Bridgestone Corporation (5108) Earnings Call Transcript & Summary

Hello, everyone. I am Shu Ishibashi, Global CEO of Bridgestone Corporation. First of all, I would like to express our heartfelt sympathy to those who have been suffering damage from the heavy rain in the Kyushu area. We, Bridgestone, have already started to provide support on-site. And thank you indeed for participating in this session during this difficult time as well. As we all deal with the COVID-19 crisis, I'm sure that it's been difficult for you. And for the sake of infection prevention and to preempt and defer further manifestations, we are taking this particular format today. I am pleased to share the company's mid-long-term business strategy framework today. We began drafting it back in January of this year and held many discussions among our global management team in order to refine the strategy, which passed the scrutiny of the Board back in April. Although I would have wanted to introduce it to you much earlier this year, we were unfortunately delayed by the COVID-19 situation. I am happy, however, to have this opportunity to share it with you today. Today, I will explain the overall picture of the mid-long-term business strategy framework, which is the first of 3 related announcements scheduled in this year. The second announcement to be in August and will include our financial results for the first half 2020. Lastly, in September, we will inaugurate the new Bridgestone Innovation Gallery, formerly Bridgestone Today, at the Tech Center in Tokyo Kodaira. Going forward, we've committed to regularly communicate with you with respect to our mid-long-term business strategy framework and our progress thereof. Here's our agenda today. Page #2, serving society with superior quality. This statement, which is formalized as our mission back in 1968, are the words of our Founder, Shojiro Ishibashi, and remains unchanged. Throughout our history, our business strategy strives from this mission and purpose. Bridgestone will mark a very important milestone in 2031, celebrating the 100th anniversary of its founding. Looking towards 2050, we will continue to provide social value and customer value as a sustainable solutions company. Our mid-long-term business strategy framework consists of this mid-long-term vision and supporting business strategy, new growth strategy that will help us realize the vision. As shown in the center of this conceptual diagram, we put sustainability at the core of our management. Through our unique solutions business, we will serve society by creating social value and customer value, while gaining a competitive advantage and evolving into a sustainable company working in collaboration with our stakeholders, including society and customers. So this is the basic concept. Solution means, literally speaking, solving problems. With our products and technology offerings or solutions across each of our business units, we will create and provide value by working to understand the needs of society and customers. Furthermore, we will co-create additional value the society and customers have not noticed nor have realized yet by studying customer behavior and insights and provide solutions through innovation, which contribute into addressing critical issues such as mobility, the circular economy and CO2 reduction. Especially in the mobility area, we will promote solutions with our unique platform, Bridgestone tires and diversified products as a solution or based on T&DPaaS to contribute into the evolution of mobility. Regarding the social value shown on the left, in order to contribute into the achievement of the UN Sustainable Development Goals, otherwise known as SDGs, which is required and expected out of companies. We will continuously enhance our activities in the 3 priority areas of mobility, people and environment, as we indicated in our way to serve our guideline to realize sustainable society. Our efforts towards the people priority area will help us build trust in co-creation with society and customers. Regarding the environment, in addition to the long-term environmental targets for 2050, we will also set new medium term environmental targets, which will serve as milestones. We will realize this vision and business strategy through the governance of decision-making, responding to the changes and the governance for value co-creation with stakeholders, including society and customers. Throughout our long history, our mission of serving society with superior quality has remained the key component of our DNA. In addition, over the decades, we have added other important components to who we are as a company. Specifically, our aspiration to be Dan-Totsu in every aspect of our business through the global and committed to strong governance principles. So I would like to explain the history of our company from 3 perspectives: business, governance and brand. First, let me take a look at the business history. Bridgestone's 1.0 is our foundation. Bridgestone was founded back in 1931 and developed the tire and rubber business in Japan through the charismatic leadership of our Founder. We expanded the business to Asia with the start of operations of the Singapore plant back in 1965. With the merger of Bridgestone and Firestone in 1988, we took our first big step towards globalization. This is the beginning of Bridgestone's 2.0, the second foundation. While overcoming various challenges throughout our history, we have promoted globalization in other words, geographical and business scale expansion as well as business quality improvement. And we've been preparing for the next chapter of the evolution of our business. With the acquisition of Bandag in 2007, we began our tire-centric solutions journey with new tires, retread and maintenance services. Since 2010, we have been executing digital business reforms in functional areas, including the material science, product manufacturing and customer contact points. Most recently, in 2019, Webfleet Solutions became a part of the Bridgestone Global Group, which marked the start of our digital solution business. With these strategic steps in place, 2020 marks the beginning of our solutions phase, positioning this as Bridgestone's 3.0, the third foundation. We will fully leverage our solutions platform based on T&DPaaS. Looking ahead into 