The world's major tire makers, led by Bridgestone Corp.'s unprecedented $2 billion in announced capacity expansion projects, have committed nearly $4.3 billion in tire plant capital expenditures in the past 12 months, double the amount announced during 2003-04 and the most since 1996-97 when Tire Business tracked $3.6 billion in capacity expansion projects.
In addition, Hankook Tire Co. Ltd. is scouting sites in eastern Europe for a plant, for which it is has budgeted a reported $500 million to $600 million, which would bring the collective investment scenario to nearly $5 billion.
About half the projects announced are in Asia, with nearly $1.1 billion going to China, according to the data. Another $1 billion-plus-not counting Hankook's project-is earmarked for projects in eastern Europe and $680 million for Brazil, underscoring the industry's drive for production sources in lower-cost areas.
By contrast, there has been only one capacity increase of consequence announced in western Europe and none in the U.S. or Canada. Bridgestone Americas' $220 million passenger tire plant project in Mexico is the only one of consequence in North America.
The projects represent nearly 150,000 units in new daily-or more than 50 million units a year-capacity to come on stream in the coming two to three years, according to a summary of the projects. This added capacity is not being offset to any great degree by plant closings.
Bridgestone's projects alone represent more then 45,000 units of new daily capacity to come on stream in the next two years. Depending on the mix, this would approximate $1 billion to $1.5 billion in new sales.
Group Michelin was the second most active investor, disclosing $617 million in the period for four separate capacity expansion projects. Michelin budgeted $450 million in 2003-04.
Pirelli S.p.A. also disclosed four expansion projects, for which the firm has budgeted $434.5 million.
Yokohama Rubber Co. Ltd. and Goodyear announced two projects each, valued at $202 million and $138 million, respectively.
Within the capital spending matrix, investments in OTR tires-which are in short supply-stand out. The majors have scheduled more than $650 million in spending for new OTR tire plants and/or expansion of capacity.
In terms of annual capital spending, the world's largest tire makers last year invested on average 6.1 percent of their sales revenue back into their corporations, up from about 5.5 percent in fiscal 2003.
South Korea's Hankook Tire Co Ltd. led the pack with a 13.8-percent investment ratio, ahead of Nokian Tyres P.L.C. at 9.6 percent and Yokohama at 9.3 percent. Goodyear, whose capital spending is limited due to bank covenants, trailed the pack at 2.8 percent.
The majors invested 3.1 percent of their revenue into research and development during 2004, essentially unchanged from 2003. Group Michelin and Continental A.G. were ahead of the average at 4.2 percent; India's MRF Ltd. and Cooper Tire & Rubber Co. were on the low end, devoting just 0.6 and 0.9 percent of sales on R&D.
Summarizing the major projects announced since August 2004:
* $75 million to upgrade its tire plant in Voronezh, Russia, and add annual capacity for 3 million radial passenger car tires by year-end 2005.
* $20 million to expand capacity 25 percent to 75,000 metric tons per year at plants in Waluj and Bhiwadi, India, and includes construction of a farm and earthmover tire plant in Chopanki.
* $159 million to boost the scope of a capacity expansion at its Chonburi, Thailand, truck and bus tire plant, to 7,500 units a day by the first half of 2008; the project includes expanding steel-cord capacity at the Rayong, Thailand, plant six-fold to 107 metric tons daily.
* $100 million for a steel cord plant in Huizhou, Guangdong Province, China; capacity of 70 metric tons a day by year-end 2008.
* $155 million through early 2007 to expand capacity for large radial off-the-road (OTR) tires by 20 percent at its Shimonoseki, Japan, plant. The project also includes provisions to expand steel cord capacity 5 percent at a plant in Saga and for tire components at the Hofu plant.
* $243 million for a high-performance passenger and light truck tire plant near Tatabanya, Hungary, based on the firm's proprietary automated ``BIRD'' production system. Due on stream in 2008, it will have a daily capacity of 8,000 units initially.
* $300 million for a 5,000 unit/day radial truck and bus tire plant in Huizhou, China, due on stream in 2007.
* $220 million for an 8,000 unit/day BIRD-based passenger/light truck tire plant in Monterrey, Mexico, due on stream by July 2007.
* $160 million for an 8,000 unit/day passenger/light truck tire plant in Camacari, Brazil, due on stream in late 2006.
