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January 06, 2016 01:00 AM

Cooper buying into China TBR plant (updated)

Bruce Davis
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    FINDLAY, Ohio (Jan. 6, 2016) — Cooper Tire & Rubber Co. is buying a 65-percent stake in China's Qingdao Ge Rui Da Rubber Co. Ltd. (GRT) for about $93 million and plans to source its Roadmaster radial truck and bus tires from GRT's plant in Pingdu, Qingdao Province.

    The deal is expected to close during the first half of 2016 pending certain permits and approvals by the Chinese government, Cooper said. GRT was founded in 2014 by Qingdao Yiyuan Investment Co. Ltd., which purchased the assets of the then-idled facility. Prior to that it was known as Qingdao Guang Ming Tire Co. Ltd.  

    The new venture will be called Cooper Qingdao Tire Co. Ltd. (CQT) once the deal closes, Cooper said. The transaction price covers the acquisition and initial investments in the operation.

    At full capacity, the factory will be capable of producing 2.5 million to 3 million radial truck tires annually, although it is producing currently at a rate of “several hundred thousand” units a year, Cooper Chairman, CEO and President Roy Armes said in a conference call with analysts.  

    Cooper also said the venture may add passenger tires at some point, with an annual capacity similar to that for truck tires. Cooper already produces car tires in China at its Cooper (Kunshan) Tire Co. Ltd. subsidiary in Kunshan.

    “Cooper is excited to take this positive step to secure additional TBR tire supply and further our Asia growth strategy,” said Brad Hughes, chief operating officer. “After a comprehensive review of options, we are pleased to have reached this agreement, which meets our goal of finding a new source of high-quality, cost-competitive TBR tires for North America and Asia.

    “As we have previously stated,” he added, “achieving our goals for growth will likely require a series of actions and today's announcement is certainly a significant one.”

    Cooper sources its Roadmaster truck tires now from Prinx Chengshan (Shandong) Tire Co., its former joint venture manufacturing company with China's Chengshan Group Co. Ltd.

    Cooper's contract with Prinx Chengshan runs through mid-2018, and Cooper has to be prepared to shift fully away from that supply source by then, Mr. Armes told analysts. He acknowledged that extending the supply contract with Prinx Chengshan is a possibility, though.

    Cooper Tire & Rubber Co. photo

    Cooper also expects to use the GRT factory to make Dean-brand truck tires for Asia and other markets in addtion to Roadmaster tires for North America. GRT's house brands are Myard, Golden Arrow and Idawall, but Cooper plans to re-evaluate the “brand landscape” once the joint venture is confirmed.

    Located roughly 80 miles nortwest of Qingdao City. GRT employs approximately 600 workers, Cooper said, at a 1 million-plus-sq.-ft. plant.

    Chinese tire industry veteran Li Zhihua is the founder, executive director and general manager of Qingdao Yiyuan Investment (QYI). Cooper said, as well as a professor at Qingdao University of Science and Technology and a founding partner of Mesnac Co. Ltd., a Chinese tire-processing equipment maker with which Cooper does business.

    QYI has put in place at GRT an experienced management team backed by a skilled workforce with extensive tire industry expertise, with an initial focus on truck tires.

    “The team at GRT is very impressive, with deep industry and technical knowledge,” said Cooper Chairman, CEO and President Roy Armes.

    Cooper TIre & Rubber Co. Image

    Location of Qingdao Ge Rui Da Rubber Co. Ltd. in Qingdao Province.

    “There's a strong workforce, facilities that we can continue to expand with further capital, and a management team that is focused on the current opportunity in TBR tires as well as our wider growth plans for Asia.

    “This is a great strategic fit within our existing and highly productive worldwide manufacturing network and will allow us to further optimize our global footprint. We welcome the GRT team to the Cooper family and look forward to many years of success together in the future as CQT.”

    GRT has sufficient space at its Pingdu plant to add production lines for passenger tires, Mr. Hughes said, but the elevated U.S. import duties on Chinese car tires reduces the urgency to act on this.

    Mr. Li added: “After a lengthy evaluation process to identify the best partner, we are pleased to team up with Cooper, a global tire industry leader with a 100-year heritage of success. We look forward to working with Cooper to maximize the opportunity we have together to drive continued innovation and expand manufacturing of quality TBR tires and other products.”

    CQT will become Cooper's eighth tire plant globally. Its others are in Findlay; Texarkana, Ark.; Tupelo, Miss.; Kunshan, China; Melksham, England; Krusevac, Serbia; and a joint venture plant near Guadalajara, Mexico.

    Cooper also recently set up a business relationship with Argentina's Fate S.a.i.c., calling for Fate to distribute Cooper brands in that country. At some point Fate could produce Cooper-brand tires at its plant in San Fernando under an off-take agreement, Cooper said.

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