such factors as sharply
higher prices for raw materials, operating income decreased
42.5%, to 0.5 bn euros in 2009 and 47.4% in 2008.
Chart 2:

Bridgestones operating margin continued to drop from 2007,
due mainly to a sharp increase in raw material price and partly to
yen appreciation. Declining profitability has forced Bridgestone
to reshuffle its operations and close down two plants in Australia
and New Zealand.


72

4.1. Bridgestone Research and development

Bridgestones R&D expenditures
unit: mn euros

Bridgestones R&D ratio
unit: %
600
650
700
750
2005 2006 2007 2008 2009

3,0%
3,3%
2,9%
2,6%
2,9%
2%
3%
4%
2005 2006 2007 2008 2009

Source: Bridgestone annual reports Source: Bridgestone annual reports

Chart 1:

Bridgestone spent about 650 mn for research and development
in 2009, 8% less than in 2008. Nonetheless, it is important to
bear in mind that Bridgestone sales were down more than 40% in
FY2009, which explains the decrease.
Chart 2:

Despite its declining sales, Bridgestones R&D ratio has stood at
a constant ratio of more or less 3% of net sales for the past 5
years. This reflects Bridgestones commitment to product
innovation, an important pillar of growth in mature markets,
where innovations drive sales.


73

4.1. Bridgestone Statistical data
Year Sales Change in %
2006 20.5 11.4%
2007 22.8 11.1%
2008 25.8 13.3%
2009 24.6 -4.6%

unit: bn euros ; annual % change ;

Source: Xerfi Global with Bridgestone annual reports

2009 19.8 -19.7%

Region % of sales Change in %
(2009/2008)
Change in %
(2008/2007)
Japan 26.2% -21.3% -8.1%
The Americas 43.3% -19.9% -6.3%
Europe 13.9% -23.6% -8.0%

unit: share in %; annual % change


Others 16.7% -12.5% 12.8%

Year Change in Operating profit Operating margin
2005 8.2% 7.9%
2006 -10.8% 6.4%
2007 31.0% 7.4%

unit: annual % change; share in %


2008 -47.4% 4.1%
2009 -42.5% 2.9%

Year R&D expenses R&D ratio
2005 8.9% 3.0%
2006 9.2% 2.9%
2007 0.1% 2.6%

Bridgestones R&D expenses


2008 7.5% 2.9%
2009 -8.0% 3.3%

Segment % of sales Change in %
(2009/2008)
Change in %
(2008/2007)
Tyres 82.8% -18.0% -4.6%
Bridgestones revenues by activity
Source: Xerfi Global with Bridgestone annual report
Diversified Products 17.2% -27.1% -4.4%


74

4.2. Michelin Company Overview

Fiscal year ended December, 31
st
2009
Headquarters
Clermont-Ferrand, France

Key figures
Net consolidated sales 14.8 bn
Operating income 862 mn
Net consolidated profit 104 mn
Staff 109,000

In 1832, Aristide Barbier and Edouard Daubre opened in Clermont-Ferrand a
factory for farming equipment and rubber items. In 1889, Edouard Michelin
became manager of the company renamed Michelin et Cie.
Also, Michelin holds a 35% share of the French Map and Guide market and a 73%
share of the road map segment. The Michelin Guide is the benchmark for gourmet
dining guides with a 40% market share.
With 72 production facilities in 19 countries, the Michelin Group sells its products
in more than 170 countries around the world and employs over 109,000 people.

North America and Mexico 33.7% of net sales
Other zones 20.7% of net sales

Michelin
Specialty tyre businesses

13.7% of sales
Truck tyres and related
distribution
30 % of sales
Passenger car and light
truck tyres
56% of sales


75

4.2. Michelin Business segments

SEGMENT
% OF
SALES
OPERATIN
G MARGIN
OPERATIONS
MAIN CUSTOMERS
PASSENGER CAR
AND LIGHT
TRUCK
TYRES AND
RELATED
DISTRIBUTION
55.9%

8.0%

Michelin covers every segment of the replacement market with a
strong presence in all geographic regions, especially Europe.

Michelin is a leader in fuel-efficient tyre technologies, its
flagship being the Michelin Energy Saver tyre.

Consumers and
companies
TRUCK TYRES
AND RELATED
DISTRIBUTION
30.4%

-1.5%

Tyres account for 2 to 3% of truck fleet operating expense and
have a significant impact on fuel consumption, which can
represent up to 30% of a trucks operating cost.
Hence the importance of total cost of ownership, which includes
tyre life, retreading and fuel consumptions.
Consumers and
companies
SPECIALTY
BUSINESSES
13.7%

13.3%

High-technology products and solutions in every market:
in earthmover and aircraft tyres,
in agricultural tyres
in the two-wheel segment, Michelin offers motorcycle
and scooter tyres
The specialty businesses also include:
Maps, guides and electronic services
Michelin Lifestyle.
Consumers and
companies
Source: Xerfi Global with Michelin.


76

4.2. Michelin Corporate strategy

Extending technological
leadership

In ten years, Michelins patent portfolio has almost tripled. With technology centres in
North America, Europe and Asia, Michelin seeks to adjust its product portfolio to local
climate conditions, so as to be able to respond pro-actively to emerging needs. This
approach is visible in Asia, where research and development facilities are located in
China, Thailand and Japan.
Enhancing competitiveness
In response to the break in its markets due to the recent economic slowdown, Michelin
has prioritised improving its organisational efficiency:
- standardising processes and components and sourcing globally in order to reduce capital
expenditure;
- resources are being focused on plants that are bigger or more specialised ;
- additional production capacity is being built in fast emerging markets such as China,
India and Brazil.
I nvesting in growth markets

In the past five years, the percentage of sales generated in high growth countries has
increased to 32% from 26%.
In line with recent advance in the global marketplace, Michelin is stepping up the rate of
expansion in China, India, and Brazil to keep up with these surging markets, by
increasing production capacity, expanding its partner dealership networks, introducing
assistance services, and setting up retread plants to encourage the trucking industry to
switch to radial tyres.


77

4.2. Michelin Recent events

Date Event
February 2009 Michelin is supplying NASAs next generation Lunar Rover Vehicle with specially designed tyres meant to
help lunar vehicles maintain mobility under extreme conditions over harsh terrain.
March 2009 The Michelin guide France 2009 celebrates its 100th edition.
April 2009 In response to the unprecedented drop in market demand, Michelin is set to close its North America BF
Goodrich tyre manufacturing plant in Opelika, Alabama.
Michelin tread pressing plant in Mexico will be closed, due to overcapacity in its North American retread
operations.
Production is to be shifted to the U.S. retread plant
J uly 2009
The first co-branded MICHELIN/Harley-Davidson motorcycle tyre was launched: Michelin and Harley-
Davidson have joined forces to develop the all-new MICHELIN Scorcher 31 tyre, which carries both
companies trademarks.
October 2009 Michelin and Agco Corporation signed a cooperation agreement: Michelin and Agco, a leading agriculture
equipment company, are working together to strengthen relations especially in three areas: research and
development, marketing and supply chain.
J anuary 2010 Michelin announces the end of tyre production at its Ota plant, Japan: despite measures taken to improve
productivity, reduce production costs and refocus on the production of complex products, the production cost
at Ota plant remains around twice as high as those of other plants serving that tyre segment.
February 2010 Michelin is the transferee of the 30% shares of Shanghai Michelin Warrior Tyre Co. Ltd: after the transaction,
the Double Coin Group will continue to grant Michelin the exclusive right to use the Warrior trademark for
its passenger car and light truck tyre businesses for two years.
The company launches the new Michelin Alpin, its latest winter tyre, the fourth-generation Michelin Alpin.
The new tyre has been designed to fit a wide range of vehicles, from city cars and compacts to multiple
purpose vehicles (MPVs) and sedans.
March 2010
Michelin Power Pure The Lightest Two-Compound Sport Premium motorcycle tyre was unveiled by
Michelin.
J uly 2010 Michelin and Air France-KLM signed a long term contract: as a result Michelin tyres will be fitted on all
aircraft operated by the Air France-KLM group and by other airlines for which Air France and KLM provide
maintenance services.


78

4.2. Michelin Key data

Michelins net sales

Michelins free cash flow
unit: mn euros
14,000
16,000
18,000
2005 2006 2007 2008 2009
-12%
-8%
-4%
0%
4%
8%

-500
-100
300
700
1,100
1,500
2005 2006 2007 2008 2009

Source: Michelin annual reports Source: Michelin annual reports

Chart 1:

In 2009, under the circumstances of a recessionary environment,
Michelin recorded a limited 9.8% decline in net sales (compared
to its main rival, Bridgestones 19.7% drop in revenues) to 14.8
bn.

Chart 2:

Free cash flow reached 1,387 mn in 2009 compared to a
negative 359 mn in 2008. The improvement was driven by a
tight management of both working capital (particularly
inventory) and capital expenditure, which was reduced to 672
mn from 1,271 mn in 2008.


79

4.2. Michelin Revenues by segment

Michelins revenues by segment
unit: share in %

Michelins change in revenues by segment
Passenger car
and l i ght truck
tyres
56%
Truck tyres
30%
Speci al ty tyre
busi ness
14%

-18% -13% -8% -3% 2% 7%
Passenger car and
l ight t ruck tyres
Truck tyres
Specialt y t yre
businesses
2009/2008 change i n % 2008/ 2007 change in %

Source: Michelin annual reports. Source: Michelin annual reports.

Chart 1:

In 2009, it was the passenger cars and light truck tyres
operations that contributed the most to the groups revenues
(56% of net sales), ahead of truck tyres (30%) and specialty tyre
(14%) operations.
Chart 2:

Net sales in the passenger car and light truck tyres segment stood
at 8,280mn for 2009, down 4.5% on 2008. The truck tyres and
related distribution segment was down 17.2%, while the
specialty tyre business income declined by almost 13%.


80

4.2. Michelin Revenues by region

Michelins revenues by region
unit: share in %

Michelins change in revenues by region
Europe
45.6%
North
Ameri ca and
Mexi co
33.7%
Other regi ons
20.7%

-25% -15% -5% 5% 15%
Europe
North America
and Mexico
Other regi ons
2009/ 2008 change in % 2008/ 2007 change in %


Chart 1:

Europes largest company generated about 45.6% of its sales
from its main market operations in 2009. Michelin derives about
55% of its revenues from other regions, mostly Nafta and
emerging countries.
Chart 2:

Michelin reported lower sales in Europe and Nafta in particular.
The company mentions lower sales volume and falling prices per
unit as the main contributors to the decline in sales.


81

4.2. Michelin Operating margin

Michelins operating profit
unit: mn euros

Michelins operating margin
unit: %
800
1,100
1,400
1,700
2005 2006 2007 2008 2009

8.8%
5.8%
5.6%
9.8%
8.2%
4%
6%
8%
10%
2005 2006 2007 2008 2009


Chart 1:

Operating income stood at 862 mn for the year 2009, compared
with 920 mn in 2008, reflecting the combined impact of: the
steep 14.8% decline in unit sales and the underutilization of
production capacity.
Chart 2:

Despite a 9.8% decline in net sales, in 2009, Michelin saw a
slight improvement in operating margin before nonrecurring
items to 5.8% from 5.6% the previous year.


82

4.2. Michelin Research and development

Michelins R&D expenditures
unit: mn euros

Michelins R&D ratio
unit: %
490
530
570
610
2005 2006 2007 2008 2009

3.6%
3.4%
3.0% 3.3%
3.6%
2%
3%
4%
2005 2006 2007 2008 2009


Chart 1:

One of Michelins strategic axes involves strengthening its
technological leader position; therefore R&D expenses are
essential to deliver ground-breaking innovations. Michelin
allocates around 500 million euros to R&D each year.
Chart 2:

Michelins R&D ratio stood at 3.4% in 2009, slightly lower than
the 3.6% ratio of 2005 and 2006, and at higher levels than the
peak years of the recent economic crisis.


83

4.2. Michelin Statistical data
2005 15.5 3.6%
2006 16.3 5.1%
2007 16.8 2.9%
2008 16.4 -2.7%

Michelins net sales
unit: bn euros ; annual % change

Source: Xerfi Global with Michelin annual reports.

2009 14.8 -9.8%

(2009/2008)
Change in %
(2008/2007)

Passenger car and light truck tyres
and related distribution
55.9% -4.5% -4.1%

distribution
30.4% -17.2% -3.7%

Michelins revenues by activity


Specialty tyre businesses 13.7% -12.0% 5.5%

(2009/2008)
Change in %
(2008/2007)
Europe 45.6% -17.2% -4.1%

North America and
Mexico
33.7% -3.2% -6.5%



Other regions 20.7% -1.0% 8.6%

Year Change in operating profit Operating margin
2005 8.2% 7.9%
2006 -10.8% 6.4%
2007 31.0% 7.4%
2008 -47.4% 4.1%



2009 -42.5% 2.9%

2005 8.94% 3.0%
2006 9.16% 2.9%
2007 0.07% 2.6%

Michelins R&D expenses


2008 7.50% 2.9%
2009 -8.03% 3.3%


84

The Goodyear Tire & Rubber Company


4.3. Goodyear Company Overview

st
2009
Headquarters
Akron, Ohio -USA

Key figures
Net consolidated profit -269 mn
Staff 69,000

The Goodyear TIre & Rubber Company is one of the worlds leading tyre
companies, with operations in most regions of the world, founded in 1898 by 38-
year-old Frank Seiberling.
Goodyear is the leading tyre manufacturer both in North and Latin America and
Europe's second largest tyre maker.
The company operates more than 57 plants in 23 countries, with marketing
operations stretching in almost every country around the world.
The company manufactures products for most applications, from passenger, light
truck and motorcycle tyres (more than 75% of sales) to commercial truck, off-the-
road (OTR) and aviation tyres. Additionally it runs several truck retreading centres.

North American Tyre 42.8% of sales
Europe, Middle East and Africa Tyre 35.6% of sales
Latin American Tyre 11.1% of sales
Asia Pacific Tyre 10.5% of sales


85

4.3. Goodyear Business segments

SEGMENT
% OF
SALES
OPERATIN
G MARGIN
OPERATIONS
MAIN
CUSTOMERS
NORTH AMERICAN TYRE
42.8%

-4.4%

World Headquarters, North American Tyre headquarters,
Innovation Centre, racing tyres, chemicals, tyre proving
grounds, global purchasing, airship operations, research and
development facilities
Consumers and
companies
EUROPE, MIDDLE
EAST AND AFRICA
TYRE

35.6%

-2.9%

Brussels: Goodyear Dunlop Tyres Europe headquarters;
Europe, Middle East & Africa Tyre headquarters.
Tyres, steel tyre cord, tyre molds, innovation Centre, tyre
proving grounds.
Consumers and
companies
LATIN AMERICAN
TYRE.

