A year after cutting their capital investment budgets back to a trickle, the world's major tire makers have opened the spigots again, disclosing nearly $8 billion in the past 12 months in spending for new plants and capacity expansions that represent more than 100 million units of new annual capacity.
The amount is more than three times the spending revealed in 2008-09 and the second-highest total monitored by Tire Business in the 25 years of publishing the annual Global Tire Report. The budgeted spending covers dozens of projects that could add more than 95 million units of new annual car tire capacity, about 10 million units of truck tire capacity and tens of millions of tons of farm and OTR tire capacity to be brought on stream in the next two to three years.
This is balanced against a dozen plant closings in the past year accounting for about 50 million units of annual capacity.
Group Michelin and Bridgestone Corp. top the list with $1.9 billion and $1.25 billion, respectively, in capacity expansion projects disclosed in the past year. Michelin's is spread over four projects, Bridgestone's over eight.
The bulk of the spending, $5.5 billion, is budgeted for projects in Asia, with India and China getting $2 billion each. Michelin, Bridgestone, CEAT, JK Tyre and Balkrishna Tyre, for example, have disclosed plans for new plants in India.
The total does not include perhaps another billion dollars or more spent or budgeted for projects for which investment figures were not released. Among these projects are new plants in China for Double Coin Holdings, Good Friend Tyre Co. Ltd. and Triangle Group Ltd., as well as several hundred million dollars Hankook Tire Co. Ltd. eventually plans to spend on a fifth plant in Asia. Hankook has not picked a site for the plant, although business interests in Indonesia and Vietnam have been courting the South Korean tire maker openly.
The concern about the global recession of the past couple of years was reflected in the major tire makers' 2009 capital expenditure budgets. All of the major tire makers that disclose capital spending reduced their spending in fiscal 2009 by an average of about 45 percent from 2008.
Yokohama Rubber Co. Ltd. trimmed its spending the most, 59.7 percent, but three other majorsNokian Tyres P.L.C., Titan International Inc. and Toyo Tire & Rubber Co. Ltd.all cut their spending by more than 50 percent as well.
The stark contrast in 2009 vs. 2010 is illustrated clearly by Goodyear, which has budgeted more than $1 billion in capital spending this year after trimming spending 20.9 percent in 2009 to $724 million.
The companies reporting capital expenditures budgeted 5 percent of their sales for that purpose in fiscal 2009, down from 7.5 percent in 2008. (See capital spending trends table on page 26 for full details).
Despite its cuts in 2009, Finland's Nokian topped the league of major tire makers in investment ratio, devoting 10.8 percent of sales to modernizing, expansion, etc. India's JK Tyre &Industries Ltd., with 9.9 percent, ahead of Hankook Tire Co. Ltd.'s 7.1 percent.
Research and development spending also took a hit in 2009, with only four of the 18 companies monitoredHankook Tire, Nexen Tire Co., Titan International Inc. and Apollo Tyres Ltd.increasing their R&D expenditures over 2008.
Kumho Tire Co. Inc. paced the R&D spending, devoting 4.1 percent of sales to this discipline, ahead of Michelin and Sumitomo Rubber Industries Ltd. at 3.4 percent.
On average, the major tire makers budgeted 2.8 percent of sales to R&D last in 2009.
Following is a summary of major projects disclosed in the past 12 months:
Apollo Tyres Ltd.
* Doubling capacity for car tires at its Vredestein Banden subsidiary's factory in Enschede, Netherlands, to 10 million units in a series of steps. No budget disclosed, but previously Apollo had budgeted $300 million for a greenfield tire plant project in Europe.
* Investing $40 million over three years in new equipment and technology to improve productivity at its tire plants in Durban and Ladysmith, South Africa.
Balkrishna Industries (BKT)
* Plans to build a plant in western India for radial and bias-ply farm, etc. tires, spending up to $200 million through 2012 for 250 metric tons/day capacity.
* $46.5 million over two years to expand capacity for car and light truck tires at its P.T. Bridgestone Tire Indonesia plant in Karawang, Indonesia, by 11 percent to 29,400 units a day.
* $142 million over two years to expand capacity for passenger tires at its 12-year-old plant in Poznan, Poland, by nearly a third to more than 23,000 units.
* $310 million to expand capacity for large OTR radial tires at its Kitakyushu, Japan, plant to 50 metric tons of daily capacity by the second half of 2012.
* $540 million through mid-2013 to build a car and truck tire plant near Pune, India, to support growing demand for radial tires in that Asian nation. The factory will reach its nameplate capacity of 10,000 passenger and 3,000 truck/bus radials a day by 2020.
* $77 million over three years at its Des Moines, Iowa, Firestone agricultural tire plant to expand capacity and upgrade manufacturing to meet demand for high-capacity radial farm tires.
* $36.7 million in the coming 12 to 18 months to add capacity for radial truck and bus tires, 400 units daily, at its Bridgestone India Pvt. Ltd. plant in Kheda, India, by the second half of 2012. The project will create about 190 jobs at the 970-employee factory.
