Tire industry investments disclosed from mid-2005 through mid-2006 fell short of the record $4.5 billion recorded in 2004-05 period, but at nearly $3.2 billion they rank second all-time.
New projects disclosed in the past 12 months represent nearly 100,000 units of new daily passenger/light truck tire and 10,000 units of new daily truck tire capacity, coming on stream starting next year through 2010.
In addition, there are seven tire plants due on stream this year and eight next year, representing nearly 115,000 units of new daily passenger and light truck tire capacity and about 6,500 units of truck/bus radials a day.
At the same time, tire makers have closed or earmarked for closing nine plants in the past year, taking about 97,000 units of daily capacity for passenger and light truck tires out of circulation by year-end.
This year Hankook Tire Co. Ltd. tops the individual company list based on the $635 million it has budgeted for its passenger/light truck tire plant in Hungary.
Group Michelin slots in at No. 2 with $532 million, divided among a dozen expansion projects at facilities around the world, including $100 million the company pledged toward its three BFGoodrich plants in the U.S. in the most recent contract negotiations with the United Steelworkers union.
Bridgestone Corp., which topped the list last year with a whopping $2.3 billion in budgeted tire plant investments, ranks third this time with $487 million from six separate projects, led by the $258 million budgeted for its truck tire plant in Poland.
China's GITI Tire plans to spend up to $300 million on tire and steel cord plants in Anhui Province, and Pirelli & C. S.p.A. has budgeted $180 million to modernize the Yanzhou Evolution Tyre Plant in Yanzhou, China.
Kumho Tire Co. plans to spend $155 million in Vietnam to build a passenger/light truck tire plant. India's Apollo Tyres Ltd. plans to spend $120 million over five years for a radial plant in Tamil Nadu in addition to spending $62 million to buy Dunlop Tyres International Pty. Ltd. of South Africa.
Way down the list is Goodyear, which has disclosed only two specific expansion/modernization projects in the past year, totaling $37 million. Goodyear's ability to invest is tied to several bank covenants. The company said its ``credit facilities limit the amount of capital expenditures that we may make to $700 million in each year through 2010,'' according to its 10K filings with the Securities and Exchange Commission.
``If we are unable to make sufficient capital expenditures, or to maximize the efficiency of the capital expenditures we do make,'' Goodyear said in its 2005 10K, ``we may be unable to achieve productivity improvements, which may harm our competitive position.''
Goodyear's capital spending the last three years has averaged 2.9 percent of sales-less than half the average of the industry's largest dozen or so competitors.
Asia once again accounts for the bulk of tire makers' spending, with nearly $1.5 billion earmarked for projects there, according to an analysis of the invesment data. Europe will get nearly $1 billion in investment in the coming years, with the majority of spending in Europe going to Eastern Europe, including Russia.
Overall, the world's major tire makers increased their capital spending during their most recent fiscal years about 12 percent, boosting the expenditures/sales ratio to 6.8 percent in 2005-06 from 6.1 percent the year before and 5.5 percent in 2003-04.
Nokian Tyres P.L.C. was the most liberal spender last year, doubling its capital spending during the year to 17.4 percent of sales. Toyo Tire was next at 11.2 percent after it boosted capital expenditures by 50 percent over 2004-05.
In terms of spending on research and development (R&D), the industry's leading players invested 2.4 percent of sales into R&D, down nearly half a point from 2004 as R&D spending growth didn't keep pace with sales growth.
Continental A.G. topped the R&D spending list, investing 4.2 percent of sales into R&D. Pirelli & C. S.p.A. and Michelin were next at 3.8 and 3.7 percent, respectively.
(See the table at right for full details.)
The following are specific projects undertaken by tire makers, listed alphabetically by company:
Apollo Tyres Ltd. will spend:
* $112 million over five years in two phases for a radial passenger, light and medium truck tire plant in India's Tamil Nadu state. Start-up capacity will be 75 metric tons a day, with growth to 250 tons a day in the second phase; employment initially will be 500-600.
* $9 million to add radial truck and bus tire capacity at its Limbda/Baroda plant-adding 400 units of new daily capacity-and generate $90 million in additional revenue annually.
Balkrishna Industries Ltd. is investing $71 million to almost double capacity at its three tire factories in India-Waluj, which makes car, motorcycle and tractor tires; Chopanki, focused on tires for bicycles; and Bhiwadi, where the company's Govind Rubber unit makes car and motorcycle tires.
The project reportedly would expand annual rubber processing capacity 66.7 percent to 100,000 metric tons and double radial tractor tire capacity to 250,000 tires annually.
JSC Belshina is seeking investors to help it convert a bias-ply commercial tire plant in Bobruisk, Belarus, into one for making radial off-road mining tires. Belshina estimates the project will require about $60 million and take four years. Capacity would be expanded beyond the plant's current 16,000 tires a year, the proposal said.
Bridgestone Corp. is investing:
* $50 million over five years to upgrade the production capability of its passenger, light truck and truck and bus tire plant in San Jose, Costa Rica. Capacity details were not disclosed.
* $17 million this year to add a fourth rubber mixer at its Aiken County plant in Graniteville, S.C. The firm did not comment on the effect on capacity.
* $258 million in a truck and bus tire factory near Stargard Szczecinski, Poland, due on stream in the first half of 2009. The plant will be rated at 5,000 tires a day at full capacity by 2011.
* $81 million for a 35,000 metric-ton-per-year carbon black plant in Altamiar, Mexico. The project is due on-stream by mid-2008.
* $14 million for a technical center in Wuxi, China, to support the company's growing production and sales base in that country.
* $25 million for a tire proving ground in Yixing/Jiangsu Province, China.
* $42.2 million through January 2007 to expand capacity for high-performance and larger diameter tires at its car and light truck tire plant in Joliette, Quebec. Bridgestone did not say what effect the project will have on the factory's capacity, listed as 15,800 units a day.
Ceat Kelani Associated Holdings (Pvt) Ltd. is spending $3 million to add capcacity at its plant in Kelaniya, Sri Lanka, to make steel-belted radial passenger and light truck tires; output is expected to reach about 25,000 units a month during fiscal year 2006-07.