11.1% 16.6%
Sao Paolo: Latin American Tyre headquarters, tyres, aero
retread facility
Retread materials
Tyres, tyre proving grounds

ASIA PACIFIC TYRE

10.5%

12.3%

Shanghai: Asia Pacific Tyre headquarters
Natural rubber purchasing
Tyres, Aero retread facility
Consumers and
companies
Source: Xerfi Global with Goodyear.


86

4.3. Goodyear Corporate strategy

Product Leadership

Goodyear is one of the industry leaders with worldwide known brands. To address market
challenges, the company wishes to achieve product leadership. In order to reach its targets,
Goodyear plans to build on:
the speed of the new product engine: rapidly launch products globally based on market-
backed innovation
key fuel efficient products such as Assurance FuelMax (North America) or EfficientGrip
(Europe).

Advantaged Supply Chain

The strategic decision to build the Advantaged Supply Chain programme is instrumental to
Goodyears competitive position. This programme is focused on specific segments of the
market, especially targeting original equipment fitments with a high potential of replacement
pull-through. The Advantaged Supply Chain programme already contributed to a reduction of
roughly 1 billion in its 2009 inventory.

Lower Cost Structure

Goodyear intends to obtain a lower cost structure by:

Achieving cost savings exceeding 1 billion dollars over the next three year period;
Increasing its low-cost production;
Raising its low-cost sourcing to more than 900 million dollars by the end of 2010;
Lowering unabsorbed fixed costs as volumes continue to recover.


87

4.3. Goodyear Recent events

Date
Event
February 2009 During the JP Morgan investor conference, Goodyear highlights industry challenges as a result of the
economic crisis and ensuing production cuts.
Mars 2009 Goodyear celebrated 100 years of innovation: on this occasion, Goodyear Aviation announced its Flight
Eagle product line enlargement. In this respect, Goodyear Tire & Rubber Companys aviation business
introduces its Flight Eagle LT (Light Turbine) tyre for the rapidly growing entry level, very light and light
jet business segments.
Goodyear introduces its latest product, the Assurance Fuel Max tyre: it features a proprietary fuel-saving
tread compound that helps reduce energy loss as the tyre rolls, so less gas (4%) is required to keep the tyre
rolling.
April 2009
Goodyear was named Americas most respected automotive company.
May 2009 Goodyear wins an important military supply contract: BAE Systems (a UK-based defence, security and
aerospace systems company) has selected the Goodyear 395/85R20 MV/T tyre as the exclusive fitment for its
FMTV (Family of Medium Tactical Vehicles), the U.S. Armys vehicle of choice in the 2.5 to 10 ton
capacity. The contract calls for supplying approximately 100,000 tyres to be delivered through 2010.
Goodyear announces plan to discontinue consumer tyre production at French plant and it will further explore
divesting EMEA, Latin America farm tyre businesses. These actions are part of Goodyears strategy to reduce
high-cost manufacturing capacity globally.
J une 2009 Goodyear moves to align capacity with weak industry demand: Goodyear will move its tyre plant in Union
City (USA), to a five-day, three-shift operation from continuous production to align capacity with weak
industry demand.
J uly 2009 Goodyear announced the closing of its Philippines tyre plant as part of a strategy to address uncompetitive
manufacturing capacity globally.
August 2009 Goodyear and NASA develop the Spring Tyre for Moon, possibly Earth.
November 2009 Goodyear Assurance Fuel Max tyres were selected to be fitted on the 2010 Toyota Prius vehicle.
J anuary 2010 Toyota selects Dunlop tyres for 2011 Sienna SE. The 2011 Toyota Sienna SE was conceived as a sporty
design and responsive performance vehicle.
April 2010 Kramer becomes Goodyear's president & CEO.
J une 2010 Goodyear announces leadership changes in finance organization, names new vice president & treasurer.
Source: Xerfi Global. Primary source: business press.


88

4.3. Goodyear Key data

Goodyears net sales

Goodyears capital expenditures
unit: mn euros
11,000
12,000
13,000
14,000
15,000
2005 2006 2007 2008 2009
-30%
-20%
-10%
0%
10%
20%

0
100
200
300
400
500
600
700
800
2005 2006 2007 2008 2009

Source: Goodyear annual reports. Source: Goodyear annual reports.

Chart 1:

Net sales were 11.6 bn in 2009, compared to 13.9 bn in 2008.
Net sales declined due to lower tyre volume, primarily in North
American Tyre and Africa Middle East and a decrease in other
tyre-related businesses, primarily in North American tyres third
party sales of chemical products.
Chart 2:

The impact of the global economic slowdown led to a scale-
down of investments for Goodyear. Capital expenditures were
535mn in 2009, compared to 752mn in 2008 and 530mn in
2007. The increase in capital expenditures in 2008 primarily
related to projects targeted at increasing capacity for high value-
added tyres was scaled back in 2009 due to the recessionary
environment.


89

4.3. Goodyear Segment volumes

Goodyears volumes sold by segment
unit: mn tyres

Goodyears change in volumes sold by segment
unit: annual % change in volumes
Repl acement
Uni ts
77%
OEUni ts
23%

-25% -20% -15% -10% -5% 0%
Replacement Units
Original equipment
units
Total


Chart 1:

In 2009, Goodyear managed to sell 128 mn tyres in the
replacement unit business, 4.6% less than in 2008. Lower
volumes were recorded for the OE unit, where the slump in the
automotive industry contributed to a sharper decrease, 22.5%
less volume than in 2008.
Chart 2:

The decrease in worldwide tyre unit sales of 17.5 mn units, or
9.5% compared to 2008, included a decrease of 11.4 mn OE
units, or 22.5%, due primarily to diminishing consumer markets
in North American, Europe, Africa, Middle East and to
recessionary economic conditions resulting in lower demand.


90

4.3. Goodyear Revenues by region

Goodyears revenues by region
unit: share in %

Goodyears change in revenues by region
unit: annual % change
North
Ameri can Tyre
42.8%
Europe,
Mi ddl e East
and Afri ca
Tyre
35.6%
Lati n
Ameri can Tyre
11.1%
Asi a Paci fi c
Tyre
10.5%

-25% -15% -5% 5% 15%
North American
Tyre
Europe, Middle East
and Africa Tyre
Latin Amer ican Tyre
Asia Pacific Tyre
2009/ 2008 change in % 2008/2007 change i n %


Chart 1:

Goodyear makes the most part of its sales -42.8%- in North
America, and is the leading tyre maker in the region. Another
significant proportion of its sales are made in the EMEA
(Europe, Africa, Middle East) region, 35.6%, while sales in
Latin America and Asia Pacific stood at 11.1% and 10.5% in
2009.
Chart 2:

North American Tyre unit sales in 2009 decreased 8.4 mn units
or 11.9% from the 2008 period, Europe, Middle East and Africa
Tyre unit sales in 2009 decreased by 7.6 mn units or 10.3%. The
decline in the Asia Pacific tyre unit was partially offset by
increased growth in vehicle production in China.


91

4.3. Goodyear Operating margin

Goodyears operating income
unit: mn euros

Goodyears operating margin
unit: %
200
400
600
800
1,000
2005 2006 2007 2008 2009

6.4%
2.3%
4.1%
6.3%
4.2%
2%
4%
6%
8%
2005 2006 2007 2008 2009


Chart 1:

Operating income in 2009 reflected the impact of a sharp drop in
units of tyres sold and was below 2008 levels by more than half,
reaching 267 mn. In addition, high raw materials cost put more
pressure on the companys profitability.
Chart 2:

Despite a steep decline in operating income, especially due to the
contraction of sales in its main markets of N America and the
EMEA, Goodyear managed to maintain a 2.3% margin in 2009,
but lower than the 4.1% margin in 2008.


92

4.3. Goodyear Research and development

Goodyears R&D expenditures
unit: mn euros

Goodyears R&D ratio
unit: %
200
220
240
260
280
2005 2006 2007 2008 2009

2.0%
2.1%
1.9%
1.9%
2.0%
1%
2%
3%
2005 2006 2007 2008 2009


Chart 1:

Goodyear is one of the leaders of technological innovation in the
tyre industry, and research and development is important to
maintain this position. Although the R&D expenses were 7.9%
lower than 2008 with a total of 241 mn, the R&D ratio stood at
an unchanged rate of 2.1% of total revenues.
Chart 2:

Goodyears R&D ratio has changed little over the past five
years. It was maintained at around 2% of revenues in 2009 as
well. Goodyear is a market maker in terms of innovation (it
launched 79 new products in 2009-2010), together with Michelin
and Bridgestone.


93

4.3. Goodyear Statistical data
Year Sales Change in % Volume
2005 12.9 -1.4% 226.4
2006 13.4 3.6% 215
2007 14.0 4.8% 201.7
2008 13.9 -0.8% 184.5

Goodyears net sales
unit: bn euros ; annual % change ; million of tyres

Source: Xerfi Global with Goodyear annual reports.

2009 11.6 -16.4% 167

(2009/2008)
Change in %
(2008/2007)
Replacement Units 76.6% -4.5% -5.5%
OE Units 22.3% -22.6% -15.7%

Goodyears volumes by activity


Total -9.5% -8.5%

(2009/2008)
Change in %
(2008/2007)
North American Tyre 42.8% -15.5% -6.8%

Europe, Middle East and
Africa Tyre
35.6% -20.7% 1.4%
Latin American Tyre 11.1% -13.1% 11.5%



Asia Pacific Tyre 10.5% -6.6% 8.0%
Year Operating profit Operating margin
2005 23.0% 6.4%
2006 -32.5% 4.2%
2007 56.5% 6.3%
2008 -34.6% 4.1%

Goodyears operating profit


2009 -53.7% 2.3%
2005 8.9% 3.0%
2006 9.1% 2.9%
2007 0.0% 2.6%

Goodyears R&D expenses


2008 7.5% 2.9%
2009 -8.0% 3.3%


94

4.4. Continental Company Overview

Fiscal year ended December 31
st
, 2009
Headquarters
Hanover, Germany

Key figures
Net consolidated sales 20 bn
Operating income -1,040 mn
Net consolidated profit -1,606 mn
Staff 134,434

The company was founded in 1871, in Hanover, Germany and is among the five
largest automotive suppliers in the world and the second largest in Europe.
Acquisitions in the fields of brakes and chassis of Teves in 1998 as well as of
Temic in 2001 in the field of electronic technologies have turned Continental from
a pure rubber based manufacturer into a leading automotive technology supplier.
The company comprises a total of six divisions, developing products ranging from
brake systems to passenger car and truck tyres.
It owns nearly 190 production and R&D sites in 39 countries.

Germany 29% of net sales
Rest of Europe 34% of net sales
NAFTA region 18% of net sales
Asia 14% of net sales

Other countries 5% of net sales
Continental
20 bn net sales
Automotive Group
60% of net sales
Chassis
22 % of sales
Powertrain
17% of sales
Interior
21% of sales
Rubber Group
40% of net sales
Passenger Tyres
23 % of sales
Commercial Vehicle
Tyres 5 %
ContiTech
12 % of sales


95

4.4. Continental Business segments

DIVISION % OF SALES
OPERATIN
G MARGIN
OPERATIONS
MAIN
CUSTOMERS
CONTINENTAL
PASSENGER LIGHT
TRUCK TYRES
23% 11.4%
It consists of the following units:
Original Equipment
Replacement Business Europe & Africa
Replacement Business, The Americas
Replacement Business, Asia Pacific
Two-Wheel Tyres

The division develops and manufactures tyres for compact,
standard-size and full-size cars, vans, motorcycles and
bicycles.

Worldwide brands: premium Continental brand, budget
Barum brand
Regional brands: Uniroyal, Semperit, General Tyre, Viking
etc.
Consumers and
companies
CONTINENTAL
COMMERCIAL
VEHICLES TYRES
5%

-4.7%
The truck division comprises the following units:
Truck Tyres, Europe the market leader
Truck Tyres, The Americas
Truck Tyres, Asia Pacific
Industrial Tyres
Consumers and
companies
CONTITECH 12% 7%
The ContiTech division is one of the worlds largest
specialists in rubber and plastics technology.
It develops and produces functional parts, components, and
systems for the automotive and other industries.
Companies
Source: Xerfi Global with Continental.


96

4.4. Continental Corporate strategy

Leading market positions

The Continental Group aims to be at least among the top three suppliers in every market it is
running operations. This is a central criterion for the group in the decision on whether or not to
enter a market.

Balance of sales between the automotive
industry and other sectors

Currently, around 67% of sales come from vehicle manufacturers primarily via business in the
Automotive Group.
The production of passenger cars and light and heavy trucks depends on factors such as economic
conditions, consumer spending and consumer preferences.
To cushion the negative effects of the cyclical automotive sector on business, Continentals goal
remains to generate at least 40% of consolidated sales from outside the automotive industry,
essentially from the tyre replacement market and ContiTechs various industries.

Taking advantage of growth opportunities

Continentals strategy in the coming years involves developing new products, particularly in the
European ultra high performance segment (UHP). This portion of the tyre market is expected to
grow by more than 6% in the following years.
Moreover, the Central and Eastern European markets, as well as expanding operations in Asia,
continue to be of long-term importance to its passenger car and light truck division.
As far as the truck tyre division is concerned, the key regions for the companys future growth
will be the Near and Middle East as well as Russia, Asia and Latin America. The opening of a
new representative office in Dubai, as well as the cooperation agreement with an Indian partner
are, among others, actions meant to prop Continentals growth strategy.


97

4.4. Continental Recent events

Date
Event
May 2009 Continental started a European tour with six new premium commercial vehicle tyres launched.
May 2009
Continental Tyre North America announced its cooperation with Marangoni Tread North America
(MTNA) in The US and Canada for fleet customers. In Mexico, a total retreading business model is
underway.
Continental has acquired the remaining 34 percent of shares in Continental Matador Rubber, Puchov
(Slovakia).
Continental is now 100% shareholder of Continental Matador Rubber. This action is in line with the
groups long-term strategy to address Eastern European markets from Puchov, Slovakia.
September 2009
Continental confirms entering the Indian truck tyre market, where around 12 mn commercial vehicle
tyres are required annually and high growth rates of around 7 percent have been forecast for the
region. Its Indian partner, Modi Tyres Company (New Delhi), produces and distributes around one
million commercial vehicle tyres each year.
Continental continues the expansion of its production capacity in its passenger car and light
commercial vehicle tyre plant in Timioara, Romania, also leading to the creation of around 200 new
jobs.
In the next two years Continental will allocate a two digit million euro amount for this project.
November 2009
Continental announced the opening of the new Asia headquarters and R&D center in Shanghai. All of
the corporation's divisions will be represented at the headquarters under one joint roof: Continental
Automotive Systems, Continental Tyres and ContiTech. This represents a significant landmark for the
growth of Continental in the China, a market that has become crucial for all tyre manufacturing
companies.
February 2010
Continental became the exclusive tyre partner and the official sponsor of 2014 FIFA World Cup in
Brazil.
March 2010
Continental announced price increases for its commercial vehicle tyres. This comes as a reaction to a
sharp rise in the cost of raw materials since the fall of 2009 which has affected all tyre companies.
J uly 2010
Continental holds machinery installation ceremony for its new tyre plant in Hefei, China.
The first phase of the 185 million euro investment project was considered to be successfully
accomplished.