2050, our group will evolve into a sustainable solutions company. Along with this business evolution, we have also evolved and adapted our global governance accordingly. Our company, which was founded in 1931 as a private company was listed on the stock exchange in 1961. As noted earlier, in 1968, we established in the corporate mission, serving society with superior quality, and received the brimming price in the same year. As we proceeded with globalization, we refined our corporate philosophy in 2011 into our mission and foundation framework, which includes our safety statement, quality statement and environmental statement. In 2017, we established our global CSR commitment, our way to serve, which is our sustainability platform. We've continued to strengthen our governance with the times and as the business evolves and this improvement process is ongoing. The evolution of our business was propelled by our strong brands. Our brand logo started with the keystone mark at the time of our founding, foundation. And in 1984, we introduced a new corporate identity, which remains mostly intact today. Since the merger with Firestone in 1988, we have been developing our global business by using the 2 major global brands, namely Bridgestone and Firestone. Global brand activities began in 1997 with Formula One participation and have been enhanced over time through the addition of various activities and partnerships, including MotoGP, World Solar Challenge and Olympic and Paralympic games in alignment with our purpose and mission. As we announced earlier today, we will change Bridgestone's brand message moving forward to solutions for your journey, which strongly represents our third foundation and the evolution towards becoming a sustainable solutions company. Let me explain more about this later. Our global footprint, our close contacts with customers, our strengths in real on-site observations and insights, our brand power, our technologies and expertise in materials. These are the core competencies of Bridgestone, which we have consistently cultivated and we'll continue to do so in the future as well. Furthermore, in order to realize our vision, we will develop our new competencies, which I will talk a little bit later. We've built our business strategy from the perspective of the business environment, both inside and outside our company. By analyzing the business environment from various angles, such as social trends, mobility trends and competition, we have discussed the strategic direction towards the global management team several times. First of all, regarding changes in the external social environment, we are in an area of unprecedented changes. The current COVID-19 situation has reminded us that unprecedented crises and unpredictable things can happen at any time. This can lead social systems and business environments to be unstable and shift significantly. Under such high uncertainty and pressure, it is imperative that our management style remains flexible and agile in order to make quick adjustments when needed. Geographical conflicts, of course, have a great impact on our business. In the post-COVID era, although we still need to assess changes in globalization, we assume that only responsive and strong companies will survive. We will continuously establish Dan-Totsu products, services and operating models while promoting smart cash management. Regarding climate change, especially in the post-COVID era, social demand for sustainability and SDGs will become stronger than ever. We put sustainability at the core of our management and we will build an end-to-end sustainable based business balancing social value and customer values. We believe that this will deliver a unique business model and lead us to gain competitive advantage. Regarding technology and digital transformation, we understand that value creation will not happen without digital transformation or DX. We started our DX in the area of material science in 2010. Then in the manufacturing area with our unique EXAMATION production system and customer contact points such as Tirematics in 2016. And in 2019, we started the digital solutions business with the merger of Webfleet Solutions. Going forward, we will continue to build a DX infrastructure throughout the value chain. Regarding mobility. I will speak mainly about passenger cars and the priority of MaaS, CASE, especially shared and connected, will have a big impact on our business. In MaaS, players in the mobility industry will diversify and their profit structure will change. In Autonomous & Electric, our position with higher cost vehicles will be very important to our strategic direction. Then it will be important for us to make a proposal of the business with high value-added tires in the aftermarket. From this point of view, it is also necessary for us to transform from offering repair services to also offering predictive maintenance services to create a comprehensive solutions network. Regarding the OE tire business, it is important to transform from a supplier into a value co-creation partner with OE manufacturers. Regarding Shared, although there are varying short-term views following the COVID-19 crisis. From the perspective of sustainability and economic rationality, we assume that the shift from owning to sharing will continue in the mid-long-term. In Shared, we assumed that a sustainable business model will become mainstream. And passenger cars will also shift into B2B business. Our group is already strong in B2B business and [ ahead ] in the solutions business model for commercial businesses, such as the truck business, mining business, aircraft business and agricultural business. We will use our existing knowledge, insights and experience in B2B to meet the demands of the consumer business over the future. Connected includes mobility systems from urban development and that is Smart City support, and we will use our products and solutions to contribute to the whole system. While everything will be connected to the car, we will also promote DX in real and digital to provide additional value and thereby connecting directly with tires. We will also create new added value by connecting systems with the Bridgestone T&DPaaS platform. This is the major strategic direction for us. Let me explain the change in the players and the profit