Cooper Tire & Rubber Co., looking to secure adequate passenger tire capacity for growing demand for its products, will source about 1 million entry-level passenger car radials from China this year while at the same time boosting performance tire capacity at its Findlay plant by 500,000 units.
Both moves are integral to Cooper's strategy to convert U.S. capacity to higher margin performance tires.
Cooper will source the tires from Hangzhou Zhongce Rubber Co. Ltd. in Hangzhou, China, the same company that is taking over Cooper's medium truck radial production. Hangzhou Zhongce will make a single entry-level line in six sizes in the Cooper, Mastercraft, Dean and Starfire brands, Cooper said, using Cooper specifications and quality standards specifically for the North American market. Tires should be available starting in the third quarter.
``This outsourcing arrangement will help us meet our growing demand,'' said Tire Group President Dick Stephens. ``By outsourcing some of our broadline products, we can devote more production capacity to the more exotic performance tires. We have increased capacity at all of our U.S. plants, and these tires from Hangzhou will help fill in the gap between our capacity and projected demand.''
Thomas Dattilo, chairman, president and CEO, said earlier this year Cooper anticipates a 10-percent jump in its unit shipments this year, vs. industry growth of 3 to 4 percent.
Speaking to analysts in a conference call discussing the firm's results, Mr. Dattilo said the anticipated growth will outstrip the company's production capacity, meaning Cooper will be relying this year even more on expanded outsourcing agreements. The growth will include a jump in the firm's market share in high-performance tires to 15 percent, Mr. Dattilo said.
Cooper engineers are on site in China developing the tire and conducting audits to assure all products comply with its quality standards and exceed all governmental requirements, Cooper said. Financial aspects of the deal were not disclosed.
This is Cooper's second deal in a matter of months regarding passenger tires from China. In December Cooper disclosed plans to build a radial passenger and light truck tire factory in China in a joint venture with Taiwan's Kenda Rubber Industrial Co. Ltd.
The plant in China's Jiangsu Province, near Shanghai, should open by late 2005, Cooper said. Initial production will be in Cooper's various brands for export, but the firms didn't disclose the cost of the project or production capacity.
In October Cooper contracted with Hangzhou Zhongce to make 250,000 to 350,000 Cooper- and Mastercraft-branded medium truck radials a year at its plant in China. Cooper is transferring molds and manufacturing equipment from its Albany, Ga., plant to Hangzhou Zhongce for the production.
At its headquarters passenger and light truck tire plant in Findlay, Cooper is investing $1.8 million in new equipment to boost capacity by 500,000 tires annually. The expansion, which represents about a 5.5-percent capacity increase, will create at least 30 new jobs, Cooper said.
``This expansion allows us to increase production of high-performance tires and also add new equipment to enhance our quality and productivity,'' said Bill Woeste, vice president manufacturing. ``We expect this equipment to be in place and at full production levels by late summer.''
In January, Cooper announced $32 million in investments in its other three U.S. tire plants: Albany, Ga., Texarkana, Ark., and Tupelo, Miss., to boost annual capacity by about 2.4 million units.