98

4.4. Continental Key data

Continental Rubber groups net sales

Continental Rubber groups capital expenditure
unit: mn euros
5,700
6,000
6,300
6,600
2005 2006 2007 2008 2009
-12%
-7%
-2%
3%
8%

150
300
450
2007 2008 2009

Source: Continental annual reports. Source: Continental annual reports.

Chart 1:

In 2009, sales in the passenger and light truck tyre division and
the commercial vehicle tyre division amounted to 4.7 bn and
1.1 bn respectively, leading to a total of 5.8 bn. Net sales
declined due to lower tyre volume sold in mature markets such
as Europe, Continentals main region.
Chart 2:

Capital expenditure amounted to 4.1% of sales. Investments in
the passenger and light truck tyres division focused on cost
reduction. Important additions were made in the commercial
vehicle tyres division as a result of quality enhancement for
truck tyre production at the plants in Puchov, Slovakia, and
Mount Vernon, USA.


99

4.4. Continental Revenues by segment

Continental Tyres revenues by segment
unit: share in %

Continental Tyres revenues by segment
Passenger and
l i ght truck
tyres
82%
Commerci al
vehi cl e tyres
18%

-30% -25% -20% -15% -10% -5% 0% 5%
Passenger and
l ight truck tyres
Commerci al
vehicl e tyres


Chart 1:

Continental makes 82% of its revenues in the passenger and light
truck tyre division and the remaining 18% in its commercial
vehicle tyre operations, a segment whose share of revenue has
been gradually declining from its 23.7% level in 2005.
Chart 2:

Sales in the passenger and light truck tyre division fell by 7.9%
to 4,696.4 mn in 2009 compared with 2008, and by 24.1% to
1,065.6 mn in the Commercial Vehicle division.


100

4.4. Continental Revenues by region

Continental Tyres revenues by region
unit: share in %

Continental Tyres change in revenues by region
Other
Countries
5%
Germany
20%
Rest of
Europe
50%
NAFTA
20%
Asi a
5%

-3% -2% -1% 0% 1% 2% 3%
Germany
Rest of Europe
NAFTA
Asi a
Other Count ri es
2009/2008 change in % 2008/2007 change in %


Chart 1:

The biggest share in Continentals revenues is held by the
European zone, while NAFTA comes in second with 20%. The
remaining 10% of net sales are recorded in Asia and other
countries.
Chart 2:

Overall sales in Continentals tyre business fell in Europe in line
with declines in vehicle production, but recorded a slight growth
in The Americas region in contrast to the market trend.


101

4.4. Continental Operating margin

Continental Tyre Divisions operating income
unit: bn euros

Continental Tyre Divisions operating margin
unit: %
500
580
660
740
820
900
2005 2006 2007 2008 2009

14,1%
9,8%
8,9%
13,4%
12,8%
7%
11%
15%
2005 2006 2007 2008 2009


Chart 1:

Compared with 2008, the passenger and light truck tyres division
reported a decrease in EBIT (operating result) of 90 mn, or
14.4%, to 536.4 mn, while the commercial vehicle tyre division
reported a decrease in EBIT of 79.6 mn, or 269.8%, to 50.1
mn, an overall 565.9 mn for the tyre operations in 2009.
Chart 2:

In 2009, Continental tyre businesses recorded one of the highest
operating margins in the industry, thanks to the passenger and
light truck tyres division which offset the impact of the negative
margin in the commercial vehicle business.


102

4.4. Continental Research and development

Continental Tyres R&D expenditures
unit: mn euros

Continental Tyres R&D ratio
unit: %
110
130
150
170
2005 2006 2007 2008 2009

2.5%
2.8%
2.4%
2.4%
2.4%
1%
2%
3%
4%
2005 2006 2007 2008 2009


Chart 1:

Research and development expenses increased by 3.1 mn or 2%
year-on-year to 160 mn. The greater proportion of expenses
goes to the passenger tyre segment, 119.5 mn compared to 40
mn in the Commercial tyre division.
Chart 2:

Research and development expenses stand at 2.8% of sales, a
higher ratio than in previous years, when it stood at 2.4%, below
the Big Three average of 3%.


103

4.4. Continental Statistical data
2005 5.8 3.9%
2006 6.1 5.8%
2007 6.4 4.3%
2008 6.5 1.2%

Continental Tyre Divisions net sales

Source: Xerfi Global with Continental annual reports.

2009 5.7 -11.4%
Segment
% of consolidated sales
Change in %
(2009/2008)
Change in %
(2008/2007)

Passenger and Light
Truck tyres 23%
3.10% 1.00%

Continental Tyres revenues by activity


Commercial Vehicle
Tyres 5%
-3.10% 1.00%

Region
% of sales Change in %
(2009/2008)
Change in %
(2008/2007)
Germany 20% -1.1% -0.5%
Rest of Europe 49% -1.0% 2.5%
NAFTA 20% 0.7% -1.1%
Asia 5% 1.0% 0%



Other Countries 5% 2.0% 0%
2005 - 14.1%
2006
-4,2%
12.8%
2007
9,6%
13.4%
2008
-33,2%
8.9%

Continentals operating profit


2009
-1,8%
9.8%

2005 6.4% 2.5%
2006 2.4% 2.4%
2007 4.1% 2.4%

Continentals R&D expenses


2008 1.8% 2.4%
2009 1.9% 2.8%


104

PIRELLI
PIRELLI
TYRE
(100%)
PIRELLI
AMBIENTE
(51%)
PIRELLI & C.
ECO
TECHNOLOG
Y (51%)
PIRELLI
BROADBAN
D
SOLUTIONS
PIRELLI
REAL
ESTATE
(68%)
PIRELLI
LABS
(100%)

4.5. Pirelli Company Overview

st
2009
Headquarters
Milan, Italy

Pirelli Group Key figures
Net consolidated profit -23 mn
Staff 29,750

Pirelli Tyre has been the core business of the Pirelli Group for over a century: after
its foundation in 1872 by a young engineer named Giovanni Battista Pirelli, the
company diversified from insulated telegraph cable (1879) to the first bicycle tyres
(1890). The first automobile tyre came off the line in 1901.
Pirelli tyre designs, develops, manufactures and markets tyres - for motor vehicles,
industrial vehicles and motorcycles - and steel cord.
The Group runs 20 plants in 11 countries throughout the world.
Pirelli Tyre International presence
Italy 9% of sales
Rest of Europe 33% of sales
North America 8% of sales
Central and South America 34% of sales

Africa, Asia, Pacific 16% of sales


105

4.5. Pirelli Business segments

SEGMENT % OF SALES
OPERATING
MARGIN
OPERATIONS
MAIN
CUSTOME
RS
BUSINESS
CONSUME
R
70% 8.3%
The Consumer line includes tyres for vehicles generally used
by private individuals: for example, tyres for cars, SUVs, vans
and motorcycles.
Consumers
PIRELLI
TYRE
INDUSTRI
AL
BUSINESS
89.5
%
30% 9.6%
The Industrial line is for vehicles for the professional
transportation of goods or passengers. Products of this line
include tyres for trucks, buses, earth-moving equipment and
farm machinery. The Industrial line also includes the
production of steel cord, the technological component used to
produce high-performance radial tyres.
Companies
PIRELLI REAL ESTATE
SGR
6.1%

-1.7%

Fund & Asset management.
Commercial Asset Management & Services
Residential Asset Management & Services
NPL Asset Management & Services
Consumers and
companies
PIRELLI BROADBAND
ACCESS
3%

3%
The Pirelli Broadband Solutions portfolio consists of three
main product lines: residential and small business broadband
access routers, IP set-top-boxes, "extenders" (products to
create home broadband networks), solutions for fixed-mobile
convergence and remote management platforms.
Consumers and
companies
-
Pirelli Ambiente: production of quality fuel from waste
(CDR-Q); photovoltaic energy
-
Pirelli Labs are the core of advanced research for the entire
business of the Pirelli group
OTHER BUSINESSES 1.4%
-4%
Pirelli Eco Technologies is specialised in the creation of
technologies that can reduce emissions from diesel vehicles
and heating plants.
Companies
Source: Xerfi Global with Pirelli.


106

4.5. Pirelli Corporate strategy

Strengthening its leadership in the tyre
industry

The Pirelli Group prioritises its core business of tyres and the similar business of particulate
filters brought together in the Tyre and Parts Division. In this sense, the group disposed of
nonstrategic assets, including the stake held in Alcatel Lucent Submarine Networks, a sale
completed in March 2009 and the stake held in Telecom Italia S.p.A..

Green performance

In accordance to its three-year plan for 2009-2011, Pirelli is aiming to increase the green
proportion of its products from 20% to 40% over the period.
All the new tyres of the Cinturato line, a historic Pirelli Tyre brand, recently relaunched, are in
keeping with the companys green performance strategy, as are the tyres of the Winter
family.

I nvesting in growth markets

Investing in new or increased production capacity in Russia, China, Romania, Brazil and Italy
(especially due to the new industrial hub of Settimo Torinese, which will be completed in 2010
and be fully operational at the beginning of 2011) is a priority for Pirelli.
In keeping with the 2009-2011 business plan, in the three-year period the group is to devote
about 200 million dollars for capacity expansion in South America, in addition to the 100
million dollars already invested in the previous year. This strategy of reinforcement in the area
aims to consolidate Pirelli Groups leadership in the South American market. The new
investments in this region will enable a 20% increase in car and motorcycle tyre production.


107

4.5. Pirelli Recent events

Date
Event
J anuary 2009
Brembo, Magneti Marelli and Pirelli announced the start of technological cooperation aimed at developing
avant-garde solutions for the Italian and international automotive industry.
March, 2009
Pirelli Tyre launched Cinturato P7, the first environment-friendly high-performance tyre for the high end of
the market.
Pirelli signed a "Memorandum of Understanding" with the Hixih Group (formerly the Yinhe Group), a
partner of the group since 2005 in the production of tyres, for the creation of a filter production plant at
Yanzhou, in the province of Shandong (China).
September 2009
In keeping with the strategy and the objectives of the 2009-2011 business plan of focusing on the core
business, the company decided to simplify its organisational structure and bring together all the activities in
direct support of the core business in the new "Tyre and Parts" Division, responsibility which was entrusted to
Francesco Gori, who also maintains the position of Chief Executive Officer of Pirelli Tyre S.p.A..
November 2009
The European Investment Bank (EIB) and Pirelli Tyre S.p.A. signed a financing agreement for 100 million
euros granted by the EIB to support Pirelli Group projects in the area of research and development for the
2009-2012 period.
Pirelli and Russian Technologies signed an agreement for the implementation of the Memorandum on
Terms. The agreement provides for an extension of the collaboration begun in the context of the joint venture
for the production of tyres and steel cord in Russia.
December 2009

The European Investment Bank (EIB) and Pirelli Tyre S.p.A. signed a 50 mn euro loan agreement. The loan
is to be used to increase the production of tyres for cars and light commercial vehicles at the Pirelli factory in
Slatina, Romania, and will be a part of the investments of 250 mn euros announced by the group for its
Romanian business for the three years 2009-2011.
February 2010
Pirelli Tyre announced a 4 to 6 % price increase in European markets for car, motorcycle and truck tyres.
May 2010
The Board of Directors approved plan for separation of its real estate divison, Pirelli Re. This demonstrates
Pirellis engagement to focus on its core business: tyres.
J une 2010
Pirelli confirmed as exclusive Formula One tyre supplier from 2011 to 2013.


108

4.5. Pirelli Key data

Pirelli Tyres net sales

Pirelli Groups cash flow from operating activities
unit: mn euros
3,200
3,400
3,600
3,800
4,000
4,200
4,400
2005 2006 2007 2008 2009
-4%
0%
4%
8%
12%
16%

0
200
400
600
2005 2006 2007 2008 2009

Source: Pirelli annual reports. Source: Pirelli annual reports.

Chart 1:

Net sales in financial year 2009 came out at 3,992.9 mn euros,
down 2.6% compared to 2008. This drop is explained by a
negative change in volumes (-5.8%) and an adverse effect of the
exchange rates (-1.6%)
Chart 2:

The Pirelli group generated a considerable amount of cash flow
from its operating activities in 2009, thanks to the positive
contribution of the Pirelli Tyre cash flow (395 mn euros) and
income from the disposal of nonstrategic assets.


109

4.5. Pirelli Revenues by segment

Pirelli Tyres revenues by segment
unit: share in %

Pirelli Tyres change in revenues by segment
Car tyres
63%
Motorcycle
tyres
8%
Tyres for
industrial
vehicles
27%
Steelcord /
other tyres
2%

-3% -2% -1% 0% 1% 2% 3% 4%
Car tyres
Tyresfor
i ndust rial vehicles
Mot orcycl e tyres
St eelcord / other
t yres
2009/2008 change i n % 2008/ 2007 change in %


Chart 1:

As the distribution of net sales by product shows, Pirelli Tyre
makes most of its revenues (63%) from its car tyre operations.
Additionally, its industrial tyre operations bring 29% of all
income and the motorcycle tyres comprise 8% of net sales.
Chart 2:

The contraction of sales was more abrupt in the Industrial
segment (-10.3%), while in the consumer segment (cars and
motorcycle tyres) there was slight overall growth (+0.9%).
2008).


110

4.5. Pirelli Revenues by region

Pirelli Tyres revenues by region
unit: share in %

Pirelli Tyres change in revenues by region
Afri ca, Asi a
Paci fi c
16.0%
Ital y
9.0%
Rest of
Europe
33.0%
North
Ameri ca
8.0%
Central and
South
Ameri ca
34.0%

-4% -2% 0% 2% 4% 6%
Italy
Rest of Europe
North America
Cent ral and
South America
Africa, Asia,
Pacific


Chart 1:
Pirelli Tyres has, above all, managed to establish a strong
presence in the emerging markets of Central and South America,
a region that makes up for 34% of its revenues. Europe accounts
for 41% and the Africa, Asia pacific regions for 16% of its sales.
Chart 2:
2009 was a year with a market scenario of recession above all in
the mature markets. Consequently, the proportion of turnover in
Europe fell from 45% in 2008 to 42%, owing chiefly to the
reduction of volumes in the Original Equipment channel.
Nonetheless, light growth was achieved in its other markets.


111

4.5. Pirelli Operating margin

Pirellis operating income
unit: bn euros

Pirellis Tyres operating margin
unit: %
240
290
340
390
2005 2006 2007 2008 2009

9.1%
8.7%
6.1%
8.6%
8.7%
5%
7%
9%
11%
2005 2006 2007 2008 2009


Chart 1:

2009 operating income was up compared to the previous year,
amounting to 344.5 mn, a result of Pirelli Tyres effort to
increase its efficiency (namely the 15% reduction of workforce in
Western Europe) by improving the industrial framework and
adjusting the overheads structure to the new market scenarios.