structure in the mobility industry with some data. This is a profit pool in the automotive industry in 2035 versus 2017. The left side shows the profit pool in the current mobility business field and the right side showing that of the future field that is MaaS and/or CASE. Overall, the market profit will multiply by 1.7x to be USD 380 billion in 2035, which means the mobility business will become even more attractive. While the current field will generate about USD 5 billion in 18 years from 2017 to 2035, the future field [ onward ] will generate about USD 150 billion of profit. The profit pool [ onward ] will be expanded in the future mobility field. I believe that our core tire business, replacement business and replacement service business will continue to be a profit solvency in the current field. The ratio of original equipment into replacement business is 3 to 7. We will continue to have strong performance and profit in this resilient replacement business in the future. We will approach the growing future mobility business field based on the ways of door track strategy in which we will strengthen and create new sales opportunities for new premium tires in our core business, while at the same time, accelerating our work in our growth business, namely solutions. Regarding the tire industry, although the profit structure of the industry as a whole is deteriorating, we still see that in this industry as more profitable than other similar manufacturing industries and it can contribute to service as a resource to fund our expansion into mobility solutions business. The gap between the players in the tire industry has been widening. And we think those that will survive will have to be strong and responsive to the rapid changes in society, customer behaviors and the business environment. We are already in a good position. And if we develop and implement the right strategy now, we think we are well positioned not only to manage, but to be able to grow. It is necessary to take bold but measured steps with an anticipation of industry changes. Based on the business environment that I described, we have established our business strategy framework. Bridgestone's 3.0 is our business strategy focusing on 2020 to 2030. We are proceeding with the same mission of serving society with superior quality. In Bridgestone's 3.0, first of all, we will differentiate our position in sustainability and allow it to lead us into a competitive advantage. With sustainability at the core of our management, we will achieve both social value and customer value, which will result in a competitive advantage and differentiators in the marketplace. Secondly, we will enhance the solutions business using our unique platform, Bridgestone T&DPaaS. Thirdly, the tire and rubber business is the basis of our business. And while further strengthening that core, we will also utilize and strength -- utilize their strengths and experience in that business to further evolve into a solutions business, which is our growth area. This strategy will require decisive action. In Bridgestone 3.0, we will optimize our end-to-end processes and carry out bold but not reckless business restructuring. We will build our own unique business model, take bold actions, including M&A, business restructuring and manufacturing footprint optimization as well as shift resource allocation into our growth areas. Regarding our core tire business, tire and rubber business. Tires carry life. This is a fact which we take extremely seriously and with great responsibility. This is a base of our vision, business strategy and all of Bridgestone's activities. The tire is the only part of the vehicle, which touches the surface of the road. And this is the fundamental value of tires. The history of tires dates back to civilizations earliest times with primitive examples of wheels dating back to 3,000 B.C. And tires have been a vital part of mobility in vehicles since the pneumatic rubber tire was invented approximately 140 years ago. Tires have also naturally evolved with the evaluation of mobility vehicles. Tires have a huge impact on all the basic functions of a vehicle, including driving, turning and braking. Essentially, tires played a vital role of transmitting vehicle performance to the road. In a CASE and MaaS world, where vehicles become smarter and more connected to information and technology, tires, with their unique contact with the road, will play an even more valuable role. Tires in the premium category will not commoditize, but instead, they keep generating new value. And moreover, Bridgestone can amplify the value of tires by combining and translating real information to digital information. Tires support and connect all kinds of mobility. Going forward, tires with intelligent systems will connect and support all kinds of mobility, which expands upon the current physical connection between the tire and mobility and vehicle. Bridgestone will continue to contribute to society and our customers focusing on co-creating solutions to support and partner with the stakeholders who comprise an evolving mobile society. More specifically, our unique platform is Bridgestone T&DPaaS. Bridgestone will provide Dan-Totsu solutions through Dan-Totsu products, Dan-Totsu service and a Dan-Totsu service network that combines real and digital. In Bridgestone 3.0, it is important to build our unique business model. As mentioned earlier, the base of our entire business is our core business, the tire and rubber business. We continue to further strengthen this business to produce and sell high value-added products for the future. However, just simply continuing the conventional tire and rubber business alone cannot secure the long-term sustainability of our business. We must steadily transform Bridgestone into a solutions business and create and sell new value by utilizing tire-related data and mobility-related data by leveraging the strength of our core business. Bridgestone is uniquely qualified to do this. The data, information and knowledge gained through our solutions business will allow us to further grow the tire and rubber business. Through the cycle -- through this cycle, the value and strength of each business will be amplified or spiral up as we grow, creating momentum. This is Bridgestone's business strategy, growth strategy. Our