Nokian's sales in North America to double by 2021

NOKIA, Finland — Nokian Tyres P.L.C. management expects its sales in North America to double in the coming five years as the company works toward opening its first U.S. plant, in eastern Tennessee, according to Nokian's interim president, Andrei Pantioukhov.

Based on the Finnish company's fiscal 2016 results, the company's business in North America was roughly $165 million, meaning the firm's sales should rise to more than $300 million by 2021, by which time the company's car and light truck tire plant in Dayton, Tenn., should be running at near full capacity.

Nokia-based Nokian Tyres expects to break ground early next year on the $360 million project and be producing tires by 2020, Mr. Pantioukhov said in a conference call May 3 with financial analysts and journalists.

Ramping up to the projected nameplate capacity of 4 million tires a year should take until 2022. By comparison, imports of passenger tires to the U.S. from Finland and Russia — where Nokian's existing factories are located — totaled 1.2 million units last year, according to U.S. Department of Commerce data.

Nokian intends to build a warehouse adjacent to the 830,000-sq.-ft. plant capable of storing 600,000 tires. Nokian Tyres North America already operates distribution centers in Albany, N.Y.; Colchester; Vt., Glastonbury, Conn.; Portland, Maine; Indianapolis; and Longueuil, Quebec, which opened just last year near Montreal.

Nokian disclosed its long-delayed decision on a third global factory on May 3 during the release of the firm's first-quarter financial results.

The U.S. plant will concentrate on higher rim-diameter passenger, SUV and light truck tires that are sold exclusively or primarily in the North American market, Nokian said.

Nokian has launched a number of North American-dedicated tire lines in the past few years, including the zLine A/S passenger and Rockproof light truck tires introduced last year. or the enTyre premium all-season line introduced in 2009 and renewed in 2015.

Mr. Pantioukhov said during the conference call the new plant most likely wouldn't make any of the firm's signature "Hakkapeliitta" winter tires, saying, "It's not the first priority to localize those products. First priority is to localize production of North American products."

Opening this plant — Nokian's third worldwide — should have a positive knock-on effect on the company's factories in Vsevolozhsk, Russia, and Nokia, Finland, Mr. Pantioukhov said, since they will be able to phase out production of North American-designated products and concentrate on products for the European markets.

This production expansion should help the company' s bottom line as well, he added, based on those plants' improved efficiencies reduced logistics costs associated with supplying tires to the U.S. and Canada.

Nokian has been evaluating its options for a third factory since 2013 and first floated the idea of building in the U.S. in early 2016. Mr. Pantioukhov said Nokian evaluated more than 80 sites in the U.S. before deciding on the Rhea County site, which he described as "clearly the best for our purposes."

The site is large enough to allow Nokian the option to double or even triple the plant's capacity over time, he added.

Mr. Pantioukhov will be Nokian's interim top executive until June 1, when recently hired Hille Korhonen assumes her duties as CEO. Thereafter he will continue as executive vice president of Nokian Tyres and as general manager, Russian operations.

Nokian expects to keep its North American headquarters in Essex Junction, Vt.

North America represented 11 percent of the tire maker's global sales last year, or roughly $165 million, down from 12 percent in fiscal 2015.

Tennessee Gov. Bill Haslam said the recent passage by the Tennessee General Assembly of the IMPROVE Act — Improving Manufacturing, Public Roads and Opportunities for a Vibrant Economy — was critical to attracting Nokian to Tennessee.

The Act provides manufacturing companies the option to use a "single weighted sales factor," which the state claims makes it more competitive when recruiting new manufacturing companies and jobs.

The state declined at this time to elaborate on the type of assistance, economic or otherwise, it's providing for the project, nor quantify its value, but said it would discuss them in more detail once all the contracts are finalized.

Rhea (County) Economic & Tourism Council Executive Director Dennis Tumlin said this investment is the single largest initial job announcement by a private company in Rhea County history.

The plant will be the seventh tire factory in Tennessee. Bridgestone Americas and Carlstar Group L.L.C. both operate two and Specialty Tires of America one. Hankook Tire Co. Ltd. is opening a plant this year in Clarksville.

Tennessee is considered the No. 5 state in the U.S. in terms of tire manufacturing, with nearly 52,000 units a day of combined capacity and 3,675 employees. The Hankook plant will add about 18,000 units of capacity and 1,200 workers at full capacity.