HANNOVER, Germany—Continental AG claims to have worked the bugs out of the concept of ``modular tire building''—building casing ``platforms'' on a large scale at one site and completing their assembly at strategically located ``satellite'' plants—and will proceed this year with at least one commercial scale plant in Germany. Continental plans to convert as much as 40 percent of its European production for ``standard'' car tires to MMP (Modular Manufacturing Process) satellite units in the coming two to three years, according to Wilhelm Schaefer, former Continental board member and MMP project consultant.
The company calculates it will be able to reduce operating costs by as much as $42 million a year by implementing the process commercially, and improve cash flow by up to $60 million a year thanks to reduced inventories and more efficient distribution.
Conti management believes the new process will allow it to improve its distribution logistics with dealers and allow it to enter new markets, such as South America and the Pacific Rim, with minimal investment.
Conti's board of directors gave the MMP project the green light March 14, culminating more than three years of development.
Company executives said investments in the new plants would be ``insignificant'' in terms of the company's overall capital spending budget. Building a new world-scale factory, by contrast, would cost more than $300 million, Mr. Schaefer said.
MMP is designed to make Conti's manufacturing system more flexible, the company said, making use of existing capacities to manufacture the tire ``platform''—believed to be the blank casing—on a large scale.
This platform is partially, or pre-vulcanized, before being shipped to the specialized MMP satellite for final assembly—adding the individual tire type distinguishing elements (tread and belt package, primarily)—and curing.
MMP yields a standardized tire, but not a homogeneous one, said Peter Scholtissek, assistant project director. Although the platform for a specific size tire will be identical for each of the brands that use it, the final stage of manufacture (belts, tread etc.) determine 50 to 70 percent of a tire's performance characteristics, he said.
A dedicated MMP finishing plant is designed to operate viably at volumes as low as 400,000 to 500,000 tires a year, the firm said, and flexible enough to accommodate runs as small as 100 tires, deliverable to the customer within 24 hours of the order, said Tom Rae, head of strategic sourcing projects.
The new process is designed to help overcome a fundamental problem of tire manufacturing—too many types and sizes and the time it takes to reconfigure production machinery to accommodate the lower volume types, said Bernadette Hausmann, director of purchasing and strategic sourcing.
In all, the firm expects to shift between 5 million and 10 million units of annual production of standard car tires to MMP satellites. Some of these will be located within existing Conti group tire plants; others will be free-standing, located at strategically important sites.
The first full-scale MMP plant will be up and running by June in Germany—most likely at Korbach.