Tire and wheel maker Titan International Inc. is consolidating all its tire production into its flagship factory in Des Moines, Iowa, until its markets require additional capacity.
The decision, announced July 28, means a continued production suspension at the company's 1 million-sq.-ft. Brownsville, Texas, tire facility. Titan announced a four-month shutdown in Brownsville in late May because of the negative sales impact of ongoing economic problems and a flood of imported tires from China.
The Brownsville facility primarily produced consumer tires for all-terrain, lawn and garden and other specialty vehicles. It will continue to operate as a warehouse and distribution center with a dozen or so employees, down from about 300 before layoffs earlier this year and the shutdown, said Maurice Taylor, Titan president and CEO.
The firm may lease out space at the Brownsville facility while production is suspended, he said.
Costs of about $3.4 million related to the consolidation occurred in the second quarter, according to Titan's quarterly financial results released July 31. The remainder will be reported in the third quarter, Mr. Taylor said.
Titan will operate at about 75-percent capacity at the Des Moines tire facility-which supplies the company's primary agricultural and construction markets-and has the resources to meet current and future demands without further capital expenditures, Mr. Taylor said.
The firm will continue to increase production in Des Moines and has moved molds from Brownsville to make radial ATV and other specialty tires when necessary. The Brownsville plant built up plenty of inventory before the shutdown, he said.
Titan will consider moving production back to Brownsville when capacity in Des Moines approaches the 90-percent range, Mr. Taylor said. The Des Moines facility employs 850-900 people, including about 600 production workers.
While the farm and construction markets haven't seen anticipated growth in 2003 and the Farm Security and Rural Investment Act-signed into law by President Bush in 2002-hasn't significantly aided equipment sales, improvements are expected in 2004, Titan said.
Imports have hindered domestic sales growth, but the weak U.S. dollar should help remedy the situation in the next six months, the company said. Titan also expects improved equipment sales and new wheels and tires in development to give the company a sales boost in 2004.
The North American large farm equipment sector has been in a slump since 1998, and strikes at Titan's plants in Des Moines and Natchez, Miss., that lasted from 1998-2001 damaged the firm's financial position, Mr. Taylor said. The Natchez tire factory has been mothballed since 2001.
Titan's financial troubles also hindered the potential for success in Brownsville, which was to be the jewel of the company's tire operations. The first tire plant built by the firm, Titan broke ground for the facility in November 1996. Delays in production and conditions caused by the strike pushed the first tire production back until early 1999.
Midway through that year, manufacturing was halted and the company used the facility to rebuild equipment and train workers. When production resumed in January 2000, the plant began rolling out small specialty tires. The facility never made larger tires for Titan's main markets, and production never rose above 25-30 percent of capacity.
Titan posted a net loss of $8.19 million during the second quarter on net sales of $131 million, compared with earnings of $383,000 on sales of $125.8 million in the same period last year. In addition to the costs associated with the consolidation, Titan also was impacted negatively by about $4.8 million during the quarter because of higher raw material prices and increased employee benefit and insurance costs.
For the first six months of 2003, the company lost $14.1 million on sales of $260 million.
Titan's stock price-under scrutiny by the New York Stock Exchange-did make some modest gains in the past two months. The company's stock price hadn't closed above $1 per share since Feb. 3 when it announced in late April it had six months to get it back up above $1 per share or face delisting by the NYSE.
The share price closed at $1.02 on June 5, and hasn't been below $1 at any time since June 10. The price closed at $1.47 per share July 30.