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August 22, 1994 02:00 AM

DUNLOP PLANS NEW TIRE PLANT IN U.S.

Bruce Meyer
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    BUFFALO, N.Y.-Dunlop Tire Corp. said it plans to build a third North American tire factory that will produce primarily radial passenger tires. Meanwhile, the strike that began June 21 at Dunlop's plant in Huntsville, Ala., continues, though talks between the company and United Rubber Workers Local 915 were scheduled to resume Aug. 18.

    The project would be the first completely new passenger tire plant in North America since Goodyear opened its Napanee, Ontario, facility in 1990. Dunlop said it will need the capacity to meet an anticipated increase in demand for its products.

    ``We've assessed our future growth opportunities and determined that an additional manufacturing facility is in our best interest,'' said P. David Campbell, Dunlop senior vice president of corporate administration. ``This move will give us the technology, added capacity and product mix flexibility we need to continue to grow.''

    Few additional details were available on the project. Dunlop has hired an outside consultant to assist in the pre-construction process, including site selection, an impact study of the effect of increased capacity and determination of the specific product mix. This process should be finished within a year, with production beginning about three years later-likely by the end of 1998.

    Passenger radials will be the focus, though, because the Sumitomo Rubber Industries Ltd. subsidiary has increased its original equipment sales of these tires, as well as replacement sales of its Dunlop and associate brands, said Patrick J. Logue, vice president of marketing.

    ``This seems to be where our production capacity requirements are coming up short when you factor three to four years out,'' he said.

    Currently, Dunlop has capacity to make 28,120 passenger and light truck tires a day at the striking Huntsville factory, and 9,400 passenger, light truck, truck/bus and motorcycle units a day at its Buffalo plant, which opened in 1923. Dunlop reported 1993 sales of $590 million.

    Once a third plant is added, future product allocation will be made from a utilization/profitability standpoint, Mr. Campbell said.

    North America is a good place to consider adding production capacity because it has become a relatively inexpensive location in which to build tires, according to Harry Millis, an analyst with Fundamental Research Inc.

    ``It doesn't make a lot of sense to move in tires (to North America) from other places outside of the Americas,'' he said.

    It also appears Sumitomo has enhanced Dunlop's operations since acquiring the firm in the 1980s and has increased its private label and associate brand business, Mr. Millis said.

    The analyst projected that a facility like the one Dunlop is planning would require a capacity of at least 15,000 to 20,000 units a day to take advantage of efficiencies of size. To fill that capacity, Dunlop would need to pick up some market share, he said.

    Mr. Millis also said the timing of the announcement, with the ongoing strike, was a bit strange given that Dunlop doesn't currently know what its labor costs will be. ``New plant announcements usually are reserved for when things are going well and you're happy with everything.''

    Mr. Logue called the timing a coincidence. ``We've been looking at this for some time,'' he said. ``For Dunlop to achieve the growth we know is needed, we had to act on this immediately so when the production capacity is needed, we have the third plant.''

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