* $100 million to modernize the Santo Andre, Brazil, passenger, truck/bus, agricultural and off-the-road tire plant.
* $130 million to double annual capacity of small radial earthmover tires at its Hofu, Japan, plant by mid-2006.
* $237 million over two to two-and-a-half years to install the ``BIRD'' system at its Hikone, Japan, tire plant, where production of car tires using the system should reach 12,000 units daily by early 2007.
* $94.3 million to build a plant in Shenyang, China, for making steel tire cord; 70 metric tons a day by year-end 2007.
* $62 million to buy Goodyear's 47,000 -acre natural rubber plantation in Indonesia.
Double Happiness Tyre
* An undisclosed sum to build a radial truck tire plant in Taiyuan; 300,000 units or 1.8 million metric tons a year.
* $30 million to double annual radial car and light truck tire capacity to 5 million units at its Federal Tire (Jiangxi) subsidiary in China by year-end.
* $18 million to install capacity for run-flat passenger tires at its Dalian, China, plant by 2007, with annual output of 200,000 units by 2011.
* $120 million to expand medium radial truck tire capacity 50 percent at its plants in Sao Paulo and Americana, Brazil, by 2006.
J.K. Tyre Group
* $51 million to double annual OTR tire capacity at its Mysore, India, plant to 2,400 units.
* $38 million to expand capacity for steel truck radials at Mysore, for radial passenger tires at its Banmore, India, plant, and for bias-ply truck tires at all Mysore, Banmore and Kankroli, India, plants.
* $185 million for a passenger and light truck tire plant in Tianjin, China; 5 million units a year by 2007, expanding to 12.5 million units annually long-term.
* $40 million to modernize its plant in Addis, Ethiopia, and quadruple annual capacity to 1 million units by 2008, including capacity for radial tires.
* $65.3 million to expand capacity for truck tires at its Tours, France, plant about 25 percent to more than 1 million units by 2007; project includes phasing out tires at the Poitiers, France, plant.
* $200 million to build an earthmover tire plant in Campo Grande, Brazil. Due on stream by the second half of 2007, the plant initially will have annual capacity of 40,000 metric tons, rising eventually to 55,000 tons.
* $330 million to expand car and light truck tire capacity at its Stomil Olsztyn S.A. tire plant in Olsztyn, Poland, over three years by about 3 million tires.
* $22 million to triple production of passenger car tires at its plant in Davydovo, Russia, to 6,000 units/day by year-end 2005.
* $180 million over three years to set up a radial truck tire joint venture in China with Roadone Tyre Co. Ltd. of Jinan, China.
* $130 million over three years to build a passenger tire plant in Slatina, Romania, primarily for performance passenger tires; no capacity data were divulged.
* $100 million to build a steel radial truck tire facility on the site of its Gravatai, Brazil, passenger tire plant and to expand capacity at its recently opened passenger tire plant in Bahia, Brazil. Capacity data were not divulged.
* $49 million, together with joint venture partner Continental A.G., to set up a steel tire cord joint venture in Slatina, Romania; annual output of 30,000 metric tons at full capacity in about three years.
* $120 million for a truck and OTR tire plant in Rugao/Jiangsu Province, China, that will turn out 2.5 million radial truck tires a year by 2007 and eventually up to 150,000 units of annual capacity for radial OTR tires.
* $1 million to add capacity for about 100,000 radial specialty tires at its Indiana, Pa., tire plant by mid-2005.
* An undisclosed sum to build a passenger tire plant in Thailand's Rayong Province that eventually will become the company's largest operation at 7 million units a year. Daily capacity will start at about 12,000 units in 2007 and ramp up to 22,000 by 2010.
* $51 million to add up to 10,000 units of new capacity for passenger tires at plants in China and Indonesia.
* $25 million to boost annual output of larger diameter passenger and light truck tires at its Kuwana, Japan, plant by 1 million and 120,000 units, respectively, by year-end 2005.
* $93.7 million to more than double production capacity of passenger and sport-utility vehicle tires at its Yokohama Tire Philippines Inc. subsidiary; annual capacity will rise to 7 million units by September 2006.
* $109 million to add passenger car and light truck tire capacity at its existing truck tire plant near Bangkok, Thailand; capacity of 1.4 million units will be on stream by late 2006/early 2007.
* An undisclosed sum to double capacity for radial truck tires at the Thai plant to 700,000 units by 2007.