CHARLOTTE, N.C.—The commercial division of Continental General Tire Inc.—on track to mark its sixth consecutive year of banner sales during coming months—is mulling the possibility of a new truck tire plant in North America. Thomas J. Reese, the division's executive vice president, said the idea of adding a second truck tire plant here makes sense as the Charlotte-based division strives to increase its market share from 7 to 10 percent over the next three years.
Mr. Reese told attendees at the company's national commercial dealer conference in February that CGT is "poised to move to the forefront of the commercial tire industry."
According to year-end financial results released by Continental A.G, CGT's parent company in Germany, the commercial division shipped approximately 2.5 million truck tires in 1999—an increase of 8 percent over 1998.
Mr. Reese said the division's 1999 net sales were approximately $475 million—up a healthy 23.1 percent from the $386 million reported in 1998.
That's not bad for an operation that once had quality problems and was losing money less than a decade ago, Mr. Reese said.
This year, CGT will be importing approximately 800,000 truck tires from Continental plants in Europe. Those, along with approximately 270,000 units resulting from an expansion of the company's Mount Vernon, Ill., plant, will give the division more than a million additional truck tires this year—virtually all of which will go to meet already existing demand, Mr. Reese said.
For some time now, CGT's Mount Vernon facility, as well as its off-the-highway tire plant in Bryan, Ohio, have been operating on overtime schedules, their capacities sold out.
"We desperately need another plant in North America," Mr. Reese said. "It's not in anybody's best interest to continue importing 800,000 truck tires. And knowing that those tires are sold, it would be a win-win situation if we could build another manufacturing plant in North America and relieve (the necessity for) some of those imports that are coming in."
Mr. Reese cautioned that he didn't mean to suggest the company was ready to embark on a brick-and-mortar expansion of this sort. "But (the possibility of a new plant) is certainly a topic for discussion," he said.
Any such decision, of course, will depend on the willingness of parent company Continental to fund the project. But it's not difficult to imagine such approval being given in view of the division's track record over the last five years, Mr. Reese said.
CGT's commercial division leads Conti's worldwide tire operations in return on assets and sales. "So the money we've requested in recent years has been given us," he said.
Conti, for example, recently provided money for increasing production capacity at Mount Vernon as well as for retooling the Bryan plant to begin production of Continental-brand radials there later this year.
in January, Continental also underwrote the cost of creating a new central sales region, bringing the commercial division's total to four.
The new region, based in Kansas City, Mo., serves Arkansas, Missouri, Texas, Illinois, Wisconsin, Iowa, Minnesota, North Dakota, South Dakota, Nebraska, Kansas, Oklahoma and parts of Michigan and Indiana.
"The autonomy of our region managers is strong," Mr. Reese said. Pushing authority for decision-making out of the company's Charlotte headquarters and into the field is one of the keys to the division's success. That also was a consideration in creating a fourth sales region. And as the company approaches $600 million in sales over the next couple of years, a fifth sales region might also be in the offing, he said.
The division as a whole serves approximately 150 dealerships across the continent, about 40 of which account for between 65 and 70 percent of shipments, Mr. Reese said.
Dealers who carry the General brand presently outnumber those handling Continental, but things should even out a bit in the years ahead, he predicted. The company is positioning Conti as the world brand.
Of the 35 largest commercial dealerships ranked by Tire Business in this issue, some 15 carry General-brand tires; eight handle Continental.
In addition to providing what Mr. Reese described as a quality product at a competitive price, he said CGT's commercial division also offers dealers an alternative to the cradle-to-grave tire management programs of competitors such as Goodyear and Michelin Americas Truck Tires. Many dealers don't like dealing with a single supplier on everything from new tires to retread materials and equipment, he said.
Such programs are not in the best interest of independents, Mr. Reese said, because the manufacturer is promising to take care of everything the dealer needs. "I don't believe that, and I don't think the American entrepreneur is going to believe it either," he said.