Chart 2:

Pirelli Tyres high operating margins are a result of the positive
trend in the costs of factors of production, in particular thanks to
the reduction in the cost of raw materials. This prompted an
improvement in the results achieved in 2008, more than
offsetting the negative effect of the reduction in sales volumes.


112

4.5. Pirelli Research and development

Pirelli Tyres R&D expenditure
unit: mn euros

Pirelli Tyres R&D ratio
unit: %
120
130
140
150
160
2005 2006 2007 2008 2009

4.0%
3.3%
3.5%
3.6%
3.7%
2%
3%
4%
5%
2005 2006 2007 2008 2009


Chart 1:

In 2009, R&D expenditures amounted to 133 mn euros.
Traditionally, Pirelli Tyres R&D activity is focused on
sustaining improvement and innovation of the product portfolio
(UHP, Winter, Runflat, SUV and motorcycle tyres).
Chart 2:

In 2009, a year which required closer attention to costs, Pirelli
reduced the ratio of research and development expenses to net
sales, from 3.5% to 3.3%, but this level still keeps the company
at the top in the industry worldwide in terms of process and
product innovation, which have always been central elements for
the competitive position in the sector.


113

4.5. Pirelli Statistical data
2005 3.6 11.6%
2006 3.9 8.7%
2007 4.1 4.3%
2008 4.1 -1.4%


Source: Xerfi Global with Pirelli annual reports.

2009 3.9 -2.6%
Segment
(2009/2008)
Change in %
(2008/2007)
Car tyres 63% 3% -1%

Motovelo tyres 8% -1% 1%

Tyres for industrial
vehicles
27% -2% 1%

Pirelli Tyres revenues by activity


Steel Cord / other tyres 2% 0% -1%
Region
(2009/2008)
Change in %
(2008/2007)
Italy 9% 0% -1%
Rest of Europe 33% -3% -2%
North America 8% 1% -1%
Central and South America 34% 1% 5%



Africa, Asia, Pacific 16% 1% -1%
2005 19.6% 9.0%
2006 3.9% 8.6%
2007 4.6% 8.6%
2008 -29.8% 6.1%

Pirellis operating profit


2009 37.8% 8.6%
2005 1.4% 4.0%
2006 0.7% 3.7%
2007 0.7% 3.6%

Pirellis R&D expenses


2008 -2.0% 3.5%
2009 -8.3% 3.3%


114

4.6. Sumitomo Company Overview

st
2009
Headquarters
Kobe, Japan

Sumitomo Group Key figures
Net consolidated profit 69.8 mn
Staff 20,797

The company is part of the Sumitomo group, one of Japan's largest keiretsu, or
conglomerates and was established as Dunlop Rubber (Far East) Ltd. in 1909, and
later on in 1917 became Sumitomo Rubber Industries, Ltd.
The Sumitomo Rubber Group manufactures and sells tyres in brands such as
Dunlop, Falken and Goodyear as well as vibration control damper, artificial turf,
printing blankets, fine rubber, rubber gloves and others.
Sumitomo Tyre International presence
Japan 55.4% of net consolidated sales
North America 14.2% of net consolidated sales
Europe 4.5% of net consolidated sales
Asia 12.5% of net consolidated sales

Other areas 13.4% of net consolidated sales

SUMITOMO

Tyre Business
82.7%

Sports Business
12.4%

Industrial and Other
Products Business
4.9%


115

4.6. Sumitomo Business segments

SEGMENT % OF SALES
OPERATING
MARGIN
OPERATIONS
MAIN
CUSTOMERS
TYRE BUSINESS

82.6%

-1.7%

Operations in the tyre segment involve the production
and sale of a wide range of tyres for a variety of
vehicles and applications such as passenger cars,
trucks, buses, motorcycles and industrial applications.

Consumers and
companies
SPORTS BUSINESS

12.5% 7.2%
Operations in the Sports segment involve the
production and sale of a variety of sporting goods,
principally golf balls, golf clubs, golf bags and tennis
balls.
Consumers and
companies
INDUSTRIAL AND
OTHER PRODUCTS
BUSINESS

5.1%

4.3%

Operations in the Industrial and Other Products
segment involve the production and sale of a variety of
rubber and rubber-based products, including vibration-
control products, flooring for gymnasiums, all-weather
tennis courts, track and field facilities, marine fenders,
precision rubber parts for office machines, and blankets
for offset printing presses.
Consumers and
companies
Source: Xerfi Global with Sumitomo.


116

4.6. Sumitomo Corporate strategy

Further development of fuel-efficient
tyres

Anticipating a growing demand for better-performing fuel-efficient tyres in the original
equipment market, the Sumitomo Tyre is dedicated to improving their capabilities in material
development and production technology and to accelerate the development and
commercialisation of eco-friendly tyres, including those that are fuel-efficient and fossil
resource free. A specific instance of such initiatives is the Material Development Headquarters,
established in 2010.

Optimal global tyre production structure

In order to pursue future growth. Sumitomo Tyre launched sales subsidiaries and commenced
full-scale sales activities in areas such as Russia, Latin America and the Middle East, where
demand expansion is anticipated.
In North America, Sumitomo strives to reinforce the marketing capabilities of Falken Tyre
Corporation, while establishing Falken Tyre Europe GmbH in Germany seeking to bolster sales
under the Falken brand in Europe.
Another focal point lies in the Asian replacement market, where Sumitomo Tyre plans to double
sales by 2015, a target underpinned by enhanced production at its factory in Thailand.

Stable procurement of natural rubber
At the end of 2009, Sumitomo Tyre decided to jointly establish a natural rubber plantation and a
processing factory with a local company in Thailand. This is expected to further accelerate our
R&D activities for eco-friendly tyres, including the development of new rubber materials for
fuel-efficient tyres.

Cost reduction

Sumitomo Tyre intends to cut costs dramatically for small-inch tyres, which are expected to
achieve growth in Japan and the rest of Asia.


117

4.6. Sumitomo Recent events

Date
Event
April 2009
Sumitomo Rubber received "Environmental Achievement of the Year" award for developing 100% fossil
resource free tyres at Tyre Technology Expo 2009 in Hamburg, Germany, and for its ambition to start sales of
100% free of fossil resource materials by 2013.
May 2009

Sumitomo Rubber produced its 100,000,000th tyre on Monday, April 27, 2009 at its facility in Indonesia.

J uly 2009
Falken Tyre Europe was established in order to expand sales of Falken and Ohtsu branded replacement tyres
in Europe: Sumitomo Rubber Industries, Ltd., Japan, announced the foundation of a tyre selling company
named Falken Tyre Europe GmbH in Offenbach, Germany as part of its global sales strengthening activities.
September 2009
Sumitomo Rubber Tyre technical centre opened in Kobe on the occasion of the companys 100th anniversary.
Sumitomo Rubber Industries announced its Dunlop's 4th Generation Runflat tyres: with its new thermal
control technology, the company has succeeded in developing the 4th generation runflat tyres which provide
ride comfort equivalent to or better than standard tyres, while maintaining runflat performance of the tyre.
October 2009

SRI Tyre Trading announced an increase in overseas tyre prices: Dunlop, Falken, Sumitomo and Ohtsu brand
tyres for passenger cars, light trucks, trucks and buses and motorcycles in Asia, Middle East, North America,
Europe, Central and South America, Africa and the Pacific region.
March 2010
Sumitomo Rubber received "Tyre Technology of the Year" award for its 4th generation Runflat tyre
technology at the Tyre Technology Expo 2010.
May 2010
'FALKEN' tyre entered the Nurbrugring 24-hour race: the Sumitomo Rubber group set up the 'Falken
motorsports' team, and entered the 'Nurbrugring 24- hour race taking place in Germany, in order to enhance
the image of FALKEN branded tyres.
J uly 2010
Sumitomo Rubber announced its plan to establish a second tyre plant in China to produce and sell radial
passenger car tyre in China. Construction is set to begin in September 2010, with a total investment of 297
million dollars. The companys decision to establish the new plant is driven by Chinas surging car
production.


118

4.6. Sumitomo Key data

Sumitomo Rubber consolidated net sales

Sumitomo Tyre net sales
unit: mn euros
3,000
3,500
4,000
4,500
5,000
2005 2006 2007 2008 2009
-20%
-10%
0%
10%

3,000
3,300
3,600
3,900
2005 2006 2007 2008 2009

Source: Sumitomo annual reports. Source: Sumitomo annual reports.

Chart 1:

Significantly affected by weak private-sector consumption and a
slump in corporate capital investment in the Sports and Industrial
businesses, and a decline in the Japanese automobile production
in the tyre segment, Sumitomo Rubbers consolidated net sales
for 2009 fell by 13.3% to 4027 mn.
Chart 2:

In addition to a 30% year-on-year decrease in the Japanese
automobile production that had a major impact on the sales of
original equipment tyres, demand in the replacement tyre market
also dropped substantially both in Japan and overseas, leading to
a 13.5% decline in the Tyre business in 2009.


119

4.6. Sumitomo Revenues by segment

Sumitomo Rubbers revenues by segment
unit: share in %

Sumitomo Rubbers revenues by segment
Tyre
83%
Sports
12%
Industri al
5%

-20% -10% 0% 10% 20% 30%
Industrial
Sports
Tyre


Chart 1:

In 2009, Sumitomos tyre operations accounted for 83% of
consolidated sales. The sports and industrial segment shares in
the groups revenue were 12% and 5% respectively. These
proportions are relatively unchanged from previous years.
Chart 2:

Confronted with a business environment of unparalleled
severity, Sumitomo Group recorded a negative performance in
each segment of its activity (-13.5%, -11.7 and -10.3 in its tyre,
sports and industrial operations respectively).


120

4.6. Sumitomo Revenues by region

Sumitomo Rubbers revenues by region
unit: share in %

Sumitomo Rubbers change in revenues by region
Other areas
16.0%
Japan
55.4%
North
Ameri ca
14.2%
Europe
4.5%
Asi a
12.5%

-40% -30% -20% -10% 0% 10% 20% 30%
Japan
North America
Europe
Asia
Other areas
2009/ 2008 change i n % 2008/ 2007 change in %


Chart 1:

Sumitomos sales are largely concentrated in Japan and countries
in the Asian zone (67.9%), and to a milder extent in North
America (14.2%), Europe (4.5%) and other zones (16%).

Chart 2:

Although managing to expand its sales in all regions in the 2008
fiscal year, in 2009 the Groups sales were on a downhill trend.
The weakest performance was recorded in Europe with sales
declining by 28.7%.


121

4.6. Sumitomo Operating margin

Sumitomo Tyres operating income
unit: mn euros

Sumitomo Tyres operating margin
unit: %
0
70
140
210
280
350
2005 2006 2007 2008 2009

10.0%
5.2%
3.2%
7.5%
6.1%
2%
5%
7%
10%
12%
2005 2006 2007 2008 2009


Chart 1:

Although consolidated net sales for fiscal 2009 fell 13.3% year
on year on the consolidated earnings front, operating income
grew 12.0% to 220.6 million.
Chart 2:

In 2009, Sumitomo Tyre accomplished a better performance in
its operating margin which stood at 5.2% compared to 3.2% in
2008, despite challenging economic environment with high raw
materials price volatility.


122

4.6. Sumitomo Research and development

Sumitomo Tyre R&D expenditures
unit: mn euros

Sumitomo Tyres R&D ratio
unit: %
60
70
80
90
100
110
120
130
2005 2006 2007 2008 2009

3,3%
3,2%
3,2%
3,4%
3,3%
3%
3%
4%
2005 2006 2007 2008 2009


Chart 1:

In its tyre business, Sumitomo Rubber Industries has pursued
technology exchange based on a global alliance with the
Goodyear Tyre & Rubber Company since 1999. In fiscal 2009,
R&D expenses in the tyre business totalled 114.3 mn.
Chart 2:

The Sumitomo Rubber Group devotes more than 3% of its
revenues to research and development (R&D) activity. In 2009,
the ratio was at 3.4%, as the group completed its Tyre Technical
Centre in 2009, the key facility of the Groups R&D activities
for tyre technology.


123

4.6. Sumitomo Statistical data

2005 3.0 -2.8%
2006 3.3 8.1%
2007 3.6 11.1%
2008 3.8 4.7%


Source: Xerfi Global with Sumitomo annual reports.

2009 3.3 -13.5%

(2009/2008)
Change in %
(2008/2007)
Tyre 82.6% -13.5% 4.7%

Sports 12.5% -11.7% 24.8%

Sumitomo Rubber revenues by activity


Industrial 5.1% -10.3% 1.1%

(2009/2008)
Change in %
(2008/2007)
Japan 55.4% -11.6 % 1.6%
North America 14.2% -13.2% 12.6%
Europe 4.5% -28.7% 24.2%
Asia 12.5% -10.2% 24.5%

Sumitomo Rubber revenues by region


Other areas 13.4% -16.6% 2.7%
2005 20.7% 10.0%
2006 -33.6% 6.1%
2007 36.1% 7.5%
2008 -55.8% 3.2%

Sumitomo Tyre operating profit


2009 42.1% 5.2%
2005 2.4% 3.3%
2006 8.0% 3.3%
2007 6.2% 3.2%

Sumitomos R&D expenses


2008 6.0% 3.2%
2009 -6.9% 3.4%


124

4.7. Yokohama Company Overview

Fiscal year ended March, 31
st
2010
Headquarters
Tokyo, Japan

Key figures
Net consolidated sales 3.5bn
Operating income 97.6mn
Net consolidated profit -43mn
Staff 17,566

The company was established in October 1917, in Yokohama, Kanagawa
Prefecture, with a joint investment from Yokohama Cable Manufacturing Co., Ltd.
(currently Furukawa Electric Co., Ltd.) and BF Goodrich, of the United States.
With 9 factory and plants located in Japan, and overseas subsidiaries located in
countries such as Canada, Australia, Philippines, Vietnam, Thailand, Yokohama is
the worlds 7
th
largest tyre manufacturing company.
Yokohama employs more than 17,000 people.

