Continental Tire eyes plant upgrades in North America

PLAYA DEL CARMEN, Mexico — The rubber that meets the road these days is much bigger than it used to be.

With rim diameters increasing yearly — 17-inch and larger sizes account for seven of the 10 most popular passenger replacement tire sizes in 2020, compared with just one 17-inch size among the 10 most popular in 2011 — the time has come for Continental Tire the Americas to address that rubber.

Bill Caldwell, senior vice president of sales and marketing for the Charlotte-based U.S. subsidiary of Germany's Continental A.G., said the tire maker has begun to discuss capacity expansions at its North American plants — the capacity to mix more rubber that in turn will be used to manufacture the tire.

"Assuming that (the trend toward larger rim-diameter tires) is going to stay — and it seems like it will, at least in this market — we should plan for it," Mr. Caldwell told Tire Business during the recent Conti Gold Trip in Playa Del Carmen.

"We need to start investing not necessarily in building machines, but in upstream to be able to process more rubber."

He said there is a need to process more rubber to manufacturing the same number of units, and that "is where we are needing to invest now based on the changes in the market."

That investment, he said, should include all components that pertain to the rubber-mixing process.

"Everything upstream there, you need to scale because all of those components are bigger now," Mr. Caldwell said. "All of that mixing capacity needs to get bigger now for the same units.

"We need to catch up to this mix change, and we also need to invest for growth."

According to data from the U.S. Tire Manufacturers Association (USTMA), the percentage of 17-inch and larger tires represented in the U.S. replacement market nearly doubled over the last five years.

The top size in 2020 was 225/65R17; in 2016 it was 205/55R16; and in 2011 it was P235/75R16, according to the USTMA.

The original equipment side is even more striking: Each of the 10 most popular passenger tire sizes was 17-inch and larger, with nine of them 18-inch and larger. That compares with eight in 2016 and five in 2011.

Mr. Caldwell said he believes it will be a three-year investment that will include upgrades in building, equipment and personnel.

According to Travis Roffler, director of marketing, the logical place to begin any upgrade is at Conti's plant in Mount Vernon, Ill., where the tire maker produces more than 14 million units annually, the bulk of which serves the light truck segment.

Conti also has U.S. plants in Bolton, Miss. (commercial tires) and Sumter, S.C. (passenger/light truck).

The light truck/SUV tire market now comprises more than half of the overall consumer (passenger/light truck) segment in North America.

Mr. Caldwell said the plan is all about "broadening the capabilities of more plants to make that type of product in order to keep (the light truck segment) going (in North America). ... This is very different versus some other markets (globally)."

The pandemic-induced supply-chain issue that is wreaking havoc across the tire industry — really most industries, for that matter — certainly has affected Conti.

"Demand and supply and are not lined up right now," Mr. Caldwell said. "That's the nature of the beast."

He called distribution/logistics "a nightmare," with the "exorbitant" cost of shipping containers making it worse.

But, he and other executives said, the issue isn't as severe as it might be because of Conti's ability to source product from plants across the world, particularly in Europe, where the population is more locked down and demand remains somewhat soft.

"(Europe) still remains our critical base of our manufacturing capacity," he said. "We are always getting tires there and we've been able to lean into that more, transferring production there. It's been a real plus for us."

Still, he said, that doesn't solve the challenges of ports and containers.

"But at least the tires have a good strong pipeline there," he said. "I don't think the plant challenges, the employment challenges there are as significant as they are here. So that's helped us weather this storm, and having that flexibility kind of paid off for us."

"It's been a really robust year over year, month over month," Chris Charity, vice president of sales, said, "but instead of high fives, we're worrying about how to make enough product."

The supply issue — as well as attracting and retaining employees — were by far the two hottest topics during the five-day Gold Trip, held Sept. 20-24 at the posh Grand Velas Riviera Maya, near Cancun.

It was Conti's first Gold Trip since 2019. Around 450 people attended, including 200 dealers who qualified for the trip. On Oct. 8, Hanover, Germany-based Continental celebrated its 150th anniversary.

Five dealerships — Ram Tire Co. Inc. of North Hills, Calif.; L&M Supply Inc. of Grand Rapids, Minn.; Quality Discount Tire of Ledgewood, N.J.; Gerald's Tire of Charleston, S.C.; and Butler Tire Co. of Atlanta — qualified for their first Gold Trip.

"Isn't it good to be back together again?" Mr. Caldwell asked the group during the annual meeting. He used three words to describe the tire maker's performance over the last 18 months: Agility, reliability and confidence.

"We had to have agility to make changes and move quickly," Mr. Caldwell said. "We were working in an environment that was new for all of us."

He said Continental's reliability — including 150 years of peaks and valleys — is illustrated in its product performance. The confidence, he said, comes from the products Conti makes and the confidence dealers put in the company and its tires.

"Without your sales and support, we couldn't do what we do," Mr. Roffler said.

Joe Maher, Conti product manager, passenger and winter tires, reacquainted dealers with products new to the market, including the:

• ExtremeContact DWS06 Plus, a premium performance tire that was released in February and covers 96% of the market;
• General Tire's AltiMax 365AW, an all-weather tire released in May that is 3-Peak Mountain Snowflake certified; and
• General G-Max Justice, an ultra-high-performance pursuit tire.

The G-Max Justice, an all-performance all-season product, is CATL 1922 pursuit and emergency high-speed approved and offers up to 15% better tread life and up to 18% better wet braking performance than a leading competitor, according to the company.

The pandemic caused several challenges for the marketing department, according to Mr. Roffler, particularly since fans couldn't attend most athletic events.

Still, he said, Conti sponsorships remain strong. Conti's sponsorship with the Major League Soccer (MLS) was renewed recently through through 2025, while its sponsorship with the NCAA and General Tire sponsorship deals with the ARCA Menard's Series racing and Major League Fishing have been renewed through 2024.

In addition, Conti will sponsor the Continental Tire Challenge, a college basketball game set for Nov. 26 at T-Mobile Arena in Las Vegas that matches perennial powers Duke University and Gonzaga University.

Mr. Roffler also said the company is heavily marketing its 150th anniversary on social media, showing a commercial featuring racer Tony Stewart as a fortune teller.

Mr. Roffler also said General Tire has collaborated with YouTube stars Dude Perfect for an Ultimate Racing Battle video series. Dude Perfect, a group of five men, has 56 million subscribers and their videos have more than 13 billion views.

Conti also will unveil new brand messaging soon.

"It's all about keeping the lines of communication open with you," Mr. Charity told dealers. "We are here for you."

It won't be long before the group gathers again: Conti is planning to hold its next Gold Trip in late March 2022, in Dominican Republic.