The Yokohama Rubber Co., Ltd. Business Information, Profile, and History

Company Perspectives:

"The superior quality of our tires is recognized at the top, by world-class professional drivers competing in race and rally events in prestigious international and national series. Behind this recognition lie our capabilities in the development of advanced technologies, and evaluation and testing systems. This provides us with a strong base from which to go forward in further technological development. Our diversification strategy also distinguishes us from competitors. We have an enormous range of technologies and products, covering the fields of general industry, civil engineering, construction, marine business, aerospace, and sports and leisure. Take our originally developed technologies, based on our distinctive adhesive technologies and our environment-friendly technologies, our multifaceted business operations and global scope, and you have the 'Yokohama Advantage' in society."

History of The Yokohama Rubber Co., Ltd.

With an estimated four percent of global tire and rubber sales in the early 1990s, The Yokohama Rubber Co., Ltd. ranked seventh among the world's top producers of tires and other rubber products. Yokohama Rubber's operations are divided into two primary segments: the Tire Group, which accounts for over 70 percent of total sales and is divided into three market categories: original equipment, replacement tires, and tires for export; and the Multiple Business Group, which encompasses all non-tire business including rubber industrial and engineered products like belts, hoses, sheeting, coatings, and even some sporting goods. Although for most of its history the company focused on its domestic Japanese business, an intense consolidation in the global tire and rubber industry prompted it to diversify geographically in the late 20th century. These international moves, coupled with an emphasis on research and development which is turning out a steady stream of new products, have strengthened the company's position in a competitive worldwide industry.

Company Origins

Formed in 1917, one of a number of Japanese industrial companies that emerged as a result of the opening of Japan to the outside world in the late 19th century, Yokohama Rubber developed during the 1920s by finding openings for innovation in Japan's growing industrial infrastructure. The company's most successful product during this period, providing the main basis for its growth, was the cord tire, which it began marketing in 1921. Until then, tires used in Japan were usually made of fabric, primarily canvas. Yokohama's Hamatown Cord, the first cord tire sold in Japan, was three times more durable than fabric tires and soon became popular on Japan's roads. At this time the company also developed products in the area of industrial systems, using rubber to improve the efficiency of transmission belts used in spinning and other industries. In 1921 the company began marketing rubber cut-edged transmission belts, which soon replaced leather transmission belts in a number of industries, and continued to improve on belt technology in 1929 when it produced Japan's first V-type belt which offered improved flexibility and transmission.

These early moves provided the basis for expansion in the 1930s, when accelerating economic activity in Japan created strong demand for rubber products both for vehicles and industrial applications. Yokohama developed balloon tires, tires designed specifically to prevent heat problems, giant tires for trucks, Y-shaped tread tires and, following a fashion started in the United States, tires with colored sidewalls. In 1930 the company developed a soft rubber lining designed for the chemical industry, to protect metals against corrosion and leaking, and also produced a hard rubber bearing to protect ships' propeller shafts. A crucial step in the company's growth occurred in 1935, when it began supplying tires to the major Japanese car producers, Nissan and Toyota, turning Yokohama Rubber into one of Japan's key rubber companies. Its growing reputation prompted the Department of the Imperial Household to ask the company to develop a set of tires for the Japanese Emperor's car, a contract that involved a year and a half of research and development and resulted in the production of 24 tires. The company stepped into the international market in 1934 when it patented, in Japan and the United States, a bandless hose for use in loading oil, followed in 1936 by Japan's first domestically produced hydraulic brake hose for cars. In 1939, the company made its strongest move to date in the growing synthetic rubber industry by developing its first synthetic rubber material.