core business is strong with the production of physical goods and is supported by a global production network. While our growth business, the solutions business is basically asset light. Transforming tire data and mobility data into value through our unique algorithms will become our competitive advantage. Moreover, this global digital platform enables us to develop globally and will create even more value in combination with our real solutions network. I see it as a resilient business as well. This doesn't mean we are shifting fully from a tire and rubber business to solutions business. In order to ensure our sustainability as an enterprise, we will evolve our business by strengthening profitability in our core business while making strategic investments into our growth business. In Bridgestone 3.0, we will focus on 4 businesses: truck and bus tires, passenger car and light truck tires, off-the-road tires and aircraft tires, which account for about 65% of our consolidated sales and implement a globally unified mid-long-term business strategy framework. Currently, these 4 businesses cover much of our operating income. So we will start our work there. Examples of product, service and business model are shown here by tire and rubber, tire-centric solutions and mobility solutions. Regarding the businesses other than these 4, such as the diversified businesses, agricultural machinery, motorcycles, sports and bicycle business, we are in a process of developing a comprehensive portfolio management strategy by clarifying what we do and what we don't do. This is the last slide of mid-long-term business strategy framework. We are pursuing glocal management for implementing the Bridgestone business strategy. It's important to stress that glocal requires a clear global strategy. While in the big picture, we must secure global consistency and a globally consistent strategic view. In each region, each SBU is expected to flexibly build and execute an SBU local strategy based on the global strategy, taking advantage of the local characteristics of the markets they serve. This management style ensures both group global optimization and total value chain optimization. Based on the clear strategy, we will adjust the local strategies to the maturity of the mobility environment, taking into consideration our position in the market, industry structure and market structure. In addition, we will adjust our approach based on the competitive environment of a particular market. For example, our approach will be different in the areas where our position is strong. For example, in the U.S., Japan, Southeast Asia and the Middle East compared to the areas where our position is not as strong, for example, in Europe and China. We will ensure total optimization by building local strategy with appropriate priorities. That's the overview of the mid-long-term business strategy framework. Now I would like to explain our unique business models with examples from each business. Our core business, the tire and rubber business and the growth business, solutions business. As already mentioned, the tire and rubber business is the base of all Bridgestone businesses where we produce and sell products. As I said, going forward, we will thoroughly strengthen this business by focusing on high value-added premium products as well as optimizing the total system to produce and sell such products throughout our end-to-end value chain. Bridgestone has strong position in the truck and bus tires business based on strong products, strong service network and customer-oriented services such as technical service, which solves customers' problems on-site. In market share of TB tires, we are in the Dan-Totsu #1 position in Japan, Thailand, Indonesia and Australia as well as the #1 position in the Americas and Middle East. Even in the EU market, which has been historically weaker for us, we have a TOP group position. Through the premium strategy, focusing on 2 major brands, Bridgestone and Firestone, our premium brand sales were positive versus demand in the first quarter in North America and EU markets, even while total tire demand decreased. We will continue this premium strategy to improve sales mix, which contributes to our profitability and capture a stronger position in the markets. In passenger car and light truck tire business, we focus on sales of high rim diameter tires, HRD, 18 inches and above as premium strategy. We are increasing HRD sales year-over-year, especially in the North American and EU markets where demand of HRD tires is increasing. In these markets, we are improving sales mix in both OE and replacement year-over-year. The trend of shifting to HRD is further ahead in OE business. We, therefore, are approaching OEMs proactively and anticipating the [ recurrent ] demand to replacement. Average OE to replacement sales ratio is 3 to 7, while in the case of HRD, it is 6 to 4. Replacement demand will continue to increase. Based on these activities, we will continue to strengthen premium product sales. Next, I would like to explain how we will strengthen the system to sell high value-added products. We will introduce the system to produce these products at the opening ceremony of Bridgestone Innovation Gallery in September. So today, I will focus on the system to sell these products. We already have a strong service network with approximately 10,000 stores in PS business and 3,500 sites in TB business as customer touch points. We will transform these networks to solutions networks that support future mobility such as MaaS, CASE and Smart Cities by the combination of real and digital. Next, I would like to describe the tire-centric solutions. Our solutions business starts by first understanding social and customer problems better than they do and then solving them. Then analyzing the accumulated big data created through the use of our unique algorithm leads to new value creation. We create tire-centric value in our tire-centric solutions, which means in order to maximize tire performance, it is necessary to conduct proper maintenance and tire monitoring such as tire wear, tire pressure and temperature control. We create customer value, maximizing the life and performance of the tire by providing Dan-Totsu solutions with Dan-Totsu products and Dan-Totsu service with proper maintenance and retread