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September 30, 2013 01:00 AM

YTC breaks ground on Miss. tire factory

Bruce Davis
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    WEST POINT, Miss.—Sept. 23 was a red-letter day for Mississippians and Yoko- --hama Tire Corp. as the tire maker broke ground on its $300 million truck and bus tire plant near West Point, providing the promise of 500 well-paying non-union jobs in the coming two years. But even as the first shovelsful of Mississippi dirt were turned over by the governor, state and local officials and Yokohama executives in the midst of the 570-acre site, attention was turning already to the project's second, third and eventually even fourth phases.

    Yokohama has stated on a number of occasions that the West Point site can accommodate a plant four times the size of the Phase One facility to be built over the coming two years—1 million square feet and 1 million tires a year. The 570-acre site eventually could be home to a plant covering up to 5 million square feet—or roughly 115 acres, as one speaker pointed out during ground-breaking ceremonies at the site—and capable of turning out 4 million tires annually with up to 2,000 employees.

    The question at hand is how quickly that will occur. Yokohama Tire and Yokohama Rubber Co. Ltd. executives are guarded in their assessment of how soon the plant might proceed to the second and subsequent phases, saying market demand and conditions will influence that decision. However, it's not just market demand and conditions in North America.

    The West Point plant is part of a larger, global growth strategy for Yokohama, which has pledged to add 20 million units of daily tire output to its global capacities by 2017. Demand growth for truck tires throughout ASEAN—the Association of South East Asian Nations—and Europe will play a significant role in Yokohama's decision to expand West Point after it opens in October 2015, because the firm now sources a large percentage of the truck tires it sells in North America from a plant in Rayong Province, Thailand.

    Since that plant also supplies customers throughout ASEAN and Europe, it's critical to have another source of truck tires to relieve pressure on that plant, which is being expanded as well, to 350,000 units a year.

    To the casual observer attending the ground-breaking, it would seem the plant's expansion to its fullest dimensions is a done deal and the quicker the better, based on comments made by a number of speakers from state and local governments and economic development agencies. Should Yokohama exercise its options to build the plant out fully, the investment could grow to $1 billion or more. To help land the project and prime the pump for expansion, the Mississippi Legislature approved a package of economic incentives worth $130 million over 10 years.

    This will be Yokohama Rubber's fourth dedicated truck and bus tire plant worldwide, joining two in Japan and one in Thailand. YTC also sources some truck tires from its GTY Tire Co. joint venture with Continental A.G. in Mount Vernon, Ill., an arrangement that will continue.

    The company has not yet disclosed the plant's specific product mix, but it appears wide-base singles—which Yokohama added to its product portfolio earlier this year—likely won't be part of the mix in the first phase, according to Tadaharu Yamamoto, president of Yokohama Tire Manufacturing Mississippi L.L.C., the new entity created to oversee the construction and eventual operation of the West Point plant.

    Mr. Yamamoto said the West Point plant would be the most highly automated factory Yokohama has built, but he and others declined to go into detail as to what areas of production will be affected or how West Point will compare with other plants from an efficiency standpoint. He also said the West Point plant will incorporate "proprietary" mixing technology, but again he and others declined to go into detail. For YTC executives, the promise of a million truck tires sourced locally is both exciting and daunting.

    According to Taka Hamaya, executive vice president of YTC, having a larger inventory and shorter supply lines will allow YTC to become a more serious player in the national accounts business and thus make Yokohama a viable alternative to the Big 3 commercial tire players (Bridgestone, Goodyear and Michelin). He said North America is Yokohama's single largest market for truck tires globally and called this the "No. 1 growth market" for the next 10 years.

    Mr. Hamaya pointed out Yokohama does business with 80 percent of the 250 largest truck tire dealers throughout North America, providing the company with a platform of sufficient scale to be able to promote Yokohama as a true national brand. In addition, Yokohama is devoting its technical resources to making sure its range of truck tires are engineered to meet the Environmental Protection Agency's SmartWay fuel-saving product performance criteria as well as to provide retreadable casings.

    Retreadability is being given a high priority, according to comments made by Yokohama executives at the West Point event and in the YRC annual report, although this does not mean Yokohama is pursuing its own retreading technology or network.

    To help solidify its commercial aftermarket sales efforts, Yokohama has enrolled more than 775 "qualified" service provider members under its "SmartSolution" certified dealer program, which focuses on the "four pillars" of YTC's value proposition—longevity, efficiency, availability and dependability—according to Rick Phillips, senior director, commercial and OTR sales. In connection with the plant project and its staffing needs, Yokohama is donating $500,000 to two Mississippi colleges—East Mississippi Community College (EMCC) and Mississippi State University—to help them establish worker training-related courses.

    Mr. Yamamoto, most recently head of Yokohama Tire Philippines, said the funds are to be used "to help build training programs and develop talent for the workforce" for the new plant. EMCC President Rick Young said his college would invest the funds into training programs that would "ensure the firm's profitability" as it comes on stream and grows.

    Construction is set to begin shortly, Mr. Yamamoto said, and be completed by early 2015. Initial tire production is expected by October 2015, which would represent the fastest construction time of any Yokohama plant to date.

    To reach this reporter: [email protected]; 330-865-6145.

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