World War II and Postwar Diversification

The outbreak of World War II prompted Yokohama Rubber to begin producing aircraft components, an area previously unexplored and, in 1941, fuel cells, flexible pipes, and tires for the Japanese army and navy's Zero and Hayabusa fighter aircraft. The strong wartime demand for these products led Yokohama, in 1944, to open a new plant at Mie to increase tire production for military aircraft. The desperate need for vehicle and industrial components in Japan's shattered postwar economy prompted the opening of another new plant at Mishima in 1946. Both of these plants remained crucial to Yokohama's production network into the early 1990s.

Like many areas of the Japanese economy, the rubber industry received a boost in the 1950s in the aftermath of the Korean War, from the U.S. Army's demand for military components. This allowed Yokohama Rubber, which was listed on the Tokyo Stock Exchange in 1950, to increase its involvement in the aircraft products market, in 1955 by beginning production of nylon cord aircraft tires and, over the next two years, aircraft fuel cells, hoses, and self-sealing couplings to meet U.S. military specifications. In 1957 the company began manufacturing and marketing tires for jet aircraft. Along with the expansion of aircraft components manufacturing, the company continued to develop and market new kinds of vehicle tires including, during the 1950s, rayon cord tires, Japan's first tubeless tires, butyl tires, snow tires, and nylon cord tires, as well as developing Hamaking all-weather tires, a basic design widely used in the early 1990s on buses and trucks in Japan. The company also began marketing its first synthetic rubber tires.

On the industrial side, the 1950s saw production of a rapidly growing range of components, including Japan's first cord conveyor belts using rubber insulated cord instead of canvas, material for use as rollers in iron works, an air spring for the Japanese National Railways Technical Research Institute, pneumatic rubber fenders for use by ships at docks, nuts resistant to loosening by vibrations, and rubber based adhesives for brake linings. The growth in the range and quantity of items being produced was helped by the increase in the company's productive capacity at two new large Yokohama Rubber plants, one at Ageo in 1950 and one at Hiratsuka in 1952.

Diversification Continues in 1960s

Notwithstanding its diversification into the areas of industrial products and aircraft components, vehicle tires remained the biggest part of Yokohama Rubber's activities and, during the 1960s, the company pushed ahead with a number of developments that ensured its position as one of the top tire manufacturers in the dynamic Japanese economy, which was growing at an average of 10 percent a year. The company began marketing all-steel radial tires for trucks and buses, studded tires, car racing tires, passenger car radials, and tubeless radials. In the aircraft area, Yokohama won a contract to supply tires to All Nippon Airways Co. Ltd.'s fleet of Boeing 727 jets. U.S. military contracts continued to provide important business, prompting the company to develop aircraft sealants and Teflon aircraft hoses and duct tubes. The company also developed a stream of fuel cells, tires, hose and tube assemblies, ferry tanks, insulation blankets, and de-icers for newly developing jet aircraft and, in 1970, honeycomb core and structural adhesives for aircraft.

Yokohama's diversification into innovative industrial products continued during the 1960s, as it developed more conveyor belt systems, including nylon and fire resistant belts, rubber highway joints to replace existing metal joints, rubber lining for atomic energy equipment, and a rubber fence for sports stadiums. The company also made shockproof pipe couplings for submarines, underwater soundproof materials for warships, dredging sleeves, high pressure hoses, liquid transportation tanks, and sheets for waterproofing roads, as well as developing new materials for use as sealants and lubricants. These continuing research based developments in all three of Yokohama Rubber's main areas of activity ensured that the company benefited from Japan's continued industrial growth. Far from remaining simply a tire company Yokohama had, by 1970, established itself as a major industrial group, with products to offer across the economy. The establishment of a new factory at Shinshiro in 1964 increased the company's productive capacity, enabling it to consolidate this versatility, while the opening of a Yokohama Rubber office in the United States in 1969, followed by a Canadian branch in 1970, marked the first move by the company to expand geographically as well as industrially.