Japan 69.5% of net sales
The Americas 19.4% of net sales
Others 6.4% of net sales
The Yokohama Rubber Company, Limited
Tyre Group

78.8 % of sales
Multiple Business group

21.2% of sales


125

4.7. Yokohama Business segments

SEGMENT
% OF
SALES
OPERATING
MARGIN
OPERATIONS
MAIN
CUSTOMERS
TYRE GROUP 82.8% 5.6%
Tyres for passenger cars, trucks and buses, light trucks,
mining and construction equipment and industrial vehicles,
aluminium alloy wheels and automobile-related components
Consumers and
companies
MULTIPLE BUSINESS 17.2% 1.0%
Conveyor belts, rubber plates, various hoses, marine fenders,
oil spill containment booms, marine hoses, air springs,
highway joints, rubber support, anti-seismic laminated rubber
sheets for buildings, water-repellent materials, water-proof
materials, sound and vibration-proof materials, adhesives,
sealants, golf-related products, fuel tanks for aircraft, aircraft
seals, acoustic materials, bathroom units and drinking water
tanks for commercial aircrafts, various honeycomb products,
metal tanks, oil tanks, thermal insulation materials,
couplings, sealing compounds, V-band couplings, flex
couplings, electromagnetic shielding materials, information
processing services, real estate and others
Consumers and
companies
Source: Xerfi Global with Yokohama.


126

4.7. Yokohama Corporate strategy

Enhance presence in the global
marketplace

Yokohama wishes to increase its global presence through a top-of-the-line product in fuel-saving
tyres, the dB super E-spec (marketed in Japan as the DNA dB super E-spec). The product was
launched in the United States in July 2009.
Also, the company is investing in the promotion of high-performance tyres under the ADVAN
name, Yokohama Rubbers global flagship brand.

Respond flexibly to demand in each
market

Following an expansion in the production capacity for tyres in accordance with regional
circumstances, Yokohama is building a plant to produce passenger car tyres in south-western
Russia in the Lipetsk special economic zone. The plant, scheduled to begin operation in 2011,
will have an initial yearly production capacity of 1.4 million tyres.
Furthermore, the company plans to restart the temporarily suspended expansion project at
Yokohama Rubbers subsidiary Hangzhou Yokohama Tyre Co Ltd in China and increasing its
production capacity to 4.1 mn tyres a year, from 3 mn currently.

Globalise operations more thoroughly

Yokohama Rubber is considering outsourcing some tyre production to local partners in emerging
markets to better respond to demand in different regions.


127

4.7. Yokohama Recent events

Date Event
Yokohama announced organisational changes aiming to improve its business efficiency
and speed by reorganising itself around six functional centres: sales & marketing,
production, technical, quality assurance, product planning, and logistics. May 2009
Yokohama Rubber decided to retreat from aircraft tyre business, since it saw no strong
growth potential for the future.
November 2009

The next-generation eco tyre technology "AIRTEX Advanced Liner" is released. It is a
new material both impermeable (airtight) and flexible, and can substantially reduce the
volume of air naturally leaking from a tyre.
February 2010

Yokohama Rubber released "C.drive2," a new high-performance eco tyre for family
cars in all classes, from small to large.
April 2010

Yokohama Rubber held a groundbreaking ceremony for a new tyre plant in Russia. The
construction of the new tyre plant is aimed at delivering high quality tyres to the
Russian market in the fastest delay. Yokohama Rubber And Itochu Corporation
established a tyre sales company, Yokohama Russia, in 2005 in Moscow. Yokohama
Russia has increased sales at a steady pace, making Russia an important market for
Yokohama Rubber.
May 2010

The opening ceremony for its natural rubber processing factory in Thailand was held in
Surat Thani province. Teck Bee Hang has been Yokohamas largest Thai supplier of
natural rubber, however the processing factory location at the Malaysian boarder area
was considered insecure. The new factory area Surat Thani Province alleviates this
concern.
J une 2010
Yokohama announced its passenger car and light truck tyre plant in Thailand would
undergo expansion. The plant had an annual production capacity of 1.4 million tyres.
The production capacity is going to be expanded to 4 million tyres by April 2011.


128

4.7. Yokohama Key data

Yokohamas net sales

Yokohamas tyre sales
unit: mn euros
2,500
3,000
3,500
4,000
4,500
2005 2006 2007 2008 2009
-30%
-20%
-10%
0%
10%
20%

2,500
2,750
3,000
3,250
2005 2006 2007 2008 2009

Source: Yokohama annual reports. Source: Yokohama annual reports.

Chart 1:

Yokohama Rubber posted lower sales in FY 2009. Its sales were
down nearly 10% from 3.9 bn in 2008 to 3.5 bn. This result is
due mainly to the declining demand in mature markets such as
Japan, where Yokohama sells most of its products.
Chart 2:

The Groups overall decline in sales is also shown by the Tyre
business results in 2009. Revenues fell to 2.8 bn from the 3bn
recorded the year ending in March, 2008.


129

4.7. Yokohama Revenues by segment

Yokohamas revenues by segment
unit: share in %

Yokohamas change in revenue by segment
Tyres
79%
Mul ti pl e
Busi ness
21%

-15% -10% -5% 0% 5% 10% 15%
Tyre
Diversified
products


Chart 1:

Net sales in the tyre segment totalled 2.8 billion euro, an 8.1%
decrease from fiscal 2008. Tyre operations account for 79% of
the groups revenues, compared to 77.3% in 2008.

Chart 2:

The recent economic downturn and the appreciation of the yen
contributed to a decline of net sales for two years in a row, in
both segments of the Yokohama Group. Nonetheless, the drop
was milder in the tyre group (-8.1%/ -4.8% in 2009/2008) versus
the multiple business group (-15.9% and -10.7% in 2009/2008).


130

4.7. Yokohama Revenues by region

Yokohama Rubbers revenues by region
unit: share in %

Yokohama Rubbers change in revenues by region
Japan
69.5%
North
Ameri ca
19.4%
Asi a
4.7%
Others
6.4%

-15% -11% -7% -3% 1% 5% 9% 13%
Japan
Nort h America
Asia
Ot hers
2009/2008 change in % 2008/2007 change in %


Chart 1:

Yokohama Rubber has a strong foothold in Asia and especially
Japan, where it concentrates 70% of sales. The North American
region and Asia contribute by 19.4% and respectively 4.7% to
the Groups 3.5 bn revenues.

Chart 2:

In 2009, Yokohama Rubbers progression has declined in all
geographical segments, markedly in Japan and North America,
the markets hardest hit by the economic slump and where the
company captures 90% of its profits.


131

4.7. Yokohama Operating margin

Yokohama Tyres operating profit
unit: mn euros

Yokohama Tyres operating margin
unit: %
70
105
140
175
210
2005 2006 2007 2008 2009

7.9%
2.9%
4.1%
7.4%
6.4%
2%
4%
6%
8%
2005 2006 2007 2008 2009


Chart 1:

Yokohama Rubber posted a 156 million operating profit for
2009, more than the half of the figure recorded the previous year,
showing improved operational efficiency.
Chart 2:

Yokohamas operating margin has been dropping since 2007. It
stood at 4.1% in 2008 and at 2.9% in 2009. The weak
performance is due to the increase in raw material prices during
the recent economic crisis.


132

4.7. Yokohama Research and development

Yokohamas R&D expenditures
unit: mn euros

Yokohamas R&D ratio
unit: %
90
100
110
120
2005 2006 2007 2008 2009

3.2%
2.8%
3.0%
2.8%
2.9%
2%
3%
4%
2005 2006 2007 2008 2009


Chart 1:

Research and development expenses for the year ending March
31, 2010, were 101 million, 13% less than in 2008, reaching its
lowest level in 5 years.

Chart 2:

Yokohama devotes around 3% of its revenues to research and
development. In 2009, the ratio stood at 2.8%, down from the
3% in 2008.


133

4.7. Yokohama Statistical data
2006 3,4 11.4%
2007 3,7 11.1%
2008 4,2 13.3%
2009 3,9 -4.6%

Yokohamas net sales
unit: bn euros; annual % change ;

Source: Xerfi Global with Yokohama annual reports.

2009 3,5 -19.7%

(2009/2008)
Change in %
(2008/2007)
Japan 26.2% -21.3% -8.1%
The Americas 43.3% -19.9% -6.3%
Europe 13.9% -23.6% -8.0%

Yokohamas revenues by region


Others 16.7% -12.5% 12.8%

2005 - 4,9%
2006 -4,0% 4,2%
2007 57,2% 6,0%

Yokohamas operating profit


2008 -61,3% 2,5%
2009 67,5% 4,6%

2005 8,9% 3,2%
2006 0,6% 2,9%
2007 4,3% 2,8%

Yokohamas R&D expenses


2008 -0,1% 3,0%
2009 -13,0% 2,8%

(2009/2008)
Change in %
(2008/2007)
Tyres 82.8% -18.0% -4.6%
Yokohamas revenues by activity
Source: Xerfi Global with Yokohama annual report
Diversified products 17.2% -27.1% -4.4%


134

4.8. Hankook Company Overview

Fiscal year ended December 31, 2009
Headquarters
Seoul, South Korea

Key figures
Operating income 349.8 mn
Staff 14,300

Hankook Tyre was established in 1941 as the first tyre maker in Korea.
Today, Hankook is the domestic industry leader, ranked 8
th
globally and 3
rd
in the
Asian region.
Hankooks global distribution network consists of four regional headquarters and
80 subsidiaries and sales offices mainly in Korea (37 sales offices) and China (14
sales offices).
More than 70 percent of Hankooks revenue is earned outside Korea, with Europe
being its most important overseas market.


Korea
16% of tyre net sales
The Americas
Europe
Asia Pacific 18% of tyre net sales

Middle East and Africa 11% of tyre net sales
Hankook Tyre Group

Hankook Tyre

90.3% of net sales
ATLASBX

7.2% of net sales
Daehwa
Engineering and
Machinery
f l
emFrontier

1% of net sales


135

4.8. Hankook Business segments

SEGMENT
% OF
SALES
OPERATIN
G MARGIN
OPERATIONS
MAIN
CUSTOMER
S
HANKOOK TYRE 90.3% 12.1% A full range of tyre-related services.
Consumers and
companies
ATLASBX CO., LTD. 7.2% -
Makes batteries for cars and trucks.
Over the years, the operation has expanded into marine
batteries and industrial batteries to lead Koreas battery
industry
Consumers and
companies
DAEHWA
ENGINEERING &
MACHINERY CO.,
LTD
1.5% -
Established in 1992 to build essential machines used in tyre
manufacturing
Consumers and
companies
EMFRONTIER CO.,
LTD
1% -
Provides e-Business-based IT solutions that include system
building and operation.
Companies

Source: Xerfi Global with Hankook.


136

4.8. Hankook Corporate strategy

Brand value-up

Hankook wants to grow into a respected global company and is working aggressively to improve
the quality of its products and ensure a sustainable growth by :

Increasing product quality (the groups brand portfolio consists of three individual names:
Hankook, Aurora and Kingstar).
Improved competitiveness in the original equipment market by enhancing R&D focus on
tyres with low rolling resistance.
Global operation excellence

Hankook intends to achieve world wide operational excellence. To this end it implements several
measures:
rationalization of resources;
increased operational efficiency: Hankook reformed the global supply chain planning unit to
maximise efficiency in supply chain management (SCM). Moreover, a new unit has been
established to attend to the strategic operations of all logistics activities. At the same time,
the strategic and support organizations at Regional Headquarters outside Korea were
separated for improved efficiency;
integration of corporate social responsibility management (CSR).

Global growth acceleration

The group was among the few industry players to register growth in 2009, despite challenging
market conditions due to the sharp economic activity slowdown. Hankook has been
strengthening its global production capacity by:

Establishing two factories, at Jiangsu and Jiaxing, China;
Expanding its facilities in Hungary to provide better access to European markets;
Beginning construction of its third expansion facility at Geumsan (Korea).


137

4.8. Hankook Recent events

Date Event
J anuary 2009 Hankook Tyre announced sales records in fiscal 2008 despite a difficult economic climate. Its global sales
increased by approximately 26%, while larger tyre manufacturers saw their sales declining sharply.
May 2009

Hankooks "Made in Europe" tyres were chosen as original equipment fitment for Volkswagen Transporter,
Caravelle, Multivan and California. This represents the first delivery to Volkswagen from Hankook's Hungarian
factory.
J une 2009

Hankook has been appointed as original equipment supplier to Audi. This is a significant event for Hankook, one
of the few medium-scale players in the industry whose strategy is to become a leader in the premium tyres
segment.
Audis A3 models will be rolling off assembly lines with Hankooks Ventus S1 evo ultra-high performance tyre.
September 2009

Hankook announced factory extension in Hungary, one of its main production locations in Europe.
Hankook Tyre plans to focus on the European market with additional investment in its Hungary plant: the amount
devoted to this project is 230 million euros.
The company announced its plans to reach a production capacity of ten million tyres per year by 2011.
Hankook Tyre announced record global sales and operating profit in 2009. Its global sales increased by 18% year-
on-year and the global operating profit rose five-fold on a year-over-year base. Hankook is among the few
companies that generated improved sales in 2009 compared to 2008, in the context of a general economic
recession.
J anuary 2010

Hankook Tyre rolled its 10 millionth tyre off the production line in Hungary, two and a half years following the
opening of its manufacturing plant in Rcalms, Hungary.
May 2010 Hankook Tyres new European Factory received A qualification on Volkswagen Audit. Volkswagen is one of
the major European car manufacturers using Hankook tyres. The A mark allows Hankook to manufacture all
kinds of original equipment tyres for the Volkswagen group.
J une 2010 Hankook tyre announced it would start supplying its original equipment tyres to Lincoln MKT, Fords luxury
vehicle.



138

4.8. Hankook Key data

Hankook consolidated net sales

Hankook tyre Sales
unit: mn euros
0
500
1,000
1,500
2,000
2,500
3,000
3,500
2005 2006 2007 2008 2009
5%
10%
15%
20%
25%

0
500
1,000
1,500
2,000
2,500
3,000
2005 2006 2007 2008 2009

Source: Hankook annual reports. Source: Hankook annual reports.

Chart 1:

In 2009, Hankooks global operations generated net sales of
2,902 mn on a consolidated scale, 15% higher year on year. This
was among the industrys highest growth rates and above the Big
Threes performance.
Chart 2:

Revenues from tyre sales have been on an uphill trend for the
past years, standing at 2621, 17.5% higher than in 2008, and
represent more than 90% of Hankooks consolidated revenues.


139

4.8. Hankook Revenues by segment

Hankooks revenues by segment
unit: share in %

Hankooks change in revenues by segment
IT sol uti ons
1%
Machi nery
2%
Battery
7%
Tyres
90%

-60% -40% -20% 0% 20% 40% 60%
Battery
Machinery
IT Solutions
Tyres


Chart 1:

Hankooks consolidated net sales for 2009 are divided as
follows: 90% the share of tyre operations, 7% the battery
segment (AtlasBX), 2% the engineering and machinery
operations and the smallest share of 1% belongs to the IT
solutions division, emFrontier.
Chart 2:

The Hankook Tyre operations are expanding quickly, with sales
growing by over 20% from 2007 to 2008. Moreover, despite
lower sales growth for the main actors of the tyre industry,
Hankook managed to increase its revenues by 17% in 2009
compared to the previous year.


