ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Saturday, June 29, 1996 TAG: 9607010039
SECTION: BUSINESS PAGE: A6 EDITION: METRO
SOURCE: JEFF STURGEON STAFF WRITER
A major retail chain will stop buying tires from Yokohama Tire Corp.'s Salem factory, raising the possibility that the manufacturer will be forced to cut production and employment.
PriceCostco, an Issaquah, Wash.-based operator of 264 warehouse-style general merchandise stores, told Yokohama this week it will cease doing business with the tire maker after 17 years.
Effective in October, PriceCostco will begin winding down its Yokohama tire purchases. Sales will stop in spring 1998.
Yokohama spokesman Dan Hunter said the plant's 850 production workers have no immediate reason to fear for their jobs. He said Yokohama executives believe the company has a "better than 50 percent" chance of weathering the cancellation without any reduction in tire output or employment by finding new outlets for its tires.
"You lose some distribution to customers and you gain some distribution to customers," Hunter said. "We consider this normal course of business."
For example, in a development not previously announced, Sears, Roebuck & Co. late last year committed to buying more Yokohama tires than PriceCostco currently does, company officials said.
Tokyo-based Yokohama Rubber Co. Ltd. operates a U.S. division, based in Fullerton, Calif., which manufactures 19,000 tires in Salem per day. Between 92 percent and 95 percent are replacement tires for cars and light trucks. The rest go on new Nissans and Hondas made in Japan and U.S.-made Toyotas. The company is involved in a joint-venture tire plant in Mount Vernon, Ill.
The corporation reported earnings of $5.3 million on sales of $3.66 billion in the year ending March 31. It has previously been ranked seventh in the worldwide tire sales but said in a May 30 release that its U.S. tire operations are expected to lose money into 1997.
Yokohama bought the Salem plant in 1989 from Mohawk Rubber Co., which had built it in 1969, and after the purchase paid more than $150 million to upgrade the facility.
The Salem plant makes a majority of the tires that Yokohama sells to PriceCostco. Yokohama officials declined to give information on the portion of the Salem plant's production that goes to the chain or give the value of those sales.
Plant manager Jim Hawk said PriceCostco's decision was not based on dissatisfaction with the quality of Yokohama tires or the company's service. Rather, PriceCostco has decided to use fewer tire suppliers in the future, Hawk said.
PriceCostco officials could not be reached Friday.
Job and production cuts are possible if the search for new customers doesn't pan out, Hawk said. In breaking the news to workers, he stressed that it gives company executives impetus to find new buyers.
"I told them, 'Gentlemen, we've just been dealt an opportunity,'" Hawk said.
The head of the Salem employee union, Eddie Robtison, president of United Steelworkers Local 1023 in Roanoke, said he had no comment on the matter.
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