Tire Innovations and Expanded Industrial Goods in the 1970s

Increasing sales in all of Yokohama's main product lines prompted it to undertake a major investment program in the early 1970s, including the establishment of two new factories designed for specific purposes. The Ibaraki plant, opened in 1973, was built to produce hydraulic hose, while the Onomichi plant, which began operating in 1974, specialized in making large off-road tires. Consolidation in all three product areas continued, with the company pushing ahead with new developments in the tire industry, producing steel belted radials for passenger cars, mud and snow radials and other off-road tires, aluminum wheels, and improving the kind of rubber used in its tires. During the 1970s Yokohama Rubber continued to extend its range of industrial goods, producing a rubber guard rail for highways, a rubber sheet to prevent adhesion of barnacles to ships, honeycomb sandwich structural material, new types of hose, rubber bags for oil spills at sea, all-weather paving material for tennis courts and athletic tracks, hot-melt type adhesives, soundproof rooms, sound- and vibration-proof materials for pianos, watertight floor assemblies, for ships' cargo holds, and many other products. Activity in the aircraft division also increased during this period, with the continued production of fuel cells, tube assemblies and other items developed over the previous two decades, as well as improving on the older designs and introducing new products. In 1972, the company developed an electric anti-icing device for helicopter rotor blades, and crash resistant fuel cells for aircraft, followed in later years by further developments in the areas of insulation blankets, honeycomb panels, and prepregs--semi-solid materials consisting of resin impregnated reinforcing fibers, used in the manufacture of aircraft primary structures, which need to be light and strong. Yokohama also began producing equipment for rockets, including heat exchangers and bellows. The company continued with its industrial diversification in 1983 when it moved into the sports products business in cooperation with ten specialist sports equipment manufacturers.

Global Competition Intensifies in the 1980s

The rapid consolidation of the global tire and rubber industry in the late 1980s and early 1990s compelled Yokohama to turn from its historical emphasis on the domestic market. It was "buy or be bought" in a market that shrunk from having 14 competitors splitting three-fourths of the sales to the "big three"--Goodyear, Michelin and Bridgestone--controlling more than half the world's tire sales. Unlike many of its global competitors, Yokohama's strategy emphasized smaller-scale joint ventures and affiliations over mergers and acquisitions, though it has used these strategies as well. In 1984 the company separated its Canadian branch from its U.S. operation and, the following year, bought a 26 percent stake in a Malaysian tire company, IT International, in a deal involving the supply of Yokohama's technical assistance to the Malaysian company. Two years later, it launched an automotive equipment manufacturing and marketing venture, Aeroquip Automotive, in the United States, in partnership with Yokohama Aeroquip Co., and Aeroquip Co. of the United States. Later the same year, the company bought a ten percent stake in South Korea's largest tire maker, Hankook Tyre Manufacturing Company and, the following year, began cooperating with the Rubber Research Institute of Malaysia to develop extraction and pulverization technology for use in obtaining useful substances from natural rubber residue.

In 1987 Yokohama launched an expansion project for its aircraft parts plant at Hiratsuka, introducing the production of large motor parts for the H-11 rocket; bought a 40 percent stake in a maker of printed circuit boards for industrial machinery, Togoshi Co.; and signed a deal with a U.S. company, Technical Wire Products Inc., to produce and market its electromagnetic wave shielding materials in Japan. It also established a joint venture with another U.S. company, Morton Thiokol Inc., to manufacture and market polyurethane based automotive windscreen sealants in the United States. In the same year, Yokohama demonstrated its level of technical achievement by ending its agreements with a number of U.S. and European tire makers who had been supplying the company with technical expertise.