options through various customer-oriented service networks. Also, utilizing tires more efficiently enables us to provide social values such as increasing resource productivity, resource circulation and reducing CO2 emissions throughout the value chain while supporting mobility infrastructure with safety and efficiency. In this manner, we are to provide both social value and customer value through the tire-centric solutions. We already provide various tire-centric solutions globally. And today, I would like to introduce the retread business, mainly Bandag, for TB tires and MOBOX, a subscription model launched in EU, which we expect to expand globally. Our retread business for TB tires is at the core of tire-centric solutions business and technology. We have been developing this business globally, following the acquisition of Bandag in 2007. Utilizing the retread can reduce raw material usage by 1/3 compared with a new tire and contributes to the reduction of CO2 emissions and improved resource productivity. In this context, we regard this as one of the most important solutions businesses. The retread business operating profit ratio is high, approximately 20% globally, with an even higher operating profit ratio around 30% in North America, which leads in our retread business. Also, I would like to share with you the retread tire business model in Japan known as Total Package Plan or TPP in short. This is a package subscription model with a flat monthly fee, which includes new tires, retread services and proper maintenance and tire consultation services through entire life of the tire. We will continue to develop the retread business globally. We also have a tire subscription model as a new service launched in the EU markets. As of today, it has been well received in markets and we have approximately 29,000 active contracts. MOBOX is a service with a flat monthly fee which includes the use of our premium tires along with replacement tires without additional fees and simple vehicle maintenance such as oil replacement. Customers can save the initial tire costs and customize their services or the service as they like. We are expanding MOBOX through our service networks globally to Middle East regions and more. Our other growth business is mobility solutions. Mobility solutions create new system value, which is generated by combining tire data and mobility data. In the mobility solutions business, we create value in the mobility system with big data generated from tire data and mobility data, which is collected and analyzed using our unique algorithm. It enables us to co-create a larger scope of value than tire-centric solutions, as shown in the diagram to optimize society and customers' operation, which, in turn, also enables us to gain competitive advantage. Expanding our scope and improving value to the customer leads to greater social value. For example, reduction of CO2 emissions, increased resource productivity, and safer and more stable traffic flow. We aim to continue to provide both social value and customer value at a higher level and wider scope through our mobility solutions business. Webfleet Solutions is one of the core of our mobility solutions business. Approximately 880,000 connected vehicles in EU are using Webfleet to support fleet operations. The fleet operations data combined with tire know-how, including expertise in wear and durability enables us to provide the optimal products and services for fleet operations and business conditions, customer by customer. Let me explain how it works. We contribute to reduction in traffic accidents and unexpected vehicle troubles as well as reducing the labor load of truck drivers by monitoring, analyzing and managing both the vehicles and the drivers' behavior, utilizing tire and mobility data. At the same time, fleets will gain full efficient -- fuel efficiency and reduce total operation costs, including tires, vehicles and related tools. Webfleet is a business model with an average operating profit ratio at approximately 25%. It is also resilient to business environment changes, and it maintained the same profitability level even in the first quarter of 2020. We established the Bridgestone's mobility solutions business unit in the Netherlands to accelerate our solutions business, integrating with existing organization and Webfleet Solutions of approximately 700 knowledgeable teammate to synergize. Professionals united as one team can utilize their expertise, which can accelerate and further strengthen the level of analysis technology and of development of our algorithm. This results to wider social value and customer value creation. In addition to the Webfleet connected with vehicles in EU, we have expanded the business to Australia, South Africa, Chile and Mexico. We also plan to expand it globally including to Japanese market. As you can see on the map on the right, the market penetration of fleet management is around 14%. Globally, it is still a growing market. Webfleet also contributes as a platform to amplify value or spiral up among our core business and growth business. Big Data that combines tire data and mobility data using Webfleet and our unique algorithm will be its base. As I said earlier, our fundamental base is the core business, which produces and sells Dan-Totsu products. In the core business, we can utilize the Big Data in the engineering chain. And by doing so, we can develop innovative Dan-Totsu product faster. For the tire-centric solutions, the combination of these Big Data and our solutions platform works to increase the value of each solution. For example, mobility data reinforces the data in Tirematics, the tire monitoring system and toolbox tire database platform in order to realize safer fleet operations. And in BASys retread tire monitoring system, we can propose a more optimal retread cycle to customers. Moreover, in real physical customer touch points, solutions network, services will be upgraded, and we can provide new value to customers together with Dan-Totsu products. This is how we describe the spiral-up system that amplifies the value of the core business as well as the growth business. We also have various solutions globally. In order to provide our solutions faster and more broadly to society and customers globally, we defined 6 unique and sustainable solution