140

4.8. Hankook Revenues by region

Hankook Parent Companys revenues by region
unit: share in %

Hankooks change in revenues by region
Mi ddl e East
and Afri ca
11%
Korea
16%
The Ameri cas
25%
Europe
30%
Asi a Paci fi c
18%

-40% -20% 0% 20% 40% 60% 80% 100%
North America
Sout h and Central America
Asia, except Korea
Europe
Local export
Domesti c
2008/ 2007
change in %
2009/ 2008
change in %


Chart 1:

In 2009, Hankook sold a large share of its tyres in the Asian
region (34%) and Europe (30%). The Americas and the Middle
East-Africa zones were next with a share of 25% and 11%
respectively.
Chart 2:

Hankooks global performance in 2009 was driven by an increase
in sales in South and central America. Nonetheless, in its other
markets, mainly Asia and Europe, its sales declined in 2009 from
2008.


141

4.8. Hankook Operating margin

Hankooks operating profit
unit: mn euros

Hankooks operating margin
unit: %
0
100
200
300
400
2005 2006 2007 2008 2009

10.7%
12.1%
4.7%
7.7%
8.3%
4%
7%
9%
12%
14%
2005 2006 2007 2008 2009


Chart 1:

While the entire tyre industry showed lacklustre performance,
Hankook posted a year-on-year growth in operating profit
(197%), which amounted to 349 mn.
Chart 2:

Also, Hankooks operating margin in 2009 was among the
highest in the industry (12.1%), an improvement from the 4.7%
in 2008.


142

4.8. Hankook Research and development

Hankooks R&D expenditures
unit: mn euros

Hankooks R&D ratio
unit: %
0
10
20
30
40
50
60
2005 2006 2007 2008 2009

2.5%
1.9%
1.9%
2.3%
2.3%
1%
2%
3%
2005 2006 2007 2008 2009


Chart 1:

In terms of R&D, Hankook spent more than 50 mn in 2009.
The amount allocated to its R&D activities has increased
gradually for the past five years.

Chart 2:

Hankooks R&D ratio stood at 1.9% in 2009, remaining
unchanged from 2008, but slightly lower than in years previous
to 2008, in line with Hankooks commitment to build a
reputation in the high-premium tyre segment.


143

4.8. Hankook Statistical data

2006 1.6 11.8%
2007 1.7 9.1%
2008 2.0 13.0%
2009 2.5 24.4%

Hankooks net sales

Source: Xerfi Global with Hankook annual
reports.

2009 2.9 14.3%

(2009/2008)
Change in %
(2008/2007)
North America
19.7% 11.2% 34.6%
South and Central America 5.5% -24.4% 85.1%
Asia, except Korea 16.4% 0.3% 86.0%
Europe 22.0% 26.0% -14.1%
Local export 6.3 -25.8% 3.4%

Hankooks revenues by region

reports.

Domestic 30 12.5% 4.1%

2005 16.5% 10.7%
2006 -15.2% 8.3%
2007 5.0% 7.7%


reports.

2008
-24.3% 4.7%
2009 197.1% 12.1%

2005 19.5% 2.5%
2006 3.0% 2.3%
2007 12.0% 2.3%

Hankooks R&D expenses

reports.

2008
3.1% 1.9%
2009 10.9% 1.9%

(2009/2008)
Change in %
(2008/2007)
Tyre 90.3% 17.6% 25.9%
Battery (Atlas) 7.2% -8.7% 32.0%
Machinery (Daewha) 1.5% 41.6% -43.5%
Hankooks revenues by activity
Source: Xerfi Global with Hankook annual report
IT Solutions (emFrontier) 1.0% 3.1% 16.7%


144

4.9. Cooper Company Overview

st
2009
Headquarters
Ohio, USA

Key figures
Operating income 112.16 mn
Staff 12,568

Cooper was incorporated in the state of Delaware in 1930 as the successor to a
business originally founded in 1914.
Cooper is the 4th largest tyre manufacturer in North America and 9th largest
globally.
Cooper places a strategic focus on light vehicle replacement tyres in North
America, but it supplies tyres for small original equipment contracts in China and
Europe.
Based in Findlay, Ohio, Cooper operates 7 manufacturing facilities and 38
distribution centres in 9 countries and employs 12,568 persons worldwide.

North America 71% of net sales
Asia 21.2% of net sales

The Cooper Tire and Rubber Company


145

4.9. Cooper Business segments

SEGMENT
% OF
SALES
OPERATIN
G MARGIN
OPERATIONS
MAIN
CUSTOMERS
NORTH AMERICAN
TYRE OPERATIONS
71% 5.6%
Produces passenger car and light truck tyres, primarily for sale in the United
States replacement market.
The segment does not sell its products directly to end users, except for three
company-owned retail stores, and does not manufacture tyres for sale to the
automobile original equipment manufacturers (OEMs).

Consumers and
companies
INTERNATIONAL
TYRE OPERATIONS
29% 1.0%
In the United Kingdom, the segment produces passenger car, light truck,
racing and motorcycle tyres and markets these products primarily to dealers
in the replacement markets in the United Kingdom, continental Europe and
Scandinavia.
The segment does not sell its products directly to end users nor manufactures
tyres for sale to OEMs in Europe, other than several small contracts with
specialty vehicle manufacturers in the United Kingdom.
The segment has two joint venture manufacturing facilities, Cooper
Chengshan and Cooper Kenda, in the Peoples Republic of China. These
facilities produce passenger car, light and medium truck tyres, and off-the-
road tyre for export to Europe, North America and other markets as well as
marketed to dealers in the replacement tyre market within China.
Consumers and
companies
Source: Xerfi Global with Cooper Tire and Rubber.


146

4.9. Cooper Corporate strategy

Expanding global footprint

In order to achieve a sustainable, competitive cost position, Cooper plans to expand its
operations in lower-cost countries. These initiatives include the Cooper Kenda Tire
manufacturing joint venture in China, the Cooper Chengshan joint venture (China) and
an investment in production operations in Mexico.
Tyres from these operations will both provide a lower cost source of tyres for existing
markets and allow the company to expand its market share in Mexico and China.
Top line profitable growth

For the following years, Cooper intends to create a sustainable competitive cost position
by reducing product costs by 10 to 15%. In this sense, Cooper plans to source 35-45% of
its capacity to low-cost countries such as China.
Cooper has undertaken a number of cost saving and profit improvement initiatives. These
included a wide variety of projects in the areas of manufacturing, supply chain, selling
and general administrative and logistics.
The implementation of these projects had a favourable impact on the companys
profitability in 2009.


147

4.9. Cooper Recent events

Date Event
February 2009
Cooper Tire brings new sizes to market announcing an expanded size offering for a
wide variety of its passenger, sport utility vehicle (SUV) and light truck tyres.
September 2009

Cooper Tire announced expansion of its Mississippi plant.
The new expansion, which includes a mixer that is being installed, will enable the plant
to be more competitive in an increasingly challenging market.
November 2009

Cooper Tire announced its plans to increase capacity at its Findlay, Ohio tyre plant.

This represents an additional 10 million dollars investment in automation, cost
improvements and retooling to support market trends. As a result, capacity will increase
and up to 100 people will be hired.
In 2010, the Findlay plant is to play a key role in Cooper Tire's launch of several new
light truck, sport utility vehicles (SUVs) and premium winter tyre products.
March 2010

Cooper Tire & Rubber company increased its ownership at the Cooper Chengshan Tyre
Company - joint venture

Cooper received final approval from the government of the People's Republic of China
to increase its ownership to 65 percent from the existing 51 percent at Cooper
Chengshan Tyre Company (CCT). The cost of the additional shares is approximately 18
million dollars and the transaction will be concluded by the end of March 2010.
May 2010

Cooper Tire & Rubber company reported improved results for the first quarter of 2010.

The company reported a significant increase of 32 percent in net sales, from the prior
year, for the quarter ended March 31st, 2010.


148

4.9. Cooper Key data

Cooper Tire and Rubbers net sales

Cooper Tire Last Quarter Net Sales
unit: mn euros
2,500
3,000
3,500
4,000
4,500
2005 2006 2007 2008 2009
-30%
-20%
-10%
0%
10%
20%

0
100
200
300
400
500
600
Q1 2009 Q1 2010

Source: Cooper Tire and Rubber annual reports. Source: Cooper Tire and Rubber annual reports.

Chart 1:

Consolidated net sales decreased by almost half a billion euros in
2009, primarily affected by lower volumes in the North
American market, and the negative impact of exchange rates in
its international operations.
Chart 2:

For the first quarter of 2010, Cooper Tires reported a substantial
increase in net sales of 32 percent, from the prior year. Operating
profit was 23.8 mn for the quarter, a 35.4 mn improvement
compared with a loss of 11.6 mn in 2009.


149

4.9. Cooper Product lines

Cooper Tire and Rubber Rubbers performance by product line (North American operations)
unit: annual % change in volumes
Coopers North American tyre
division produces passenger car and
light truck tyres, primarily for sale in
the replacement market.
In the United States, the segments
unit sales of passenger tyres and light
truck tyres decreased 16% and 4%
respectively in 2009 from 2008.
The total decline in light vehicle tyre
sales was 6%, exceeding the 2.8%
decrease in total light vehicle sales for
the total industry estimated by the
American Tyre Association (RMA)
for 2009.
The industry decrease in units sold
was primarily due to the overall
economic circumstances in North
America during the first half of 2009
as impacts of a global recession have
affected tyre demand.

-20% -15% -10% -5% 0%
Passenger tyres
Li ght truck tyres
2009/ 2008 change i n % 2008/ 2007 change i n %

Source: Cooper Tire and Rubber annual reports.


150

4.9. Cooper Revenues by region

Cooper Tire and Rubbers revenues by region
unit: share in %

Cooper Tire and Rubbers change in revenues by region
North
Ameri ca
69.6%
Europe
9.3%
Asi a
21.2%

-20% -15% -10% -5% 0% 5% 10% 15%
North America
Europe
Asia


Chart 1:

Cooper Tires sales are predominantly concentrated in the North
American region. In 2009, its American operations encompassed
70% of all sales, leaving 21% and 9.3% for the Asian and
European markets, respectively.
Chart 2:

Sales of the Asian segment continued to grow in 2008 (6.8%
from 2007) and 2009 (12.6% from 2008). On the other hand, in
the European and North American operations, Cooper Tire sales
continued to decline year-on-year.


151

4.9. Cooper Operating margin

Cooper Tire and Rubbers operating profit
unit: mn euros

Cooper Tire and Rubbers operating margin
unit: %
-200
-150
-100
-50
0
50
100
150
2005 2006 2007 2008 2009

1.2%
5.6%
-7.5%
4.6%
-1.8%
-8%
-4%
0%
4%
8%
2005 2006 2007 2008 2009


Chart 1:

The Company recorded operating profit in 2009 of 112.1 mn
compared to an operating loss of -154.5.mn in 2008. Improved
manufacturing operations contributed to the profit improvement
from 2008 to 2009.
Chart 2:

Coopers margin has changed in line with its operating profit:
after a negative result of -7.5%, in FY2008, its margin stood at
5.6% the year that ended on December 31, 2009.


152

4.9. Cooper Research and development

Cooper Tire and Rubbers R&D expenditures
unit: mn euros

Cooper Tire and Rubbers R&D ratio
unit: %
11
13
15
17
2005 2006 2007 2008 2009

0.8%
0.8%
0.8%
0.8%
0.9%
0%
1%
2%
2005 2006 2007 2008 2009


Chart 1:

Research and development expenditures were 15.8 mn, 16.5
mn and 16 mn during 2007, 2008 and 2009, respectively.
Cooper conducts extensive testing of its tyre lines, as well as
new concepts in tyre design, construction and materials.
Chart 2:

For the past 3 years, Cooper Tire engaged 0.8% of its net sales in
research and development activities. This figure is below the 3%
industry average.


153

4.9. Cooper Statistical data

2006 1.4 -2.2%
2007 1.8 26.5%
2008 2.1 13.9%
2009 2.0 -1.7%


Source: Xerfi Global with Cooper Tire and Rubber
annual reports.

2009 1.9 -3.6%

Region % of sales
Change in %
(2009/2008)
Change in %
(2008/2007)
North America 69.6% -5.9% -3.2%
Europe 9.3% -14.3% -4.7%

Cooper Tire and Rubbers revenues by
region

annual reports.

Asia 21.2% 12.6% 6.8%


2005 -60.2% 1.2%

2006 -279.9% -1.8%

2007 397.0% 4.6%
Cooper Tire and Rubbers operating
profit

annual reports.

2008 -261.2% -7.5%

2009 172.1% 5.6%

2005 -14.1% 0.8%
2006 45.4% 0.9%
2007 -4.7% 0.8%

Cooper Tire and Rubbers R&D
expenses

annual reports.

2008 4.5% 0.8%
2009 -3.4% 0.8%


154

4.10. Maxxis Company Overview

Fiscal year ended December 31st, 2009
Headquarters
Yuanlin, Taiwan

Key figures
Operating margin 20%
Net profit margin 16.8%
Staff 24,360

Cheng Shin Rubber Ind. Co., Ltd. is engaged in the manufacture and distribution of
a whole range of tyres: radial tyres, automobile tyres, motorcycle tyres, tyres for
agricultural and industrial vehicles, as well as bicycle tyres.
Cheng Shin was founded in the 1960s and started out as a bicycle tyre producer.
The companys five major factories are located in China, Thailand, Vietnam and
Taiwan.
The company is the sponsor of the World Enduro Championship and the British
Drift Championship.

The Americas

Asia
Europe
Middle East and Africa
New Zealand and Australia
CHENG SHIN RUBBER
INDUSTRY CO., LTD


155

5. Statistical appendix


156

Year Michelin Goodyear Bridgestone Others
2000 18.9% 18% 20% 43%
2001 19.6% 18% 18.9% 44%
2002 20.1% 17% 18.8% 44%
2003 19.9% 16.8% 18.3% 45%
2004 19.2% 17.7% 18% 45%
2005 18% 17.1% 17.9% 47%
2006 17.2% 16% 17.2% 50%
2007 17.1% 14.9% 16.9% 51%
Change in world market share
unit: %

Source: Xerfi Global. Primary source: Bridgestone
2008 16.3% 13.2% 16.7% 54%

2009 Net sales Operating margins
Bridgestone
19,799.9 3.5%
Michelin
14,807.0 5.8%
Continental
20,100.0 9.8%
Pirelli
4,462.0 8.7%
Yokohama
3,555.6 4.6%
Goodyear
11,699.8 2.3%
Sumitomo
4,027.7 5.2%
Hankook
2,902.3 12.1%
Consolidated bet sales and operating
margins in 2009
unit: mn euros and %

Source: Xerfi Global. Primary source: Company annual
reports.
Cooper
1,994.6 13.5%

Natural Synthetic
North America 0 2,036
Latin America 228 601
Europe 0 3,112
Africa 446 60
Natural and synthetic rubber
production by region
unit: tons

Source: Xerfi Global. Primary source: IRSG
Asia/Oceania 9021 6,274


157

2006 20.5 11.4%
2007 22.8 11.1%
2008 25.8 13.3%
2009 24.6 -4.6%


Source: Xerfi Global with Bridgestone annual reports.

