WHITE, Ga. (Dec. 19, 2005) — The gala celebrating the opening of Toyo Tire & Rubber Co.'s first wholly owned tire plant outside Japan had barely ended when company officials already started talking about the future.
The Japanese firm's Toyo Tire North America Inc. business opened its automated tire plant in White, a rural Georgia city about 50 miles northwest of Atlanta, with great fanfare on Dec. 8. About 350 people from 35 countries attended the ceremony, with guests including company officials from Japan and the U.S., tire dealers, suppliers and local and state government officials.
Toyo invested about $180 million for the first phase, which gives the firm capacity for up to 2 million passenger and light truck tires a year under the Toyo and Nitto brands.
The factory occupies about 1 million square feet on a 150-acre site. Initially, about 60 percent of production will be for Toyo-brand products—primarily Proxes S/T high-performance tires and Open Country M/T and A/T light truck tires—and 40 percent for Nitto tires, though that may fluctuate based on market demands, said Shozo (Carlos) Kibata, Toyo Tire North America president.
The plant has started making test tires, but Toyo expects commercial production to begin in the first quarter of 2006, with all 12 production modules for the first phase in place by June. Four of the modules will be for sport-utility vehicle tires, six for light truck and two for 20-inch ultra-high performance tires, Mr. Kibata said.
Initial employment will be 350, but if Toyo proceeds with two future phases, production capacity would increase to 6 million units annually and employment to 900.
Mr. Kibata said the initial 2 million units won't be enough to meet demand for Toyo and Nitto tires in North America. North American sales for Toyo have been on an upward curve, rising 22.7 percent to $617.1 million for its 2005 fiscal year, ended March 31. For the six months ended Sept. 30, sales in North America were $347.8 million, roughly 16 percent ahead of fiscal 2005 on an annualized basis.
He said Toyo officials will decide sometime during 2006 when to start the second phase and most likely put the expansion in place during 2007.
Mr. Kibata, who expects the new plant to be profitable within three years, didn't know what the investment for the second phase would be, but said it would be less than the initial $180 million outlay because some parts of the plant, such as rubber mixing, will serve both phases of the tire production process.
The third phase, however, will depend on market conditions, he said. After the completion of phase two, discussion about expansion beyond that probably would come in late 2007. Earlier, Toyo said the second and third phase expansions could re-quire up to $250 million in additional investments.
It's all about ATOM
Without a doubt, the star of Toyo's grand opening was its highly automated proprietary tire production system, dubbed the Advanced Tire Operation Module, or ATOM.
Visitors for the opening were given a peek—albeit from a distance—at the system, where no individual touches the tire until the first inspection after curing. Toyo said the process is designed for multi-product, small lot production and enables it to reduce its space needs and manufacturing lead times.
After seeing the plant, Phil Nussbaum, president of A to Z Tire & Battery Inc. in Amarillo, Texas, and a long-time Toyo dealer, said it was wonderful to see the advancements in technology. “The ATOM module, in particular, is where I believe manufacturers have to go in the future because of size proliferation,” he said.
Toyo developed ATOM internally over the past five years and already is using it at one of its Japanese facilities. “We're trying to get as close to 'made to order' as possible,” said James L. Hawk, senior vice president and plant manager.
Mr. Hawk, a veteran of nearly 35 years in the tire industry, said this technology is far beyond anything he's seen. “I can remember being an engineering student at the University of Akron, and in my wildest imagination I could have never imagined this.”
With ATOM, there are no tire builders. Each tire assembly module is self-contained, with 12 extruders built into each module. Belts are made in one area, beads and inner plies in another, and sidewall and tread in yet another. Green tires are then taken by overhead conveyors directly to curing.
“Everything is being extruded in-place,” he said, “so the belts are cut to length and width in place.”
Mr. Hawk previously worked for Continental General Tire Inc. and later with Yokohama Tire Corp. He was familiar with Toyo because he was plant manager at the GTY Tire facility in Mount Vernon, Ill., in which all three of those companies are partners.
Mr. Hawk said he was more familiar with Toyo's expertise in materials technology, not tire making machinery. He credits Mr. Kibata and Yoshio Kataoka, president and CEO of the Japanese parent company, for having the vision to take Toyo into the large-diameter, ultra-high performance market, and then committing the resources to research and development to make the high-quality tires that are a must in that arena.
“Frankly, I was expecting to see a high-speed, semi-automated tire machine, like I saw at competitors,” he said. “Not even close. They have virtually eliminated the whole preparation extruding department.”
With ATOM, Mr. Hawk said tire uniformity improves dramatically because everything is precise and the process eliminates splices. “Uniformity's not 5- or 10-percent better,” he said. “It's in the range of 50- to 75-percent better.”
In addition, ATOM requires only about one-third the labor force a comparable production facility typically employs, a company representative said earlier this year.
Why 'Made in the USA'?
While many manufacturers are looking at other areas outside the U.S. to locate production facilities—and procure cheaper labor costs—Mr. Kibata said the state-of-the-art technology at this new facility allowed it to be built here.
“Our ATOM plant is very automated so we don't need lots of labor. We need high-skilled labor,” he said. “Another reason is that the American tire market is the biggest tire market in the world. It's better to have a facility in the biggest market.”
Mr. Kibata said Toyo visited about 15 locations, including some in Alabama, Tennessee and Kentucky. In the end, Bartow County provided the 150 acres in a site that is near the auto makers in the South and near Interstate 75 for easy transport.
Toyo is working hard to become a part of the rural Georgia community. A citizens group had sought to block the firm's plans to locate the plant in Bartow County but later dropped the action. As part of its opening, Toyo announced monetary and volunteer contributions to Bartow County Schools and the Margaret & Luke Pettit Environmental Preserve.
“To make Toyo Tire North America the No. 1 plant, we must ensure good communication with the local community,” Mr. Kataoka said, “so that we may be recognized as a good corporate citizen.”
Despite wanting to be close to the transplant OEMs, production for at least the first two to three years will be dedicated to the replacement market, according to Mr. Kibata. Toyota Motor Manufacturing North America Inc. has requested that Toyo supply some tires, he said, but the two firms are working together on development.
Toyo also moved a distribution center earlier this year from Austell, Ga. to the White site, where it will occupy about 400,000 square feet.
The tire maker said having warehousing at the plant will enhance distribution and inventory availability for Toyo's expanding network of independent dealers facing an increased demand for high-performance tires. The White location gives proximity to rail, air and interstate highway transportation, which will streamline distribution to dealers by expediting shipments and reducing supply-chain costs.
“Toyo and Nitto take great pride in the relationship we have established with independent tire dealers,” Mr. Kibata said. “As a partner in your business success, our goal is to provide you with a high-quality product designed to meet all your customers' needs and expectations.”
He said the firm has no plans currently to move its sales organization—Toyo Tire (U.S.A.) Corp.—from its Cypress, Calif., headquarters, but that it can't exclude that possibility in the future.