Published on September 2, 2014

TB EDITORIAL: Boost in cap spending a good sign

AKRON (Sept. 2, 2014) — If you want to know where the tire industry is headed, take a look at how the world’s largest tire companies are allocating their capital spending and research and development expenditures.

By doing so, one can start to visualize how the scorecard may look in a few years.

Today, aggressive capital investment is taking place in all regions of the world, with Asia getting $2.77 billion in committed projects, Europe, $2.4 billion and North America $2 billion in 2013 alone. It wasn’t that long ago that such money was being allocated primarily to facilities in other countries, mostly in Asia, with little investment targeted at North America.

Some of this spike is due to the industrial philosophy of thinking globally but acting locally—meaning building plants closer to their targeted markets.

This approach is aimed at improving delivery times and reducing transportation costs.

But tire makers also appear to be positioning themselves for forecasted strong growth in the coming years in all markets of the world.

This year’s Global Tire Report compiled by Tire Business, and those of past years, shed light on some of the companies to watch.

South Korea’s Nexen Tire Corp. is one such firm. In the past year, it invested $364 million in capital spending as the company embarks on building a $1.1 billion passenger/light truck tire plant in Czech Republic. Nexen also pumped up its R&D spending by 35 percent.

India’s Apollo Tyres Ltd. also is moving ahead aggressively following its failed merger with Cooper Tire & Rubber Co. It boosted R&D spending by 60 percent in 2013 and announced its intentions to build a $685 million car and truck tire plant in Eastern Europe, and to spend $340 million to modernize and expand two plants in India.

Nearly all of the world’s tire makers boosted R&D spending in 2013, with Hankook Tire Co. Ltd. leading the pack with a near tripling of expenditures. Hankook also announced plans for an $800 million car and light truck tire plant to be built in Tennessee, and is committing $500 million on an R&D center and tire proving ground in Korea.

China’s tire companies are continuing their global march, highlighted by Giti Tire (China) Investment Co. Giti has committed $560 million to build a passenger/light truck tire plant in the U.S. and is developing an R&D center in Akron. This would be the first tire plant to be built by a Chinese company in the U.S.

Predicting the future is always difficult, but looking at the capital expenditures and R&D spending of the world’s largest tire makers provides insight to how the tire market may look a few years down the road.

This editorial appears in the Sept. 1 print and digital editions of Tire Business. Have an opinion on it? Email your comments to tirebusiness@crain.com.

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