HANOVER, Germany-Continental A.G., faced with rising costs and shrinking profit ratios, has closed a plant in Mexico and told workers at factories in Austria and Sweden those facilities would close in 2002.
Conti will take a $270 million charge against earnings to cover plant closings in Traiskirchen, Austria, Gislaved, Sweden, and Guadalajara, Mexico, along with a closing earlier in 2001 in Herstal, Belgium.
Conti closed the Guadalajara plant of its Compa¤¡a Hulera Euzkadi S.A. de C.V. subsidiary in mid-December, eliminating 1,164 hourly and salaried jobs. The firm blamed the closing on the labor union at the plant, saying nearly two years of ``repeated efforts to implement international productivity standards proved ineffective due to internal union politics.''
The closing will not affect the commercial viability of the Euzkadi brand nor the operations of a second plant in San Luis Potosi, Mexico, said Jose Mendoza, spokesman for Euzkadi. The Guadalajara plant produced 2.5 million to 3 million radial car and light tires and about 500,000 medium truck and farm tires annually, Conti said.
The net loss of capacity will be negligible, a spokesman said, since Conti's other plants in the U.S. and Mexico will absorb most of the phased out production.
Conti declined to say what the closing will cost or the savings it expects to accrue. For the year through Sept. 30, Continental Tire North America reported a $68.9 million operating loss as sales were off 4.9 percent to $1.17 billion. It blamed about half the loss on the Mexican situation.
In Europe, Conti is planning to phase out tire production at plants in Austria and Sweden this year, eliminating 1,731 jobs and a few million units of annual production. The two plants produced more than 6 million units this past year, but Conti said it expects to absorb a significant portion of this capacity, at other, lower cost plants in eastern Europe.
Conti blamed the closings on the factories' high operating costs and reduced demand for passenger tires.
Conti will cease tire production at its Semperit Reifenwerke car and truck tire factory in Traiskirchen, Austria. Conti blamed the closing on lower demand for truck tires in the U.S. The plant exported 400,000 truck tires to the U.S. in 2001, after shipping double that many in 2000.
In Sweden, Conti is negotiating with local trade unions at its Continental Gislaved Dack A.B. plant in Gislaved about closing the facility by July. Gislaved, with an annual capacity of 4 million tires, is the smallest Conti tire factory.