Spurred by fill-rate shortages and a state tax credit, Continental Tire the Americas will invest $224 million over three years to expand passenger and light truck tire capacity by nearly 45 percent at its Mount Vernon tire plant.
In addition to expanding passenger and light truck tire capacity, Conti's commercial vehicle tire division will increase capacity at Mount Vernon by 15 percent by December 2012, bringing annual truck tire capacity to 3.15 million tires. The first 5-percent increase already has been achieved, Conti said.
The physical expansion at one of the tire maker's largest facilities will add 444 full-time jobs and increase capacity by nearly 4 million passenger and light truck tires annually, the company said.
About $171 million of the planned investment will be used for new machinery and equipment, while the remaining $53 million will be directed at infrastructure upgrades.
“Continental Tire the Americas is experiencing significant growth and demand for its tires throughout the region,” said Continental Tire CEO Matthias Schoenberg. “Adding production capacity to meet this demand was essential.”
When the expansion is complete, the plant's employment will reach nearly 3,000 workers producing about 13 million tires annually.
“The driving force of this investment has been the tremendous growth we've experienced in our passenger and light truck business over the last years. So we've been able to expand our business faster than the market and we've been able to increase our market share in North and South America with both our brands, the Continental tire brand and the General tire brand,” Mr. Schoenberg said during the May 12 public announcement at the plant, which included a groundbreaking ceremony with state and local officials as earthmovers worked in the background.
It was about a week earlier, on May 6, that Illinois Gov. Pat Quinn signed legislation that allows Conti to claim $22 million in incentives through the state's Economic Development for a Growing Economy (EDGE) tax credit on the condition the tire maker agrees to create at least 350 jobs, retain at least 2,400 employees in Illinois and make a capital investment of at least $200 million.
The state's EDGE program is offered to companies looking to build new facilities in Illinois and used to retain companies on the verge of leaving Illinois to locate in another state, according to state officials.
Conti has been wrestling with fill-rate shortages—ranging at times from 45 to 55 percent—and has been increasing daily output at its plants in Mount Vernon as well as Camacari, Brazil, and San Luis Potosi, Mexico, over the past two years.
Conti announced earlier in the year that among these plants, the Mount Vernon plant would see the greatest capacity increase—18 percent—in 2011, which is in addition to the production boost expected with the new expansion plans, according to company officials.
In addition to the Mount Vernon expansion, parent company Continental A.G.'s supervisory board recently approved funding for a greenfield tire plant in North America. Mr. Schoenberg said the company was looking at locations in the southern U.S., and a site will be announced later in the year.
“Analyzing today's distribution of our tires, the best location would be southern U.S., if you only want to optimize logistic costs. Transport costs play an important role in that. That plant would produce mostly for the U.S. market and comprise light truck tires and our new lines of high-performance and ultra-highperformance tires,” Mr. Schoenberg told Tire Business.
Meanwhile, the GTY Tire Co. truck tire joint venture operation housed in the Mount Vernon plant has adjusted the joint venture ownership after an agreement to dissolve the partnership with Toyo Tire Holdings of Americas Inc. The GTY venture, formed in 1988 by Toyo, Conti and Yokohama Corp. of America, now involves only Conti and Yokohama under terms of an agreement the three partners reached in mid-January to settle Toyo's lawsuit against Continental and Yokohama.
According to Mr. Schoenberg, Toyo's 16-percent ownership in the venture has been divided between Conti, which now has a 59-percent stake, and Yokohama, which now has a 41-percent share.