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Firm opens mothballed Conti plant

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Llanti Systems, a Mexican investors group, recently restarted a closed Continental A.G. plant that had sat idle since late 2001 and expects to reach a daily production of 7,000 tires by year-end.

Llanti, doing business as Pneustone S.A. de C.V., acquired the factory from Conti in January. In restarting the plant, it also established a cooperative arrangement with its 500 employees. It created a subsidiary, Corporacion de Occidente, that provides the labor for the plant since it has no direct employees itself.

The Guadalajara plant closed in 2001 after Continental recorded ``sustained operational losses, particularly from low capacity utilization,'' the German tire maker said in its 2001 annual report. Bernd Frangenberg, then-president and CEO of Continental Tire North America Inc., said in 2002 that the plant also ran into trouble with ``special unions'' unique to Mexico.

For its part, Llanti Systems is calling its arrangement a ``new strategy to restart (the) plant's operations.'' Executive Vice President Jose Suarez said Llanti Systems will run the entire operation of the plant, including sales and management. Only in some key decisions, such as selling a fixed asset or asking for a loan, will the company need to get the workers' approval.

``Although there is no union in this cooperative company, we do have a labor contract that considers most people's concerns, including pay raises, and which stipulates internal regulations to hire or fire employees, along with all other general issues,'' Mr. Suarez said.

Workers also share the company's profits, he added.

Mr. Suarez said the plant has capacity for more production, but he declined to forecast a long-term production estimate. The plant's acquisition was finalized in January, but the company didn't receive the property until March due to certain parts of the agreement.

For now, Continental has been helping with technical assistance for the plant's opening, he said. Continental also produces a private brand, Pneustone, for the Mexican company in the U.S. Llanti Systems makes Pneustone for the Mexican market.

``As today both companies are exploring various business opportunities, there is a possibility that some associate brands are produced for Continental in our plant,'' Mr. Suarez said.

The plant produces passenger and light truck radial tires as well as bias truck and light truck tires. The company plans to produce various private brand tires for independent tire dealers and other tire manufacturers. For the Mexican market it produces the Pneustone and Blackstone brands.

Outside of Mexico, company officials said they are ``approaching'' the European and Central America regions, but no tires will be sold in the U.S. in the short term.

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