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Worldwide capacity growing but capital expenditures down

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The world's major tire companies have committed nearly $1.2 billion in the past 12 months to capacity expansion projects, which would add more than 35,000 units of new capacity annually starting in 2004.

This amount is 25-percent less than the $1.6 billion in projects announced from August 2001 to August 2002.

In general, capital investments by the top 11 tire makers were off about 6.5 percent in fiscal 2002, down to $3.91 billion, according to an analysis of their financial reports. That calculates to 5.1 percent of corporate sales, down from 5.5 percent in fiscal 2001.

Research and development spending, on the other hand, was up 4.3 percent in 2002 over 2001, raising the spending/sales ratio slightly to 3.4 percent. Individually, Group Michelin has the highest R&D spending/sales ratio, at 4.5 percent, slightly ahead of Continental A.G.'s 4.3 percent.

Some of the major projects announced by tire makers in the past year included:

Bridgestone

Bridgestone Corp. leads the way with nearly $350 million budgeted for a half-dozen expansion projects, including new plants in China and Thailand-the latter of which already is being expanded before the initial phase is complete.

The projects announced since August 2002 are on top of more than $400 million in expansion projects launched by the firm in 2001 and 2002.

Among the specific projects are:

* $17 million through year-end 2004 to add 1,300 units of daily capacity for radial truck and bus tires at facilities in Amagi, Tochigi and Tokyo, Japan.

* $59 million through year-end 2006 to double the daily capacity, to 5,000 units, at its Chonburi, Thailand, factory under construction. The additional spending is on top of $139 million budgeted in late 2002 to build the facility, the company's third in Thailand.

* $99 million over two years to construct a radial passenger car and light truck tire plant in Wuxi, China. The 8,000-unit-per-day facility, due on stream by September 2004, will be Bridgestone's third tire factory in China but its first wholly owned subsidiary.

* $40 million through year-end 2004 to build a 40,000-metric-ton-per-year carbon black plant in Rayong, Thailand, as part of its strategy to increase self-sufficiency in key raw materials.

Cheng Shin/Maxxis

Cheng Shin/Maxxis International has budgeted more than $150 million for two projects: a passenger and light truck tire facility near Bangkok, Thailand, and a radial truck and bus tire plant in Xiamen, China, the latter with Japan's Toyo Tire & Rubber Co. Ltd. as a minority partner.

The 10,000-unit-a-day Thai plant should start production by late 2004, with 1,700 employees at full production.

Additionally, Toyo has agreed to invest in a factory in Xiamen that up to now was operated by Cheng Shin/Maxxis in conjunction with local partners. Toyo will invest $10 million for a 20-percent share of CSTP (Xiamen) Co. Ltd., the new name for Cheng Shin-Petrel Tire (Xiamen) Co. Ltd.

Together, the three partners will invest up to $150 million to build a new factory for radial truck and bus tires on the Xiamen company's site, according to Toyo. The 300,000-unit-per-year facility should be operational by early 2004; a second-stage project could boost annual output to 750,000 units by 2006.

Continental A.G.

Continental A.G.'s expansion in the past year took the form of joint ventures and minority partnerships.

It started last September with an agreement with Moscow Tyre Plant to create a joint venture to oversee the construction of a new tire factory on the grounds of Moscow Tyre.

Continental's $35 million investment is expected to yield 1.5 million Continental- and Barum-branded tires initially and more than double that to 3.4 million units by 2006.

In February, Conti strengthened its Asia beachhead by buying a 30-percent stake in the tire activities of Malaysia's diversified manufacturer Sime Darby Bhd., comprising DMIB Bhd. and Sime Tyres International Sdn. Bhd.

Group Michelin

Michelin North America Inc. committed $200 million to boosting and modernizing car and sport-utility vehicle tire capacity at its Ardmore, Okla., plant to produce larger tire sizes to further tap into sport-utility, performance and other large tire markets.

Matador

Slovak rubber company Matador A.S. budgeted $18 million in investments this year for increasing its overall output and modernizing production.

Pirelli S.p.A.

Pirelli S.p.A. is building a tire plant in Bahia, Brazil, where Ford Motor Co. has fostered the development of a supplier park for its new assembly factory there. Pirelli is investing a reported $200 million in Bahia, including a large share of the $136 million budgeted originally for a modernization at its Feira de Santana bias ply factory in Brazil.

The new facility, which uses conventional tire-building methods-as opposed to the firm's more revolutionary Modular Integrated Roboticized System (MIRS)-will be dedicated largely to making passenger and light truck tires for North America. The Bahia plant should start production later this year at about 2,000 units a day but expand to 7,500 units by year-end 2004, according to local media reports.

Sumitomo Rubber

Sumitomo Rubber Industries Ltd. committed $285 million over two years to expand tire production capacity in Asia. About two-thirds of the sum is destined for factories in Japan to increase sport-utility vehicle tire output by 30 percent, passenger tires by 10 percent and truck and bus tires by 15 percent.

The lion's share of the remainder is going to Indonesia, where Sumi Rubber Indonesia will more than double capacity to 30,000 tires a day from 12,000 by year-end 2005.

Yokohama Rubber Co.

Yokohama Rubber Co. Ltd. is spending $41 million through early 2005 to add capacity for larger-diameter performance passenger and sport-utility vehicle tires at its Shinshiro Ninami, Japan, facility.

The new capacity-300,000 units initially, expanding to 750,000 units eventually-will be based on Yokohama's New Manufacturing System, which emphasizes small-lot production runs using advanced, space-saving techniques, the company said. The new facility will feature a mill that integrates everything from mixing, forming and building to vulcanizing, the company said.

The firm also said it ``eventually'' may build another passenger tire plant at the Shinshiro site but did not disclose further details.

In addition, Yokohama Tire Philippines Inc. is spending $16.5 million to boost production of passenger tires at its Clark Economic Zone factory by 25 percent.

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