* $56.3 million in its car and light truck tire plant in Kheda, India, to boost capacity 40 percent to 15,000 tires a day by mid-2010. The expansion will create 300 new jobs.
* $35 million over three years in its car and light truck tire plant in Joliette, Quebec, to modernize the plant to support its specialization on low-profile, larger-diameter tires.
Carlisle Tire & Wheel Co.
* $65 million to cover the costs of converting a factory in Jackson, Tenn., to tire production and relocating the bulk of capacity at its Carlisle, Pa., plant and some capacity from its Buji, China, factory to the new site.
CGS A.S. / Mitas
* $44.5 million to convert an idled Winnebago Inc. assembly plant in Charles City, Iowa, to agricultural tire production. The plant would employ up to 192.
Cooper Tire & Rubber Co.
* $17.9 million to raise its ownership in its Cooper Chengshan (Shandong) Tire Co. Ltd. joint venture in China to 65 percent from 51 percent.
* $7 million to expand capacity for car and light truck tires at its Tupelo, Miss., factory.
Danang Rubber JSC
* $166 million through 2013 to build radial truck tire plant, with a projected capacity of 600,000 units per year.
Double Coin Holdings
* Company plans to build a radial passenger and light truck tire factory, 3 million units per year capacity, near its Rugao, China, plant. The company is undergoing its due diligence to set a timetable for construction.
Dunlop Aircraft Tyres Ltd.
* Firm acquired aircraft tire-building and -testing equipment from Yokohama Rubber Co. Ltd., which phased out that type of tire from its production portfolio. The equipment was transferred to DATL's Birmingham, England, factory.
* Argentine tire maker Fate and Brazilian retread systems supplier Borrachas Vipal S/A are exploring the feasibility of building a tire plant in Brazil, which could involve investments of up to $200 million.
Good Friend Tyre Co.
* Commissioned a passenger tire plant, 5 million units/year in summer 2010.
* $5 million to install truck tire retreading at Wittlich, Germany, plant.
* $150 million (estimated) to build a 200,000-sq.-ft. expansion of its Lawton, Okla., tire plant.
Hankook Tire Co. Ltd.
* $82 million by year-end to boost annual capacity for car and light truck tires at its Jiaxing, China, plant by 2.1 million units to 30 million units.
* $333.5 million over two years to double annual capacity at its consumer tire plant in Dunaujvaros, Hungary, to 10 million tires.
JK Tyre & Industries Ltd.
* $325 million through year-end 2011 to set up a radial car and truck tire plant in Sriperumbudur, Tamil Nadu province, India, with capacity to produce 5.6 million tires annually.
* $11.3 million to expand aviation tire operations in Norwood, N.C., including adding aviation tire retreading by year-end 2011. Project includes closing a retread plant in Kansas City.
* $25 million to buy a 30-percent stake in Shanghai Michelin Warrior Tire Co. Ltd. to take full control.
* $1 billion to build a passenger and truck tire plant in Shenyang, China, with annual production capacity to exceed 28,000 units, starting in 2012.
* $870 million to build a truck and OTR tire plant in Tiruvallur near Channai in southern India in the coming two to three years. Capacity data has not yet been disclosed.
Nexen Tire Corp.
* $843 million over eight years to build a passenger and light truck tire plant in Gyeongnam Province, South Korea, to meet growing demand for fuel-efficient tires. The plant's eventual capacity will be 30 million units a year.
* Russian petrochemicals group OAO Tatneft is planning to add 1.2 million units of annual capacity for steel radial truck tires at its Nizhnekamskshina tire unit in a project valued at $575 million. Continental A.G. is to provide technical support, with initial production expected in 2010.
Pirelli & C. S.p.A.
* $300 million in Brazil through 2012 to expand production capacity there for passenger, light truck, agricultural and OTR tires to satisfy growing demand throughout Latin America for such tires. $100 million will go toward making the Santo Andre, Brazil, plant a manufacturing and technology hub for farm and OTR tires, Pirelli said. Capacity for these tires should grow 40 percent.
* $100 million-plus to cover other projects, such as doubling car tire capacity in China, boosting car tire capacity 60 percent in Romania; and expanding truck tire capacities 20 percent in China, Egypt and Latin America.
Sumitomo Rubber Industries Ltd.
* $297 million to build a passenger tire plant in Changsha, China, with production expected to start by July 2012. The factory will hit 15,000 units daily by year-end 2014 and then double to 30,000 units daily by year-end 2017.
Toyo Tire & Rubber Co. Ltd.
* $105 million to build a car and light truck tire plant in Zhangjiagang City, China, by year-end 2011 with annual capacity for 2 million tires and a work crew of about 500 employees.
Triangle Group Co. Ltd.
* $465 million for a truck and car tire plant8 million car and 5.6 million truck/bus tires annuallynear its headquarters in Wehei, Shandong, China. The plant was scheduled to come on stream in 2010.
Yokohama Rubber Co. Ltd.
* $109 million through early 2011 to double annual car and light truck tire capacity at its plant in Rayong, Thailand, to 4 million units.
* $165 million for a car tire plant in Lipetsk, Russia, that should be in production by year-end 2011 with annual capacity of 1.4 million units.