World's largest tyre-maker to cut almost $2 bn in costs to ride out Covid crisis
Bridgestone Corp. will cut about 200 billion yen ($1.9 billion) of spending this year and issue a forecast that assumes another wave of Covid-19 infections in the coming months, Chief Executive Officer Shuichi Ishibashi said.
Half of the reductions will come from reduced advertising and events, and another half from fewer investments this year, we all as other cuts, Ishibashi said in a recent interview. The Japanese tyre maker withdrew its outlook in May but is planning to issue a new forecast when it reports first-half results on Friday.
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Consumers across the globe are traveling less and buying fewer cars, forcing the 89-year-old company to contend with falling tyre demand and price competition. Even so, Ishibashi is counting on steering the world’s largest tyre maker through the crisis in anticipation of a recovery, with the global market projected to expand 8.4% annually through 2024, led by Asia dominating output and consumption, according to Goldstein Market Intelligence.
“It’s critical to imagine the worst situation," said Ishibashi, 66, who became CEO in March. “We’ll review everything, be cash-oriented and control resources, including operating and capital expenditures globally."
Ishibashi said that Bridgestone has received 200 billion yen in financing from banks, and may issue corporate bonds once things settle down. He said in July that the company will have to make tough decisions, including restructuring businesses and shrinking factories.
“The key is whether the company will hit the bottom in the second quarter amid the coronavirus and show a recovery path," said Kazunori Maki, an analyst at SMBC Nikko Securities Inc. “Whether it’ll show us concrete plans for the restructuring is crucial."
Even amid the challenges, Bridgestone is looking for merger and acquisition opportunities, Ishibashi said. Any deal, including a partnership or capital stake, would seek to bolster the tire maker’s data business, he said. Rather than just selling tyres, Bridgestone is shifting its focus to offering solutions, such as using driving data collected from tyres. The company has unveiled plans to offer services that predict when tires are likely to wear and recommend maintenance plans.
Bridgestone bought Amsterdam-based TomTom NV’s digital-fleet solutions business for 910 million euros ($1.1 billion) last year. The company will focus first on commercial vehicles as there’ll likely be higher demand, and eventually expand into passenger cars.
“The basic idea is to build a core business through an acquisition and bolster it," Ishibashi said. “We still don’t have enough presence in the US."