2009 19.8 -19.7%

(2009/2008)
Change in %
(2008/2007)
Japan 26.2% -21.3% -8.1%
The Americas 43.3% -19.9% -6.3%
Europe 13.9% -23.6% -8.0%



Others 16.7% -12.5% 12.8%

2005 8.2% 7.9%
2006 -10.8% 6.4%
2007 31.0% 7.4%



2008 -47.4% 4.1%
2009 -42.5% 2.9%

2005 8.9% 3.0%
2006 9.2% 2.9%
2007 0.1% 2.6%

Bridgestones R&D expenses


2008 7.5% 2.9%
2009 -8.0% 3.3%

(2009/2008)
Change in %
(2008/2007)
Tyres 82.8% -18.0% -4.6%
Bridgestones revenues by activity
Source: Xerfi Global with Bridgestone annual report
Diversified Products 17.2% -27.1% -4.4%


158

2005 15.5 3.6%
2006 16.3 5.1%
2007 16.8 2.9%
2008 16.4 -2.7%

Michelins net sales


2009 14.8 -9.8%

(2009/2008)
Change in %
(2008/2007)

Passenger car and Light truck
tyres and related distribution
55.9% -4.5% -4.1%

distribution
30.4% -17.2% -3.7%

Michelins revenues by activity


Specialty tyre businesses 13.7% -12.0% 5.5%

(2009/2008)
Change in %
(2008/2007)
Europe 45.6% -17.2% -4.1%

North America and
Mexico
33.7% -3.2% -6.5%



Other regions 20.7% -1.0% 8.6%

Year Change in operating profit Operating margin
2005 8.2% 7.9%
2006 -10.8% 6.4%
2007 31.0% 7.4%
2008 -47.4% 4.1%



2009 -42.5% 2.9%

2005 8.9% 3.0%
2006 9.1% 2.9%
2007 0.1% 2.6%

Michelins R&D expenses


2008 7.5% 2.9%
2009 -8.0% 3.3%


159

Year Sales Change in % Volume
2005 12.9 -1.4% 226.4
2006 13.4 3.6% 215
2007 14.0 4.8% 201.7
2008 13.9 -0.8% 184.5

Goodyears net sales
unit: bn euros ; annual % change ; mn tyres


2009 11.6 -16.4% 167

(2009/2008)
Change in %
(2008/2007)
Replacement Units 76.6% -4.5% -5.5%
OE Units 22.3% -22.6% -15.7%

Goodyears volumes by activity


Total -9.5% -8.5%

(2009/2008)
Change in %
(2008/2007)
North American Tyre 42.8% -15.5% -6.8%

Europe, Middle East and
Africa Tyre
35.6% -20.7% 1.4%
Latin American Tyre. 11.1% -13.1% 11.5%



Asia Pacific Tyre 10.5% -6.6% 8.0%
2005 23.0% 6.4%
2006 -32.5% 4.2%
2007 56.5% 6.3%
2008 -34.6% 4.1%

Goodyears operating profit


2009 -53.7% 2.3%
2005 8.9% 3.0%
2006 9.1% 2.9%
2007 0.1% 2.6%

Goodyears R&D expenses


2008 7.5% 2.9%
2009 -8.0% 3.3%


160

2005 5.8 3.9%
2006 6.2 5.8%
2007 6.4 4.3%
2008 6.5 1.2%

Continental Tyre Divisions net sales


2009 5.7 -11.4%
Segment
% of consolidated sales
Change in %
(2009/2008)
Change in %
(2008/2007)

Passenger and Light
Truck tyres
23% 3.10% 1.00%

Continental Tyres revenues by activity


Commercial Vehicle
Tyres
5% -3.10% 1.00%

Region
(2009/2008)
Change in %
(2008/2007)
Germany 20% -1.1% -0.5%
Rest of Europe 49% -1.0% 2.5%
NAFTA 20% 0.7% -1.1%
Asia 5% 1.0% -0.01%



Other Countries 5% 2% 0%
2005 - 14.1%
2006
-4,2%
12.8%
2007
9,6%
13.4%
2008
-33,2%
8.9%

Continentals operating profit


2009
-1,8%
9.8%

2005 6.4% 2.5%
2006 2.4% 2.4%
2007 4.1% 2.4%

Continentals R&D expenses


2008 1.8% 2.4%
2009 1.9% 2.8%


161

2005 3.6 11.6%
2006 3.9 8.7%
2007 4.1 4.3%
2008 4.1 -1.4%



2009 3.9 -2.6%
Segment
(2009/2008)
Change in %
(2008/2007)
Car tyres 63% 3% -1%

Motovelo tyres 8% -1% 1%
Tyres for industrial vehicles 27% -2% 1%

Pirelli Tyres revenues by activity


Steel cord / other tyres 2% 0% -1%
Region
(2009/2008)
Change in %
(2008/2007)
Italy 9% 0% -1%
Rest of Europe 33% -3% -2%
North America 8% 1% -1%
Central and South America 34% 1% 5%



Africa, Asia, Pacific 16% 1% -1%
2005 19.6% 9.0%
2006 3.9% 8.6%
2007 4.6% 8.6%
2008 -29.8% 6.1%

Pirellis operating profit


2009 37.8% 8.6%
2005 1.4% 4.0%
2006 0.7% 3.7%
2007 0.7% 3.6%

Pirellis R&D expenses


2008 -2.0% 3.5%
2009 -8.3% 3.3%


162

2005 3.0 -2.8%
2006 3.3 8.1%
2007 3.6 11.1%
2008 3.8 4.7%



2009 3.3 -13.5%

(2009/2008)
Change in %
(2008/2007)
Tyre 82.6% -13.5% 4.7%

Sports 12.5% -11.7% 24.8%

Sumitomo Rubber revenues by activity


Industrial 5.1% -10.3% 1.1%

(2009/2008)
Change in %
(2008/2007)
Japan 55.4% -11.6% 1.6%
North America 14.2% -13.2% 12.6%
Europe 4.5% -28.7% 24.2%
Asia 12.5% -10.2% 24.5%

Sumitomo Rubber revenues by region


Other areas 13.4% -16.6% 2.7%
2005 20.7% 10.0%
2006 -33.6% 6.1%
2007 36.1% 7.5%
2008 -55.8% 3.2%

Sumitomo Tyre operating profit


2009 42.1% 5.2%
2005 2.4% 3.3%
2006 8.0% 3.3%
2007 6.2% 3.2%

Sumitomos R&D expenses


2008 6.0% 3.2%
2009 -6.9% 3.4%


163

2006 3.4 11.4%
2007 3.7 11.1%
2008 4.2 13.3%
2009 3.9 -4.6%

Yokohamas net sales
unit: bn euros; annual % change ;


2009 3.5 -19.7%

(2009/2008)
Change in %
(2008/2007)
Japan 26.2% -21.3% -8.1%
The Americas 43.3% -19.9% -6.3%
Europe 13.9% -23.6% -8.0%

Yokohamas revenues by region


Others 16.7% -12.5% 12.8%

2005 - 4,9%
2006 -4,0% 4,2%
2007 57,2% 6,0%

Yokohamas operating profit


2008 -61,3% 2,5%
2009 67,5% 4,6%

2005 8,9% 3,2%
2006 0,6% 2,9%
2007 4,3% 2,8%

Yokohamas R&D expenses


2008 -0,0% 3,0%
2009 -13,0% 2,8%

(2009/2008)
Change in %
(2008/2007)
Tyres 82.8% -18.0% -4.6%
Yokohamas revenues by activity
Source: Xerfi Global with Yokohama annual report
Diversified products 17.2% -27.1% -4.4%


164

2006 1.6 11.8%
2007 1.7 9.1%
2008 2.0 13.0%
2009 2.5 24.4%

Hankooks net sales

Source: Xerfi Global with Hankook annual reports.

2009 2.9 14.3%

(2009/2008)
Change in %
(2008/2007)
North America 19.7% 11.2% 34.6%
South and Central America 5.5% -24.4% 85.1%
Asia, except Korea 16.4% 0.3% 86.0%
Europe 22.0% 26.0% -14.1%
Local export 6.3 -25.8% 3.4%

Hankooks revenues by region


Domestic 30 12.5% 4.1%

2005 16.5% 10.7%
2006 -15.2% 8.3%
2007 5.0% 7.7%



2008 -24.3% 4.7%
2009 197.1% 12.1%

2005 19.5% 2.5%
2006 3.0% 2.3%
2007 12.0% 2.3%

Hankooks R&D expenses


2008 3.1% 1.9%
2009 10.9% 1.9%

(2009/2008)
Change in %
(2008/2007)
Tyre 90.3% 17.6% 25.9%
Battery (Atlas) 7.2% -8.7% 32.0%
Machinery (Daewha) 1.5% 41.6% -43.5%
Hankooks revenues by activity
Source: Xerfi Global with Hankook annual report
IT Solutions (emFrontier) 1.0% 3.1% 16.7%


165

2006 1.4 -2.2%
2007 1.8 26.5%
2008 2.1 13.9%
2009 2.0 -1.7%


annual reports.

2009 1.9 -3.6%

Region % of sales
Change in %
(2009/2008)
Change in %
(2008/2007)
North America 69.6% -5.9% -3.2%
Europe 9.3% -14.3% -4.7%

Cooper Tire and Rubbers revenues by
region

annual reports.

Asia 21.2% 12.6% 6.8%

2005 -60.2% 1.2%
2006 -279.9% -1.8%
2007 397.0% 4.6%
Cooper Tire and Rubbers operating
profit

annual reports.

2008 -261.2% -7.5%
2009 172.1% 5.6%

2005 -14.1% 0.8%
2006 45.4% 0.9%
2007 -4.7% 0.8%

Cooper Tire and Rubbers R&D
expenses

annual reports.

2008 4.5% 0.8%
2009 -3.4% 0.8%


166

6. Information sources


167

I nternational organisations

IRSG

International Rubber Study Group
111 North Bridge Road, Singapore 179098
http://www.rubberstudy.com/

JATMA

Japan Automobile Tyre Manufacturers Association
3-8-12 Minato-ku, Tokyo, Japan 1050001
http://www.jatma.or.jp

OICA

Organisation Internationale des Constructeurs dAutomobiles
www.oica.net

Press

Tyre business 1 725 Merriman Road, Suite 300, Akron, Ohio 44 313-5 283
www.tyrebusines.com


168

Corporate websites

Bridgestone
www.bridgestone.com

Michelin
www.michelin.com

Goodyear
www.goodyear.com

Continental
www.conti-online.com

Pirelli
www.pirelli.com

Sumitomo
http://www.sumitomocorp.co.jp/english/

Hankook
www.global.hankooktyre.com

Cooper
www.coopertyre.com

Yokohama
www.yrc.co.jp/english

ChengShin
www.cst.com.tw


169

7. Annexes


170

7.1. Overview of the market 2009 sales

2009: a gloomy year for the industry

Global passenger car and light truck market in 2009
unit:% of change from 2008
The global economic slowdown gradually
caught up with the tyre industry, and
demand weakened in all economies, even
in the emerging markets, except China.

Replacement markets declined by an
overall 3.2% in 2009.

Original equipment markets around the
world, except for China, fell by a steep
11.9% as carmakers slashed
production due to collapsing demand.
Demand picked up in the second half
of the year, markedly in the mature
markets that had taken measures to
support the automobile industry
(offering incentives such as the cash
for clunkers program).

-35% -30% -25% -20% -15% -10% -5% 0% 5%
Europe
Nafta
Asia
South America
Africa Middle East
Total
Original equipment Replacement

Source: Xerfi Global. Primary source: Michelin


171

7.1. Overview of the market 2010 sales

2010 shows good signs of growth picking up its pace

Net sales - H1 2010
unit: 2010/2009 % change
The first half of 2010 confirmed the
predictions for growth in the industry. Net
sale figures illustrated a clear rebound in
the tyre markets: Continentals revenues
increased by 29.5% in the first half of 2010
from the same period in 2009, Sumitomos
by 22%, Pirellis by 21.4% etc. and this
trend is expected to continue in the second
half of the year, even though the pace of
economic recovery will vary from one
region to another.

While rising raw materials costs will have a
negative impact on second-half
consolidated results and reduce operating
income, net sales are on the rise and the
industry has returned to profitability

0% 10% 20% 30% 40% 50%
Bridgestone
Michelin
Goodyear
Pirelli
Sumitomo
Continental

Source: Xerfi Global. Primary source: Company reports.


172

7.2. Demand Market breakdown

Demand is on the whole drawn by Asian countries

Global passenger car and light truck tyre market by regions in 2009
unit:% of volume

Global truck tyre market by regions in 2009
unit:% of volume
Asi a/ Oceani a,
27%
Africa
Middle East,
7%
Europe, 35%
Latin
America, 6%
North
America,
26%

Africa
Middle East,
11.2%
Sout h
America,
9.5%
Asia,
50.0%
North
America,
14.9%
Europe,
14.2%

Source: Xerfi Global. Primary source: Michelin Source: Xerfi Global. Primary source: Michelin

Chart 1:

Passenger car and light truck tyre units sold in 2009 was
superior to 1,100,000,000. The main consumers were in the
European market, followed by Asia and North America.

Chart 2:

As far as truck tyres are concerned, Asia makes for half of the
volumes sold globally, by large the industrys biggest client.


173

7.2. Demand

Two-wheel demand is concentrated in Asia, while aircraft demand is driven by North America

Global two-wheel motor vehicle possession by regions in 2007
unit:% of total fleet

Global aircraft tyre market breakdown in 2008
unit:% of volume
Africa
Middle East,
3%
South
America, 5%
Asia, 77%
North
America, 3%
Europe, 10%

Asia,
17.0%
Europe, 31%
Americas,
52%

Source: Xerfi Global. Primary source: OICA Source: Xerfi Global. Primary source: Michelin

Chart 1:

Demand for two-wheel vehicle tyres is driven by Asia, where
motorbikes offer enhanced mobility. As for the other markets, two-
wheels are used especially for leisure.
Chart 2:

Makers sell more than half of their aircraft tyres in the American
markets. Globalisation and international tourism growing at a fast
pace in the emerging countries will trigger a wider demand in
aircraft tyres.


174

7.2. Demand

Agricultural tyre demand poised for growth

Tractor and other agricultural machinery fleet in 2007
unit: % of the world fleet

Tractor and other agricultural machinery fleet in ASI A- 2007
unit: %
Oceania
1%
Asia
41%
Central and
South
America
5%
Northern
America
17%
Europe
34%
Africa
2%

Others
33%
Japan
21%
India
26%
China
20%

Source: Xerfi Global. Primary source: FAOSTAT Source: Xerfi Global. Primary source: FAOSTAT

The total number of tractors and other machinery used for agriculture is estimated to be at around 33.7 million.
The regional vehicle-inventory breakdown shows that most agricultural vehicles in use are in Asian countries and Europe,
respectively.
A closer look at Asias tyre demand shows that three Asian countries, namely India, China and Japan represent nearly 75% of the
market volume.


