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Tire makers' capital spending eases; Asia still tops

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Photos courtesy of Alliance Tire Group; Federal Corp.; Stephen Downer; and Thai Investment Capital spending projects of the past year include (left to right) Alliance Tire Group's plant in Dahej, India; Federal Corp and Goodyear breaking ground on plants in Taoyuan, Taiwan, and San Luis Potosi, Mexico, respectively; and Qingdao Sentury Co. Ltd.'s plans to build in Thailand.

AKRON (Sept. 8, 2015) — After several years of steadily increasing investment in new factories and expanded capacity, the world’s leading tire makers eased back on the cap-ex accelerator over the past year, committing more than $6 billion to new projects in the 12 months through mid-August.

This is the lowest 12-month amount tracked by Tire Business since 2008-09 but is essentially equal to the 10-year running average. The actual number is likely closer to $7 billion, however, as a number of companies did not disclose their investments.

Roughly two-thirds of the investment spending on specific projects disclosed in the past year was targeted at plants in Asia, the research shows, in particular China and Thailand.  

The investments announced in the past year include a dozen new factories. Combined, the projects tracked by Tire Business represent 66 million units of new annual passenger/light truck tire capacity, at least 9 million units of new truck/bus tire capacity and up to 5 million units of new capacity for other types of tires.

  • This article appears in the Aug. 31 print edition of Tire Business.

This contrasts with just three plant closings announced by major manufacturers in the past year: Apollo Tyres Ltd. in Durban, South Africa, (truck and OTR tire plant, 600 workers); Group Michelin in Budapest, Hungary (radial truck tire plant; 500+ employees affected) and Joue-les-Tours, France (radial truck tires, 8,000 units/day, phased out.)

In addition, Michelin phased out all but a few select high-performance tire lines at its Pictou, Nova Scotia, plant.

Yokohama Rubber Co. Ltd. led the league this year with a capital expenditure announcement of $1 billion, although that’s spread out over five years and multiple factories.

Goodyear ($635 million), Kenda Rubber Industrial Co. Ltd. ($500 million) and Apollo Tyres Ltd. ($425 million) are next on the spending list.

In terms of capital spending by fiscal year, the largest firms tracked by Tire Business devoted on average 7.2 percent of sales on capital improvements last year, down nearly one full percentage point from fiscal 2013.

Individually, South Korea’s Nexen Tire Corp., India’s JK Tyre & Industries Ltd. and Indonesia’s P.T. Gajah Tunggal Tbk. nearly doubled that rate at 14.9, 13.3 and 13.2 percent, respectively.

Taiwan’s Cheng Shin Rubber Industrial Ltd. also spent at a double-digit rate — 10.3 percent.

Bridgestone Corp. and Continental A.G. spent the most in raw monetary volume, at $2.8 billion and $2.7 billion, respectively.

Research and development spending was up across the board for the companies profiled, but not as much as revenues increased, dropping the industry average a few tenths of a percentage point to 2.6 percent of sales.

Michelin, Pirelli & C. S.p.A. and Nexen topped the tire league with 3.4-percent R&D spending ratios.

Individual expansion projects, by company alphabetically, include:

Alliance Tire Group opened in January its newest factory, a $150 million plant in Dahej, Gujarat, dedicated to making off-highway tires. The plant, Alliance’s second in India, is rated at 54,000 metric tons a year at full capacity. It will have capacity for both radial and bias-ply tires, up to 54-inch rim diameters, a spokesman said.

Apollo Tyres Ltd. is planning to double truck and bus tire capacity at the company’s 5-year-old Chennai, India, plant over the coming two to three years with a $425 million investment. Capacity will grow to 12,000 tires a day.

CEAT Tyres Ltd. will invest $65 million to build a plant in Butibori, Nagpur, India, for two-wheeler tires. The first phase, for 1.2 million tires a year, is expected on stream by the second quarter of 2016. Two successive phases will triple that, the company indicated, raising the total investment eventually to $195 million.

