Hankook Predicts Weaker Yen to Give Japan Companies Edge

Hankook Tire Co. (000240), South Korea’s largest tiremaker, said it anticipates its exports to be hurt as new Prime Minister Shinzo Abe’s success in driving down the yen gives Japanese companies an advantage in pricing.

“The Japanese government under Abe is trying to get their competitiveness by devaluing the yen against other currencies,” Lee Soo Il, head of Hankook Tire’s China operations, said in an interview yesterday in Shanghai. “Short term, it’s going to work because they have price competitiveness.”

Hankook’s comments echo those of Hyundai Motor Co. (005380) and smaller affiliate Kia Motors Corp. (000270), both of which reported quarterly profit declines last month and expressed concerns about worsening exchange rates. The yen’s drop of about 18 percent against the won in the past six months is making everything from Japanese cars to vacuum cleaners more competitive versus Korean products in the U.S. and Europe.

“Exports are going to be affected a little bit,” Lee said. “Already, some are saying that Japanese products are reducing their prices.”

Other Korean companies are also going to be affected, he said. Hankook is working to overcome the unfavorable currency by improving product quality, strengthening its brand image and marketing, he said.

Photographer: Nasha Lee/Bloomberg

A worker checks a tire at a Hankook Tire Co. store in Seoul. Hankook is working to overcome the unfavorable currency by improving product quality, strengthening its brand image and marketing. Close

A worker checks a tire at a Hankook Tire Co. store in Seoul. Hankook is working to... Read More

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Photographer: Nasha Lee/Bloomberg

A worker checks a tire at a Hankook Tire Co. store in Seoul. Hankook is working to overcome the unfavorable currency by improving product quality, strengthening its brand image and marketing.

Hankook fell 0.5 percent to 48,300 won as of 9:10 a.m. in Seoul trading, while the benchmark Kospi Index gained 0.7 percent.

Japanese Tires

Tokyo-based Bridgestone Corp. (5108), the world’s biggest tiremaker, this month forecast full-year profit that was 14 percent higher than analysts estimated, citing a decline in raw material costs and a weaker Japanese currency.

“Hankook Tire’s major competitors are Japanese tiremakers and the weakening yen would make a favorable business environment for companies like Bridgestone,” said Suh Sung Moon, an analyst at Korea Investment & Securities Co. in Seoul. “Such a trend would put pressure on Hankook Tire’s export business.”

Hankook Tire is better off than other Korean tiremakers because it has factories in other countries, including China, Indonesia and Hungary, Suh said.

In China, Hankook is targeting to sell 13.5 million tires to automakers this year, up from 12.5 million in 2012, said Lee. The Seoul-based company is focusing on selling more high-end tires and aims to be the top seller of replacement tires in China within three years, he said.

Lee, who took over as the head of Hankook in China this year, said the company is negotiating to supply to more premium automakers in China, without being more specific as talks are ongoing.

Hankook currently doesn’t have plans to raise prices and is monitoring the cost of rubber, Lee said. The company will consider “different kinds of variables” before making a decision, he said.

Hankook has two plants in China that produce 31 million units a year. A third factory started operations in January in Chongqing, which will add 2.5 million units in capacity by the end of the year. The company is operating at more than 99 percent of total global capacity, Lee said.

To contact Bloomberg News staff for this story: Alexandra Ho in Shanghai at aho113@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net

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