models based on our core competence as a global common solution platform and have expanded it throughout of our global footprint. These business units where a particular solution has the most advanced position are identified and works as the center of excellence, in leading the global expansion of that solution. For example, the CoE, the Center of Excellence of retread tire monitoring system, BASys, in the United States, the Webfleet and MOBOX CoEs are in the EU. And the CoEs related to the unique algorithm in mining and aircraft solutions are in Japan. We will further expand our solutions model through CoE smooth agility. In addition to these global common platforms, we also provide customized unique solutions by region and business. This provides the best combination of our solutions faster and provides social and customer value. We will also transform our technical centers to innovation sites. The Tokyo Kodaira site will be restructured as a Bridgestone Innovation Park. We have also opened a mobility lab in the United States and a digital garage in EU to accelerate innovation and our new solutions activities. We released a news about our collaboration with Microsoft about tire damage monitoring system. This model is a unique tire monitoring system with Microsoft Connected Vehicle Platform, MCVP. We utilize MCVP cloud to accumulate tire and vehicle data and analyze them with our unique algorithm, and it can prevent tire trouble and provide driver safety and peace of mind. This collaboration made with Microsoft and our digital garage in Rome, Italy, we recognize, will expand our digital footprint in OE and REP business. And globally, this will be the technology indispensable for the autonomous vehicles. On the next slide, I would like to introduce another example of mobility solution, aircraft solutions launched in June in collaboration with Japan Airlines. We are also planning to introduce our latest mining solutions initiative as part of our financial results for the first half of 2020 announcement in August. In cooperation with Japan Airlines, we will begin to operate a new service model. As part of this collaboration, the aircraft insights and flight data of Japan Airlines and J-Air will be combined with tire insights and digital tire wear prediction technologies from Bridgestone to determine the optimal time to replace tires and optimal aircraft maintenance operations. We see this collaboration as a sustainable solution model that has been co-created with one of our partners. Our unique tire wear prediction technologies have been matched to aircraft maintenance system, which will ensure efficient maintenance at the right time according to the aircraft conditions. This will contribute to safe aircraft operations and more efficient aircraft maintenance as well as reduction of tire inventories. Also, through this new service, Japan Airlines can use its tire assets longer and more effectively. This will result in optimizing resources and resource productivity in addition to CO2 emission reductions from manufacturing and in-use stages. We established this aircraft solutions model based on on-site observation with customers, which was made mainly by our field engineering team during the process of value creation. We will expand this business model to support mobility system and to create both social value and customer value. In order to further promote the solutions business in the Japanese market, Bridgestone Tire Japan will be relaunched as Bridgestone Tire Solution Japan in October this year. In order to evolve into a solutions company, leveraging the strength of the tire wholesale business, we will change the company name and create 2 business units: a core wholesale business and a growth solutions business. You can find more about the new movement of Bridgestone Tire Solution Japan in the news release today. As I noted earlier in my presentation, we will signal our transformation to a solutions company with an introduction of a new brand message, "Solutions for your journey" and begin to use it in September onward. The new brand message was crafted to build on the success of the previous one "Your Journey, Our Passion," which has been using since 2011. This new message shows our commitment that our journey as a company continues with a focus on contributing to realize sustainable society through our solutions. It is also rooted in the brand preface to contribute to society's advancement through care, confidence and creativity. In addition to care and confidence, which are competencies we have demonstrated through our history, we advance our journey to solution through creativity. As I explained, we have 4 core strengths built through Bridgestone 1.0 and 2.0: a global footprint, close contact with customers, brand power, and material expertise. Based on these, we will build new additional core competence in Bridgestone 3.0, our third foundation: sustainability, digital transformation and technology, innovation for solutions, and human resources transformation will be the base for the other competencies. Regarding sustainability, we will issue our 2020 Sustainability Report on July 21. In the report, linked with the mid-long-term business strategy, we will express our commitment to the realization of a sustainable society to our stakeholders and communicate our intention to create new value with our customers and partners who share our value. This is an invitation to co-create value with us. We will further explain the content when we announce the financial results for the first half of 2020 on Friday, August 7. Towards Bridgestone 3.0, we have been promoting digital transformation in material science, manufacturing and social customer contact points. From 2020 onwards, we have begun full-scale digital transformation in the development field, including in the engineering disciplines. I already explained DX or digital transformation in social and customer contact points, in solutions network, and the deployment of Webfleet. We will introduce our digital transformation in material science, manufacturing, product development and ongoing initiatives, along with the mid-long-term business strategy at the opening of the Bridgestone Innovation Gallery in September. But today, I will introduce our unique simulation technology which is the key to our