Following a share swap with another Japanese rubber company, Toyo Tyre and Rubber Co., Yokohama established a joint venture to sell passenger car tires and truck and bus steel radials in Germany with Marubeni Corp. in 1988. Later that year, the company made its biggest move to date into the huge U.S. tire market when, in a joint venture with Toyo Tyre and Rubber and the German industrial group Continental Aktiengesellschaft, Yokohama began construction of a plant to produce radial truck and bus tires in the United States. The plant, at Mount Vernon, Illinois, was designed to produce 880,000 tires per year at full capacity. Yokohama made another significant move into the U.S. market in 1989, when it bought a U.S. rubber company, Mohawk Rubber Co. Ltd., with a tire plant in Virginia, an industrial rubber products plant in Ohio, and retread shops in Alabama and California, for about US$150 million. It announced soon afterward that it intended to spend US$200 million over the next five to six years to raise production capacity at the plant. In the same year, Yokohama strengthened its assault on the U.S. market by launching its first television advertising campaign, and began a joint venture with Hankook in South Korea to produce tire tubes and flaps. The company's president, Kazuo Motoyama, summed up the direction of Yokohama's activity in 1989, when he said "We have no intention whatsoever of remaining a local Japanese tire maker."

Globalization, R&D Emphasized in 1990s

Given its relatively late entry into the global rubber fray, Yokohama Rubber set up an energetic expansion program encompassing both acquisitions and organic growth in the early 1990s. In 1990 alone, Yokohama bought 49 percent of a Taiwanese rubber hose maker, Shieh Chi Industrial Co.; launched its products in Portugal; signed a five-year technical agreement with another South Korean company, Bukdoo Chemical; and made moves to begin exporting radial motorcycle tires to Brazil. The company planned to expand from its Asian and North American strongholds into Europe by establishing factories and distribution centers throughout the continent. Increased penetration of Asian and Pacific Rim markets came with the creation of new production operations in the Philippines and Australia mid-decade. Along with this energetic geographic diversification, Yokohama continued to inject funds into its research and development program. This resulted in new products in a number of areas, including the development of electroconductive, anti-static flooring material, a printed wiring board that dissipates heat more efficiently than conventional ones, new prepregs for use as primary structural components for aircraft, new car window adhesives, and a radio-wave isolation room with smooth flat walls, which satisfy a strong demand from electronics and appliance manufacturers.

These extensions of Yokohama's geographic reach and product line were made against a backdrop of continued intense competition, especially from world market leader Michelin, which initiated a price war in the early 1990s. Hoping to seriously undermine its rivals, the French company timed its price cuts to coincide with the global recession then under way. Along with many of its competitors, Yokohama suffered declining sales and profits throughout the first half of the decade. Revenues dropped from ¥441.4 billion in 1991 to ¥379.4 billion in 1994, and net income dropped from ¥5 billion to a loss of ¥207 million in 1993 before recovering to ¥2.1 billion during the period. A change in the company's fiscal year end shrunk fiscal 1995 to just three months (January 1, 1995 to March 31, 1995).

Although fiscal 1996 (ended March 31) sales showed the first year-over-year increase in the decade, net income resumed its downtrend, sliding to ¥563 million (US$5.3 million) from fiscal 1994. Company executives blamed the poor results on its U.S. subsidiary, Yokohama Tire Corp., which suffered a "one-two punch" of high debt service and raw materials expenses. A reorganization of the American operations mid-decade aimed to boost productivity by simultaneously increasing capacity, consolidating distribution, and decreasing employment levels.

Yokohama appeared mid-decade to have reconciled itself to a position outside the tire industry's "big three." Instead of concentrating its efforts on fighting for sales in the low-margin original equipment market, its strategy for the future included a continued emphasis on research and development with a particular focus on high-margin, niche products. Though the company wasn't likely to abandon its core tire business--which encompassed OEM, replacement, and specialty tires and continued to contribute more than two-thirds of sales in the mid-1990s--it expected sales of non-tire goods to grow fastest in the waning years of the 20th century.

Principal Subsidiaries: Yokohama Tire Corporation (U.S.A.); Yokohama Tire (Canada) Inc.; Yokohama Tyre Australia Pty. Ltd.; Yokohama Reifen GmbH (Germany); The Mohawk Rubber Company (U.S.A.).