Nexen settles on site for Czech tire plant

PRAGUE, Czech Republic (June 27, 2014) — South Korea's Nexen Tire Corp. has committed to spending $1.1 billion to build a tire plant in Žatec, Czech Republic, according to a statement and video posted on the Czech Republic government's website.

The plant near Žatec eventually will have a capacity estimated at 6 million units annually with more than 1,000 employees, the Czech government report states.

The plant will be built on a 86.5-acre site in the Triangle Industrial Zone near Žatec, the report states, with construction scheduled to start in 2015. A suggested completion date was not given.

Žatec is a town of about 20,000 located 50 miles northeast of Prague.

A second expansion phase could double the investment and employment to $2.2 billion and 2,300 workers, respectively, according to the report.

Photos and a video posted on the site show Nexen Tire Chairman Kang Byung Jung and Czech Prime Minister Bohuslav Sobotka signing a proclamation and making statements about the investment. The video is in Czech.

Landing this project for Czech Republic was the result of “intensive negotiations” involving Nexen, the Czech government, the Czech Ministry of Industry and Trade, the Czech Investment and Business Development Agency CzechInvest and representatives of the town of Zatec and the Ústí region.

Under terms of the contract, the Czech state will provide investment incentives valued at a maximum of $190 million, according to the Ministry of Industry and Trade. Of this, $100 million represents tax relief on corporate income $50 million will be for financial support in the framework of strategic investments, $15 million for job creation, $15 million from the Ústí region as a discount on the land and $4.5 million in financial support for training.

Mr. Sobotka said in prepared remarks his country's offer prevailed over “severe” competition from neighboring countries.

"According to reasonable estimates, the state´s return on investment will be doubled," said Jan Mládek, the Minister of Industry and Trade. "Investment benefits consist primarily in direct and indirect employment and related levies and income taxes and effects of the construction of the hall, which will be performed under participation of the Czech companies.” 

The Czech government first claimed June 16 that Nexen had committed to the Czech Republic for its plant. The signing ceremony on June 26 in Prague confirmed that report. 

Nexen will start recruiting for managerial positions in the second half of 2015, The Ministry of Industry and Trade said, and in 2016 for jobs in the production.

Nexen has not yet issued any official statements on the decision, although the company has secured a number of OE contracts with European car makers in the past several months.

With annual sales exceeding $1.5 billion, Nexen is among the world's 25 largest tire makers. Europe represents about 20 to 21 percent of Nexen's global sales.

Nexen also is spending $300 million in South Korea on a second-stage expansion of its Chang-Nyeong. Once completed, annual capacity at the 2-year-old plant in southeast Korea will nearly double to 11 million units, according to company documentation.