solution business. It is difficult to understand the complicated behavior of rubber; however, mastery of rubber to see, analyze and manage rubber has been one of our core competencies. That simulation technology, which allow us to visualize the complexities and behavior of rubber in tires is necessary to further strengthen this competency and to provide new value and solutions to society and customers. The simulation technology itself is very difficult to develop and, therefore, offers a significant competitive advantage. But the combination of knowledge, expertise and experience in rubber and tires and their manufacturing combined with Big Data enables the advanced Bridgestone unique simulation technology. Moreover, the combination of this technology with market data helps us realize our unique solutions by modeling changes in the tire depending on customers' usage and mobility condition. Also by using feedback through the engineering chain, we can accelerate Dan-Totsu products development for optimized solution by market and by customer. This simulation technology also contributes to efficiency while improving quality and contributes to the transformation and optimization of our tire development process. This is an area we will focus on the future. Innovations for solutions. We have been renovating the Tokyo-Kodaira area, our technical base, as a global hub, for creating new value through innovation. It is an important site for us as it will serve as a location that will invite and enable co-creation with society, customers and those partners who share our vision and mission. At September opening event, we will also introduce a comprehensive effort to Bridgestone DX, digital transformation, and innovation for solutions, in addition to the system to produce high value-added products that I mentioned earlier. To realize the mid-long-term business strategy framework, we will execute our own original human resources transformation. We are a global company, but the current personnel system in Japan is not at the level of a global standard. We will make the most of human resources through a transformation of our HR system. We are introducing a job-type assignment system, job-matching system and a more advanced global leadership development. In our work-style reformation, we are studying value creation through remote work as a next-generation TQM activity. In promoting the solutions business, we will focus on building an organization system centered on Webfleet Solutions and strengthening the recruitment, development of solution personnel. Currently, we have approximately 540 digital experts. We will develop them as data science and we'll collaborate with 750 new digital experts newly joined from Webfleet Solutions and iTrack Solutions business. In order to implement the mid-long-term business strategy, we have started the portfolio management from a new perspective and will consolidate our financial foundation for that. We will restructure the new business portfolio by combining the core business and the growth business as well as business reforms and restructuring, clarifying what we do and what we don't do, clarify the role and positioning of each business and invest resources. We will also set investment criteria and evaluation criteria of its return, appropriate to each business characteristics. For example, for the current business field with knowledge and know-how, we will evaluate the capacity of solid cash generation and implement a tight management for investing resources. And for the entry to the new growth businesses, we will make investment based on the possibility of value creation and its probability. Then we will follow-up the investment with clarified goal, action KPIs and milestones and Agile PDCA cycle. In this way, we will achieve results. We would like to show the specific direction of our new portfolio at the occasion to announce our financial results for the first half of 2020 on August 7. In conclusion, today, I explain the overall picture of the mid-long-term business strategy framework, which is the first of a series of 3 announcements. Next, we will announce financial results for the first half of 2020 in August. And in September, we will host the opening of the Bridgestone Innovation Gallery. We are committed to continuously communicating with our stakeholders regarding our strategy and our progress on our transformation. When we announce our annual results in February next year, we will announce the mid-term business plan based on this framework. The midterm business plan is the evolution of the content and process of the former Mid-Term Management Plan and designed to allow us to execute our strategy in a steadier and strategically consistent manner globally while taking into consideration factors, such as the volatile business environment. Through these communication opportunities, we will continue to provide visibility to progress on our commitment to deliver our growth strategy. Thank you for today and for your time and for your understanding and continued support. Now we start the Q&A session.

My name is [ Tanabe ] and I am with Nikkei. I have 2 questions to ask, if I may. My first question, so not expecting any details or the numbers, just so that I can have a rough image. At present, the split order ratio between the tire and rubber business on one hand and solution-related business. What's the split between the 2 now? And what is your expectation in terms of the ratio, the split between the 2 going forward? Again, some information on that would be much appreciated, so that I can have an image.

Thank you. I will answer. That isn't going to be one important part of the mid-long-term business strategy. We have the retread business and as a mobility solution, we do have Webfleet. But combining the 2 -- those 2 do not account for any major portion because at present, really, the majority is occupied by our core business, namely, the tire and rubber business. Now through global management discussions, we are going to have global deployment of the tire-centric solutions and mobility solutions. As we do so, our thinking will become much clear -- much more clear. And then at what timing would we be ready to announce, that will be in February of 2021. There is going to be an occasion for us to announce our midterm business plan.

