SHERIDAN, Colo. — Remember Green Diamond Tire, the innovative tire remolder that touted the use of carbide crystals in the tread to provide winter traction?
The U.S. operation shut its only plant in Elmira Heights, N.Y., about two years ago but interest in its passenger and light truck tires has lingered ever since. Now Sheridan-based Green Diamond Tire North America L.L.C. is banking on a phoenix-like resurrection of the product out of the ashes of its predecessor.
Owner, President and CEO Richard Gostenik, who was the western distributor for the former Green Diamond of New York, has been seeking investors over the past few years to reestablish production and now plans to open a 254,000-sq.-ft. facility in a soon-to-be disclosed location in southern Colorado. The company is investing $27 million for the plant, equipment and property.
“We're finally in a position where we can put all of this together and bring the company back online this year,” he told Tire Business.
Mr. Gostenik and his partner, Fridrik Vigfusson, an original investor in the Icelandic company that developed the Green Diamond concept, took over ownership of Green Diamond from its Icelandic owners in 2009. Green Diamond Tire North America is a licensee of New Industries Ltd. of Reykjavik, Iceland, with rights to use the Green Diamond patent in the U.S. and Canada. The patented bead-to-bead remolded tire technology features silicon carbide granules molded into the tread to enhance snow and ice traction without damaging road surfaces.
“When the Icelandic economy back in 2008 imploded, there was no more funding or capital to go into that New York plant and so it was not well capitalized from the very beginning. And with the Icelandic ownership not in a position to fund anymore, it was kind of in a death spiral,” said Mr. Gostenik. “At that time I was the western distributor for the product and very frustrated because I wasn't able to get the product that we had sales demand for out here in the western U.S. So basically it was a series of foreclosures on equipment and the facility and there was no way to recover it. Also, the equipment was rather old, at least 15 to 20 years, and it's not something I wanted to assume responsibility for.”
The grand plan at the Elmira plant was to produce more than 200,000 units a year but it only produced about 70,000 to 80,000 units annually in the years before its closing.
Now Green Diamond Tire North America is considered a start-up company for investment purposes, he said.
But unlike most start-up companies, Green Diamond already has an established following.
“The demand is phenomenal. There's not a day that goes by that I don't get at least one or two orders for tires,” Mr. Gostenik said. “I mean orders, and we're not even producing tires at this time. And I have to cancel those orders. And then there are queries from around the world for containers of Green Diamond tires. So we're woefully behind schedule in our own goal of resuming production.”
He said there also are numerous large wholesalers and retail chains in the west that have expressed an interest in carrying Green Diamond tires.
“There's not a month that goes by that they're not asking me for a status because they would be putting them back in their chains. So with about 33 different states having restrictions or prohibitions on studded tires or chaining up, Green Diamond Tire is nicely positioned to move back into that market.”
While there has been strong interest in ordering tires, there had been little interest in investing in the operations to produce the product.
“Last year we tried everything and we were not successful…,” Mr. Gostenik said. “We chased so many frogs from 2010, 2011 and it wasn't until we discovered the USDA (U.S. Department of Agriculture) program, that is what has broken the stalemate. We have approached so many people and banks weren't lending. Remolded tires still have a stigma of the recap/retread and there's an education process that we have to take investors through. We're bread-and-butter American manufacturing of a very green product but I think investors…(are) looking for the next biomedical breakthrough or alternative energy and they just kind of view remolding of tires, irrespective of our market, as kind of being low tech and something that carries liabilities that they didn't want to research.”
However, Green Diamond has been able to tap into USDA backing by setting up its factory in a rural area. The company is still in the process of purchasing the property and didn't want to disclose the location. Mr. Grostenik said the USDA is expected to underwrite capital loans of up to 60 percent of any amount greater than $10 million. “So with that USDA guarantee, it became easier for us to raise the capital,” he said.
Mr. Gostenik hopes to produce the first tire by late July. The company expects to hire 70 production employees at start-up and eventually employ as many as 400 when production reaches 1 million-plus tires annually, possibly in the third year.
Mr. Gostenik admitted that the obstacle to ramping up production is the availability of equipment shipped from its supplier in Italy. “We won't have equipment to build that volume until the sceond or third year.”
Green Diamond first will target government agencies as its primary end-users.
“We're still considered a winter traction tire but toward the end of our production cycle in 2009-2010, with the emphasis on renewable energy and sustainability and what have you, Green Diamond Tire was gaining a kind of an acceptance as an ecologically, environmentally-friendly tire. And that's how we'll go to market when we reintroduce the product,” Mr. Gostenik said.
“We look to the federal GSE (general services enterprise) schedule as our largest vehicle for moving tires into the market. We're assured of being placed on the GSE schedule because the recycled content of the Green Diamond tire is at least 60 percent and it approaches 70 percent. And the GSE mandate is their procurement and purchasing people need to look at any product that has 50-percent recycled product. So we fit into that niche very nicely.
“Beyond federal accounts, we're looking at state and local municipalities and then those major wholesalers and then our third tier of marketing would be into the internet. We have been very successful putting Green Diamond tires out there through the Internet,” he said.
The Colorado plant is the first step in the company's grander plan to make its mark in the tire industry.
“The business plan calls for Colorado to be the headquarters and primary manufacturing and logistics facility, and then run that out to about 1.2 million to 1.3 million tires per year. When we hit that saturation point then we will look to putting satellite sub-factories up in different regions of the country. We've already identified what those locations are, such as Pacific Northwest, two in the central U.S., one up in the Northeast and two in Canada,” Mr. Gostenik said.
“The initial production for the first two to three years will be for the Snow Belt but the tires are run year round. It's a winter traction tire but because they don't tear up the roads, and they're relatively quiet, most people run them year round. And by running them year round that negates the requirement of having a second set of summer performance tires. We view that as one of the key benefits of the tire,” he said.
“We can build the Green Diamond tire without the granules so once we've met our market objectives for the snow belt states, then we'll add additional satellite plants. We'll be able to produce tires without the granules and so go into the southern states. And those states would have a different tread compound formulation because of the differing pavement temperatures they typically encounter.”
In the future, Green Diamond hopes to expand into the performance tire market.
“We've identified a market niche of performance tire users, Audis and BMWs and the like, wanting to still have a performance summer tire but looking for the best winter tire they can get,” he said.
“Many have identified Green Diamond Tire as the tire they want for their winter tire and we readily concede that we're not going to be the performance tire they want to run during the summer time. So we're in the position to increase the carbide for that class of customer. We can increase the carbide content and reduce the treadwear variable so the tire won't last quite as long, but it will be the gummiest, stickiest winter tire we can possibly produce. And if they get a season or a season-and-a-half out of the tire, that class of consumers is very happy with that.”
To reach this reporter: [email protected]; 330-865-6127.