175

7.2. Competitive environment Profile of the leading companies

The crisis had a visible impact on company sales

Change in net sales of world tyre makers in 2005-2008(average growth) vs. 2009
unit: %
In the fiscal year 2009, tyre makers
recorded declines in sales and profitability.
The global economic slump beginning at
the end of 2008 was accompanied by
sluggish demand.

All companies implemented various
initiatives (reducing fixed costs, prioritizing
investment, adjusting production to
minimise inventories) in order to offset the
impact of the crisis, still, the business
environment significantly affected the
performance of the top-notch players in the
industry. The exception was Hankook, who
managed to maintain the same growth level
in 2009 as before the crisis.

-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
B
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2005-2008 average 2009



176


Operating margins affected by the recent economic slump

Operating margins of world tyre makers in 2005-2008 (average growth) vs. 2009
unit:%
The only two companies that managed to
secure better margins in fiscal 2009, in
spite of the sharp economic downturn, were
the American-based Cooper and South
Koreas largest tyre maker, Hankook.

Continental, Hankook and Cooper have the
largest operating margins in the industry,
while Goodyear and Bridgestones
operations in 2009 seem to have been
significantly impacted by the crisis.

0%
2%
4%
6%
8%
10%
12%
14%
16%
B
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2005-2008 average 2009



177

7.2. Competitive environment Net sales

Sales are improving in the industry

Net sales in Q2 2010 (the period starting April 1st and ending J une 30th)
unit: mn euros
In light of the latest financial results,
Bridgestone continue to be the worlds
leading tyre maker, followed by Michelin
and Goodyear.

In addition, all companies reported better
sales in the second quarter of 2010,
compared to the same period in 2009.

Improved results were impacted by:
Price/mix offsetting higher raw
material costs
Volume growth
Consumer original equipment recovery
stronger than anticipated
Commercial results strengthening

0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
B
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2010 2009



178

7.2. Competitive environment Operating margins

Margins are recovering

Operating margins Q2 2010 vs Q2 2009 (the period starting April 1st and ending J une 30th)
Companies succeeded in significantly
increasing their margins, according to the
figures released for the period starting April
1st and ending June 30th: all of them
reported positive operating results.

Hankooks margins stood at 13%, second
only to Continental with almost 15%. In the
meanwhile, Yokohama Rubber and
Bridgestone are back in black, after a
negative result in the same quarter of 2009.

-10% -5% 0% 5% 10% 15% 20%
Continental
Hankook
Pirelli
Michelin
Sumitomo
Bridgestone
Goodyear
Yokohama
2010 2009

Source: Xerfi Global. Primary source: company releases


179

7.3. Presence in main geographic segments Asia

Passenger car production is growing at double digit pace

Vehicle production in Asia by type
unit: thousands of vehicles
Although the Asian population is five times
larger than that of Europe and the US
combined, in Asia (except Japan), there are
only 90 cars per 1,000 people, compared
with 570 in Western Europe and close to
800 in the United States.

Having risen by nearly 15% a year on
average over the past four years, annual
passenger car sales in Asia is an
opportunity for increasing demand in the
replacement tyre market.

0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
1998 2005 2009
Passenger cars Li ght commerci al vehi cl es Heavy trucks Buses and coaches

Source: Xerfi Global. Primary source: OICA


180

7.3. Presence in main geographic segments

Asia: the extra legroom for growth

Asia vehicle production
unit: number of vehicles

I ndia and China vehicle year on year market growth
unit: % change
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
2004 2005 2006 2007 2008 2009
Chi na Indi a Other

0%
10%
20%
30%
40%
50%
60%
2005 2006 2007 2008 2009
China India

Source: Xerfi Global. Primary source: OICA Source: Xerfi Global. Primary source: OICA

While mature markets such as Europe, North America and Japan experienced double-digit car sales declines, India and China saw
sales increasing at an impressive rate (almost 50% in China and 12% in India).
Thanks to demand in fast-growing countries, the number of vehicles in the world is expected to increase by more than 20% by 2015
and to double by 2030.
More than half of the worlds automobiles will be produced in high-growth countries by 2014, with a subsequent effect on tyre
replacement markets.


181

7.3. Presence in main geographic segments I ndia

Domestic players dominate the market

Share in passenger car tyre market
unit: %

Share in truck and bus tyre market
unit: %
Others, 4%
Goodyear,
13%
Ceat, 3%
JK, 19%
MRF, 19%
Bridgestone
, 23%
Apollo, 19%

Birla,
19%
Ceat , 13%
MRF, 19%
Others, 3%
Apollo, 29%

Source: Xerfi Global. Primary source: Apollo Source: Xerfi Global. Primary source: Apollo

In the main segments of the Indian tyre market, domestic producers (Apollo, MRF, JK Tyre, Ceat) hold the biggest share, while most
international top tier players have a feeble presence, except for Bridgestone and Goodyear in the passenger car tyre market.
In 2009, the majority of tyre manufacturers reported higher sales, driven by growth in both volumes and value. It is expected that the
industry will continue to witness healthy growth, however facing the challenge of rising raw material price.
The truck and bus segment is seeing a gradual rise in the proportion of radial tyres. While around 90% of the passenger car tyres are radial
in India, the T&B tyre is the next major category with surging demand for radial tyres.


182

7.3. Presence in main geographic segments South America

Mercosur region: growth potential is second only to China

South American vehicle fleet breakdown - 2009
South America's main trading bloc
Mercosur is set to attract significant new
investments from global automotive
manufacturers keen to benefit from the
region's strong economic growth prospects
and free trade tariffs.

Significant growth perspectives in the
market are envisaged by tyre
manufacturers, who have already begun
expanding their operation by increasing
plant capacity or building new plants.

0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
1998 2005 2009
Passenger cars Light commercial vehicles Heavy trucks Buses and coaches

Source: Xerfi Global. Primary source: OICA


183

7.3. Presence in main geographic segments

Brazil is South Americas biggest and fastest growing market

Latin America and Brazil vehicle production

Brazil vehicle market growth
unit: % change
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
2004 2005 2006 2007 2008 2009
Brazi l Other Lati n Ameri can countri es

-4%
0%
4%
8%
12%
16%
2005 2006 2007 2008 2009

Source: Xerfi Global. Primary source: OICA Source: Xerfi Global. Primary source: OICA

Brazil is Latin Americas growth engine, accounting for 80% of production of vehicles, the biggest and fastest growing market with
car sales expected to continue to grow.
Brazil, which currently leads the bloc's production, will receive 90% of the investment, experts said, as car makers are keen to profit
from impressive sales forecasts driven by booming consumption rates (on the back of easy credit) and a stellar economic
performance.
Much of the investments will also go to improve the manufacturing quality in the bloc to keep the Mercosur product competitive with
imports.


184

7.3. Presence in main geographic segments North America

Goodyear is the leader in both passenger car and truck tyre segments

Passenger car tyre market share in North America 2009
unit: %

Truck tyre market share in North America 2009
unit: %
Continental,
6%
Cooper, 10%
Bri dgestone/
Fi restone ,
18%
Michelin,
19%
Others, 26%
Goodyear/
Sumitomo,
21%

Yokohama,
4%
Cont inental,
9%
Bridgestone/
Firestone ,
25%
Goodyear,
28%
Others, 13%
Michelin,
21%

Source: Xerfi Global. Primary source: Continental Source: Xerfi Global. Primary source: Continental

The last 2 years have not been stellar ones for the North American tyre industry, and the sharp economic plunge had a huge impact on
tyre shipments and retail tyres.
The competition in the market is intense: the adjacent graph for the passenger car tyre segment paints the bigger picture for all other
segments (light truck, heavy truck, agricultural and off-the-road tyres) the top 3 leaders are the industry key players, medium size
players (Cooper and Goodrich) occupy approximately 10% of the market and roughly half of the market share is divided between
smaller players.


185

7.3. Presence in main geographic segments Europe

Growth potential is immense in Eastern European countries

Passenger car tyre market share in Europe 2009
unit: %

Truck tyre market share in Europe 2009
unit: %
Pirelli,
8.0%
Bridgestone
/ Firestone ,
11%
Goodyear/
Sumitomo,
18%
Michelin,
20%
Others, 22%
Continental,
21%

Ot hers, 2%
Pirelli, 5%
Continental,
17%
Bridgestone/
Firestone ,
19%
Goodyear/S
umitomo,
20%
Hankook, 3%
Michelin,
34%

Source: Xerfi Global. Primary source: Continental Source: Xerfi Global. Primary source: Continental

In Western Europe as well as in other mature markets, tyre companies have streamlined their manufacturing operations towards high
performance tyres.

Around 10 % of the production is now located in new EU countries, such as Poland Slovakia, Romania and Slovenia, where the
potential growth in demand is higher than in the Western part of Europe.


186

7.4. Differentiation strategies Research and development

Innovation: essential for maintaining market share in developed economies

R & D expenses
unit: million euros
Companies such as Goodyear, Michelin
and Bridgestone have always led the
industrys innovation path. Besides, the
value of resources they allocate for research
and development are far greater than those
of all other companies in the tyre business.

Tyre scientists are now exploring
nanotechnology. Its applications could
mean a significant drop in tyre weight,
which will translate to greater fuel
efficiency. Some of the materials
companies are currently working on include
nano clays, nano scale rubber gels and
smart materials that can be adapted to the
needs of a tyre.

Finally, micro-scientists in the industry
have even gone as far as saying that, by
using nanotechnology, tyres could be made
to last for the life of the car.

0
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200
300
400
500
600
700
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187


High margins require intensive capital

R&D requirements by tyre segment
Although Asian tyre makers tend to be
referred to as simple low cost"
manufacturers they are becoming
increasingly aggressive in the export on
classical tyre products. Presently, they are
attacking other segments such as civil
engineering tyres or OTR (off-the-road),
the most lucrative products of the tyre
market, which require costly equipment and
pointed expertise.

Passenger
replacement
World
market
size Radial Truck
(value)
Passenger
original equipment
Agricultural Civil engineering
Bias Bias Radial Radial
Bicycle Motorcycle Aviation Motorcycle Aviation
R&D value

Source: Xerfi Global. Primary source: Michelin


188

7.5. Regional overview Asia-Pacific

Asia has the highest growth potential for the industry

CHINA INDIA JAPAN
MAIN COMPANIES
Hangzhou Zhongce Rubber
South China Tyre & Rubber
Qingdao Double Star Tyre
MAIN COMPANIES
Apollo
MRF
JK Tyre
MAIN COMPANIES
Bridgestone
Sumitomo
Yokohama

VEHICLE PRODUCTION
Passenger cars : 10.3 mn
Commercial vehicles: 3.4 mn
VEHICLE PRODUCTION
VEHICLE PRODUCTION
Commercial vehicles: 1 mn
TRENDS 2010-2015

TRENDS 2010-2015

TRENDS 2010-2015

TOTAL ASIA
Type of tyre
Breakdown
of sales
Vehicles
per 1,000
inhabitants

SHARE OF WORLD MARKET

Passenger cars

Trucks

Radial: 52%
Bias: 48%
Passenger car tyres : 305 mn
67mn
54


189

7.5. Regional overview Latin America

Industry leaders have ample production facilities in Brazil

BRAZIL ARGENTINA

MAIN COMPANIES
Pirelli
Michelin
Bridgestone
MAIN COMPANIES
Fate
Pirelli
Bridgestone
VEHICLE PRODUCTION
VEHICLE PRODUCTION
TRENDS 2010-2015

TRENDS 2010-2015

TOTAL LATIN AMERICA
Type of tyre
Breakdown
of sales
Vehicles
per 1,000
inhabitants


Passenger cars

Trucks

Radial: 65%
Bias: 35%
15mn
120


190

7.5. Regional overview North America

North America remains a key market in the replacement segment

UNITED STATES
CANADA
MEXICO

MAIN COMPANIES
Goodyear
Bridgestone
Cooper
MAIN COMPANIES
Goodyear
Bridgestone
Michelin
MAIN COMPANIES
Tornel
JK Tyre
Goodyear
VEHICLE PRODUCTION
VEHICLE PRODUCTION
VEHICLE PRODUCTION
TRENDS 2010-2015

TRENDS 2010-2015

TRENDS 2010-2015

TOTAL NORTH AMERICA
Type of tyre
Breakdown
of sales
Vehicles
per 1,000
inhabitants


Passenger cars

Trucks

Radial: 96%
Bias: 4%
23mn
750


191

7.5. Regional overview Europe

Seeking growth, companies tap further into Eastern European markets

EASTERN EUROPE WESTERN EUROPE

MAIN COMPANIES
Michelin
Pirelli
Continental
MAIN COMPANIES
Michelin
Pirelli
Continental
VEHICLE PRODUCTION
Passenger cars : 12 mn
VEHICLE PRODUCTION
TRENDS 2010-2015

TRENDS 2010-2015

TOTAL EUROPE
Type of tyre
Breakdown
of sales
Vehicles
per 1,000
inhabitants


Passenger cars

Trucks

Radial: 79%
Bias: 21%
16mn
550 (Western Europe)
180 (rest of Europe)


192

7.5. Regional overview Africa and Middle East

A market that is increasingly explored

SOUTH AFRICA
MAIN COMPANIES
Michelin
Pirelli
Bridgestone
VEHICLE PRODUCTION

Passenger cars : 12 mn
TRENDS 2010-2015

TOTAL AFRICA AND MIDDLE EAST
Type of tyre
Breakdown
of sales
Vehicles
per 1,000
inhabitants


Passenger cars

Trucks

Radial: 72%
Bias: 28%
16mn
45


193

Statistical framework

1353 codes of the ICB classification

This report analyses the tyre industry worldwide. The relevant ICB code is the 1353:
Commodity Chemicals, which is included in the code 1350, Chemicals.


194

Data

Analysed financial data

The main indicators and ratios used for analysis purposes are the following:
Net sales;

Operating profit, which is the difference between operating revenues and
operating expenses;

Operating margin, which the result of operating profit by net sales;

Net income (profit or loss after operating expenses. taxes and exceptional
charges);

Net margin, which is the result of net income by net sales.

Exchange rates

Financial figures mentioned in the report are stated in euro. The conversion rates
used for comparison purposes are the following:
1USD= 0.78 EUR (January 2009 December 2009)
100 JPY = 0.85 EUR (January 2009 December 2009)
1000 KRW= 0.67 EUR (January 2009 December 2009)
1 TWD = 0.02 EUR (January 2009 December 2009).

Methodological notes

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World Tyre Manufacturers

Market Analysis 2010-2015 Trends Corporate Strategies

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