Then my second question. You refer to the promotion of bold measures is what you say, and you also talk about manufacturing footprint, here, optimization. For the tire and rubber business, what is going to be your view regarding the capacity to producing those goods? Is it going to become bigger or smaller or what?

Thank you. Okay. Let me take the passenger car tire production as an example. As I explained to you, high rim diameter, premium zone tires. That's the segment or the zone where the capacity has been enhanced given the continuous expansion of business activities and sales. But at the same time, we also have from the different segment or the zone, of passenger car tires, namely commodity tires, so-called. That is subject to further reduction in capacity. So including those capacities which have come along with the acquisition of Firestone many years back, we still have the network manufacturing in the plant, not all of which command a very high value added. So we do intend to go through those plants, particularly the older or the smaller scale plants.

I would like to ask the next present to raise questions. So the next person is [ Mr. Yamata ] from Toyo Keizai.

Okay. This is [ Yamata ] from Toyo Keizai. I do have 2 questions to raise as well. First of all, business restructuring or the realignment or the review, particularly non-tire business activities or even within the tire business, agriculture tires or the motorcycle, on the segment, I think you alluded to the fact that isn't going to subject to a certain review or the restructuring. So do you have something more concrete in mind already, including also the sports business? And if there isn't going to be restructured or realigned, is it going to be that you're going to shrink the top line first before starting to expand, once again, the profitability -- the company with better profitability?

Okay. I would like to talk about the diversified non-tire business and its history. We had a history of entries made and withdrawals as well, such as with electronic paper or the solar panels or more recently, bathroom unit business. We decided to enter first, but then ultimately, we withdrew from those areas. Or as it relates to the sports business, the category, tennis, that's an area that we decided to withdraw. So as you can see, we have constantly been mindful of the needed review and realignment of the business portfolio. That's very important. We will continue to do so. And in doing it, we will broadly clarify what we do and what we do not. So that's what we mean. By the way, you referred to agriculture as well as motorcycle businesses. As we consider the definition of global strategy, in terms of the motorcycle and the tire business, for instance, globally, it's a JPY 20 billion in business. So it's a global niche. It has not had a mainstay as part of the global strategy, so that's the reason why we set that separate from certain others. The agriculture, that's North American centric. So as such, it's already a very strong regional business. So the agriculture tire business is very much centered around North America, and the team there has been taking the lead there. So each business has its characteristics, given the performance in agriculture, you said to shrink first before expanding. In that analogy, I would say that well, as I come back in August to talk about the first half results, the situation this year is indeed quite challenging. So we are already noticing that we have to accept to shrink first. On top of that then, as we start to plan for the future the next 3 years, we will go through the process of review and restructuring. So that although the current top line conditions are so challenging, we will dare to accept that so that we can continue to expand into the future. By the way, we will discuss that as we announce the new medium-term business plan in February of next year.

My second question is related to the question asked earlier by the first questioner about the retread business and solutions business overall. Do I understand correctly that you still can't share with us the net sales amount? I'd like to know the ballpark, is it JPY 100 billion, JPY 200 billion or JPY 300 billion? That will be very helpful.

The retread business globally, and the Webfleet, as I said earlier, these are the core of the solutions business today. But in addition, throughout the retail channel, there are various solution services being provided. Currently, the net sales of global retread is what...?

This is Hishinuma, the global CFO. Let me take that question. Retread business on a global scale, approximately JPY 100 billion is the size. As was mentioned earlier, in the solutions business, this is the most solid part with large net sales amount and high profit ratio. In August, we should be able to give you some more details. We are going to be disclosing the information by product group going forward, so I think we can share with you some more specifics.

The next questioner is [ Ms. Murata of Daily Automotive News ].

This is [ Murata from Daily Automotive News ]. I hope you can hear me, yes? I also have 2 questions. First, today, you mainly talked about the solutions business. And I'm wondering what your intention is going forward regarding possible acquisitions or partnership with other companies. And if you are going to do so, what areas, what technologies do you think you are missing and are interested?

If you look at the history of our business, you will find that, as was mentioned earlier, in 2007, we acquired Bandag, which was our first step in solutions business. And in 2019, last year, we acquired Webfleet Solutions business, which represented a major step in the mobility service, mobility solutions business. And in addition, more recently, iTrack Solutions business was acquired, which is a company specializing in monitoring the mining vehicle tires. So companies providing solutions, digital transformation offerings, aside from the size, are the companies that we are interested in, could be partnership, could be acquisition.