Continental A.G.:

  • Will invest $280 million over four years at its 4-year-old plant in Hefei, China, to boost capacity 75 percent to 14 million car and light truck tires a year and raise bicycle tire capacity there as well to 13 million units a year by 2025. The firm did not say whether this capacity expansion will require expanding the physical size of the 753,000-sq.-ft. factory, which was commissioned in May 2011. The expansions will more than double employment to 2,700.
  • Is spending $60 million on a “high-performance technology center” at its tire plant in Korbach, Germany, dedicated to the production of tires in the 18- to 22-inch rim diameter range and to developing advanced manufacturing methods. Conti expects manufacturing at the 12,900-sq.-ft. “factory within a factory” to start by July 2016, with annual production of about 350,000 tires at full capacity.
  • Christened an expanded R&D facility at its Púchov, Slovak Republic, tire plant that will support expanded manufacturing at the facility. Conti budgeted $9.4 million for the project, which will include the installation of a tire durability test drum and labs for tire analysis along with infrastructure to connect the new and old facilities.

Dunlop Aircraft Tyres Ltd. has selected a site in Mocksville, N.C., as the preferred base for the retreading plant it is planning to open to serve customers throughout the Americas. Final approval of the site, however, depends on the company’s gaining state funding for the modernization of a vacant industrial building in Davie County, N.C.

Federal Corp. has broken ground on a $300 million car and light truck tire plant in Taoyuan, Taiwan, its second factory in Taiwan and third overall. The 150,640-sq.-ft. plant will employ 900 workers making an estimated 6 million tires a year at full capacity.

Goodyear:

  • Is committing up to $550 million in its unionized U.S. plants for “high-value-added” (HVA) tire production, as part of a deal worked out with the United Steelworkers (USW) union after the Akron-based tire maker opted to build a $500 million to $550 million car/light truck tire plant in Mexico. The new capital spending is above and beyond the $700 million the tire maker already had budgeted for 2015, according to the union.
  • Is expanding its four-year-old plant in Pulandian, Liaoning Province, China, with a $135 million investment through 2017 to add capacity for 2.08 million car tires a year. The project will include capacity for 48,000 run-flat tires a year, the company said, and occupy 1.25 million square feet. The added output will expand capacity by nearly a quarter to 10.5 million units annually.

Group Michelin:

  • Is investing $22 million in its Dothan, Ala., plant to boost production of its high-performance light truck and SUV passenger tires. The investment will support “significant” equipment upgrades that will result in a 10-percent increase in production and create about 40 new jobs at the plant, which currently employs 560.
  • Will invest $53 million at its plant in Nyíregyháza, Hungary, through 2017 to add capacity for ultra-high-performance tires and more than double the plant’s overall capacity to 6,900 tires a day and add 100 jobs to the 950 listed there now.
  • Budgeted about $50 million to convert a 135,000-sq.-ft. structure in Piedmont, S.C., to the first manufacturing site for its non-pneumatic Tweel tire/wheel assembly.

Guangzhou Fengli Tire & Rubber Co. Ltd.:

  • Has started work on a project at its plant in Conghua, Guangdon Province, to install annual capacity for 10 million eco-friendly, high-performance tires. The project is budgeted at $328 million and is scheduled to be completed by year-end 2015.
  • Has set up a joint venture with Chinese vehicle maker China Anhui Jianghuai Automobile Co. Ltd. (JAC) to build a $325 million all-steel radial truck tire plant in Hefei, Anhui Province, China. The plant has a designated annual capacity of 2 million tires. The venture, Hefei Wanli Tire Co., will be located on a 3.66 million sq.-ft. site at JAC’s industrial park in Hefei for vehicle components.

Guizhou Tyre Co. Ltd., producer of the Advance and Samson tire brands, is building a specialty tire plant complex in Xiuwen, China, where it plans to relocate production from three of its existing factories together with new capacities. The company has earmarked $225 million for the project, which calls for annual capacities of 1.2 million pneumatic industrial tires, 1.1 million small agricultural tires and engineering tires, 180,000 large agricultural tires and radial tires, 270,000 large engineering tires and 500,000 solid tires.

JK Tyre Industries Ltd. invested $45 million to expand JK Tornel’s manufacturing capacity in Mexico City, adding 5 million units of annual radial car tire capacity, a 50-percent jump.

