Specialty wheel and tire maker Galaxy Tire & Wheel Inc. has bought 70-percent ownership of Rumaguma A.D., a Ruma, Serbia-based producer of agricultural and off-road tires, and it will invest ``several'' million dollars over five years to modernize and expand the company's sole 21-year-old plant.
Galaxy said it pursued the Rumaguma acquisition to secure sufficient capacity to support its growth prospects for the coming years, according to Neil Ganz, managing director. Rumaguma is operating at only about 65-percent of its 11,900 metric tons annual capacity, but the company hopes that by filling the spare capacity with its products, Rumaguma's operating efficiencies and its overall cost structure should improve.
Galaxy is purchasing the share of Rumaguma from the Serbian government, which had put the company on the market as part of a privatization program. The purchase price was not disclosed. The remaining 30-percent stake is owned by the company's 480 workers, Mr. Ganz said.
Galaxy assumed day-to-day operational control of Rumaguma Feb. 20. George Odavic, managing director of Galaxy Europa, will move to Ruma to take over as general manager of Rumaguma. Gorjana Matic will succeed Mr. Odavic at Galaxy Europa.
The bulk of Rumaguma's production is now for Germany's Continental A.G. under an off-take agreement, a business arrangement Mr. Ganz said will continue. Rumaguma has produced tires for Galaxy for the past five years-a fact that made due diligence for the purchase an easier process, he added.
Galaxy reported approximately $75 million in sales last year. About half the company's tire sales are from original equipment contracts, Mr. Ganz said, with customers such as Case New Holland, Deere & Co., Caterpillar Inc. and Terex Corp.
Besides tires, the company makes wheels through its Redco division for a variety of commercial vehicles.
Up to now, the company had contracted out the production of its tires to third-party tire makers around the world. Being classified as a tire manufacturer in its own right will generate an image change in some customers' minds, Mr. Ganz added.
Separately, Galaxy recently extended an off-take manufacturing and technology-sharing pact with Yugoslavia's Trayal Corp. through 2007. The agreement, valued at $27.5 million, calls for Krusevac, Serbia-based Trayal to make Galaxy- and Constellation-brand skid steer and industrial tires.