Michelin chooses Mexico for plant

Crain News Service report

LEON, Mexico — Group Michelin has selected a site in León, in Mexico's Guanajuato state, for a $510 million car and light truck tire plant it said is in response both to “sharp growth in Mexico's automobile market and to the confidence that the world's largest car manufacturers have put in us.”

The tire maker said it expects production at the 1.58 million-sq.-ft. structure to start in late 2018, with a capacity initially of 4 million to 5 million tires a year and approximately 1,000 employees. The company said 80 percent of the plant's output will be tires with 18-inch rim diameters or larger.

Michelin's announcement follows by several months a report by Reuters News Agency that Michelin was planning to build a factory in central Mexico. Ground-breaking is scheduled for Aug. 22 (See separate story).

Michelin said the location reflects its “commitment to producing its tires as close as possible to the markets in which they are sold.” The plant's location is within a three-hour drive of the production facilities of 18 large car manufacturers with operations in Mexico.

Leon is a city of 1.2 million inhabitants about 250 miles northwest of Mexico City and 140 miles east of Guadalajara.

“The new plant reflects our ability to take advantage of growth opportunities in the dynamic North American market,” Michelin CEO Jean-Dominique Senard, “and to make our manufacturing operations more agile by deploying tire ranges that integrate innovative technology.”

Michelin noted most of the high-performance tires to be made at the plant will be for the OE segment. These short distances from the plant to OE assembly plants mean that the tires will be delivered to Michelin's customers faster and more cost effectively, thereby reducing the Group's carbon footprint and helping it to meet its environmental objectives,” Michelin said.

The plant will be Michelin's 21st production site in North America and 69th worldwide, including a plant in Queretaro, Mexico, the company opened originally in 1987 and then reopened in 2002 after a 20-month business hiatus.

Michelin North America Inc. recently disclosed that it has invested more than $3.1 billion since 2011 on manufacturing capacity and infrastructure and other developments in support of its sustainable growth strategies. Included in the total was $43 million at the Queretaro plant.

This is the third major tire capacity investment announcement in Mexico in the past 15 months, totaling nearly $1.3 billion.

Goodyear announced last April it intended to invest up to $550 million in a car and light truck tire plant now under construction near San Luis Potosi, Mexico. The plant's projected capacity is 6 million units a year with 1,000 employees at full capacity.

Pirelli Tyre S.p.A. disclosed in April it is committing $200 million over the coming 18 months to expand its four-year-old car and light truck tire plant in Silao, Mexico, by 50 percent to 7.5 million units.

Last year, both Ford Motor Co. and Fiat Chrysler Automobiles (FCA) disclosed they were planning to shift production of “mass market” nameplates to Mexico so they could dedicate U.S. plants to higher-margin pickups and SUVs.

Ford said at the time it planned to move production of the Focus and C-Max small cars to Mexico and consolidate production of the Fusion mid-size sedan in Mexico, where some capacity already exists.

FCA is expected to move the Dodge Dart and Chrysler 200 to assembly plants in Mexico after 2016.

 This story is based on reporting by Tire Business, European Rubber Journal, Rubber & Plastics News and Automotive News, all sister publications under the Crain Communications Inc. banner.