Kenda Rubber Industrial Co. Ltd. is committing more than $500 million over several years to expand capacity at plants in China, Taiwan and Vietnam and build two plants — a radial truck tire plant in Kunshan, China, and a plant in Jakarta, Indonesia, for two-wheeler tires and tubes.

Otani Tire Co. Ltd. has received approval for a $180 million investment for a new factory in Thailand’s Nakhon Pathom Province. Further details were not available.

Pirelli Tyre S.p.A. and Egypt’s Ministry of Investment signed a memorandum of understanding (MOU) covering a potential investment of about $107 million in the expansion and further technological upgrade of the company’s factory in Alexandria, Egypt. The project calls for a 35-percent increase in capacity, to about 1.15 million tires a year.

Qingdao Sentury Tire Co Ltd. is building a factory in Thailand that will cover the company’s lines of Landsail and Delinte tires, including new light truck AT, HT and MT tires. Manufacturing capacity will be built out in two phases, Sentury Tire said, starting with 5 million tires annually before expanding to 12 million tires sometime in 2016. The company did not disclose its investment sum.

Shaanxi Yanchang Petroleum Northwest Rubber L.L.C. has finished construction of a tire factory in Xianyang, Shaanxi Province, that is rated at 8 million units a year of radial car tires in the first phase. The new plant represents a $165 million investment, according to the company, and is part of a first-phase project that it said also includes a truck/bus radial line that went into operation in 2010, rated at 2 million tires a year.

Shandong Linglong Tire Co. Ltd. invested $115 million to add radial truck tire capacity to its year-old factory in Chonburi, Rayong Province, Thailand. Linglong International Tire (Thailand), the Thai subsidiary, put the capacity for truck tires at 1.2 million units a year, to go with 12 million units of car and light truck tire capacity, which came on stream a year ago.

Sumitomo Rubber Industries Ltd. is investing $100 million through 2017 at its plant in Ladysmith, South Africa, to expand overall capacity and upgrade capacity for high-performance tires. The capacity expansion — to 12,200 tires a day by 2016 and 14,500 tires a day by 2017 from 9,600 currently — will help support Sumitomo Rubber expand its tire business throughout the African continent and accelerate the pace of its global expansion.

Trelleborg A.B. budgeted $50 million through 2018 to convert a coated-fabrics plant it operates in Spartanburg, S.C., to the production of radial agricultural tires. The 430,000-sq.-ft. plant is set to start production in the latter half of 2015. The plant should create 150 jobs at full capacity.

The Uzbekhistan government is underwriting a $184 million project involving China’s Poly Technologies Inc. as the turnkey construction partner and Uzbekistan’s Uzkimyosanoat, a leading chemical firm in the country. The plant, to be built in the Angren Special Industrial Zone, is scheduled to have annual capacities of 200,000 agriculture tires, 3 million car tires and 100,000 meters of conveyor belting.

Vee Rubber Corp. Ltd. is adding 10,000 units of daily capacity for passenger and light truck tires at its Bangkok, Thailand, plant complex to expand its ability to export, especially to the U.S. Vee described the investment as “sizable” and said that it would create 400 to 500 jobs. The company expects the additional capacity to be on stream by mid-2015, which would position the tire maker to take full advantage of the antidumping and countervailing duties the U.S. has levied on Chinese tire manufacturers.

Yokohama Rubber Co. Ltd. is committing $1 billion through 2020 toward expanding and upgrading its tire production worldwide, raising annual production capacity 13 percent by 2017 and nearly 31 percent by 2020. Yokohama said the plan will include tire plant construction and expansion projects in North America, Russia, Europe and China, and will underscore the firm’s efforts to increase its business with auto makers in overseas markets. Annual capacity is seen rising to 74 million units by 2017 and 89 million units by 2020, up from 68 million currently.

Zhongce Rubber Group Co. Ltd. has commissioned production of passenger tires at its first overseas manufacturing unit, Zhongce Rubber (Thailand) Co. Ltd. in Rayong Province, Thailand, and disclosed plans to add truck/bus radial production there as well. The plant covers an area of more than 6.1 million square feet, according to the company, and opens with a rated capacity of 5 million passenger car and light truck tires a year. The investment was not disclosed.

 

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