Yokohama Eyes 1.6 Percent Annual Growth Through 2020

Yokohama Rubber Co. Ltd. is projecting relatively modest growth of roughly 1.6 percent a year through 2020 while maintaining a 10 percent operating margin.

Yokohama disclosed its long-term goals recently as part of its Grand Design 2020 Medium-Term Management Plan, which outlines the firm's strategy and goals through fiscal 2020 as the company starts its second century in business.

The firm's GD-2020 plan is, in effect, a re-boot its GD-100 plan, which saw Yokohama fall short of the targets it announced in 2005—sales of $6.9 billion and a 10.4 percent operating ratio—in the runup to its centennial in 2017.

YRC is basing its 2020 projections on a number of macroeconomic factors, including annual growth of 1.9 percent in unit vehicle production and 3.2 percent in tire demand. At the same time, YRC anticipates escalating competition as tire makers in emerging economies increase production.

To achieve its 2020 goals, YRC has identified a number of key business areas for growth:

Consumer tires—position the company in the premium segment, including tires for high-end premium-grade cars, winter tires (both studless for Japan and Europe and studded for northern Europe and Russia) and "hobby" tires (off-roading, racing, rallying, classic cars, etc.).

Customer communication—tapping into motoring lifestyles.

Commercial tires—leverage the company's expanding truck/bus tire position in North America and promote ultra-wide-base tires and continue to build the off-highway business that it bolstered twice in the past 18 months via acquisition (Alliance Tire Group and Aichi Tire Industry).

Non-tire businesses—concentrate resources on sectors where Yokohama asserts a competitive edge, such as hose assemblies and sealants.

GD-2020 also stresses three financial priorities—reducing interest-bearing debt and idle assets, revitalize Yokohama's corporate culture through human resources measures for energizing the company's organization, and minimize corporate risk through systematic management.

Among specific goals, YRC said it expects to generate a cash flow over the coming three years of nearly $1.8 billion while also reducing interest-bearing debt and maintaining a shareholder payout ratio of 30 percent. Investment will take place within the scope of depreciation.

In human resources management, YRC said it is working to revitalize its organization by training and mobilizing human resources effectively, including identifying ways of promoting fuller participation by women in the workplace.

In the GD-2020 document, YRC acknowledges it fell short of the GD-100 goals, noting that earnings growth in the final phase of the 12-year plan was sluggish due to escalating price competition and a surge in capital spending and corporate acquisitions.