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Giti seeks to strengthen global supply chain with U.S. plant

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South Carolina Gov. Nikki Haley and Giti Executive Chairman Enki Tan celebrate the selection of Chester County as the site for the tire maker's first U.S. manufacturing plant.

CHESTER COUNTY, S.C.—Giti Tire Group's journey to this rural, sparsely populated corner of the South Carolina Piedmont started roughly five years ago, when the company's management started looking at the firm's potential for global supply.

That process took the Singapore-based firm's managers on dozens of trips to potential plant sites throughout the American Southeast, Giti Executive Chairman Enki Tan and other executives said in conversations during the June 16 cere-mony and press conference to announce the selection of an 1,100-acre plot of land in Chester County as the location of Giti's $560 million U.S. tire factory.

During that time, Giti was forced to deal with a global recession and three years of elevated U.S. tariffs on imports of passenger and light truck tires from China, where it sources the majority of the tires it sells.

Two years ago, at the International Tire Exhibition & Conference in Cleveland, Tan said dealing with the elevated U.S. tariffs had made Giti a stronger competitor because it had to focus on the added value it brings to its customers in the U.S.

At that time, he noted changes necessary were improvements to the distribution supply chain and improvements in the products themselves—strategic moves that now include the U.S. plant and distribution/logistics center in South Carolina.

Having a plant and a tech center in the U.S. will allow Giti to accelerate its development of products designed for customers in North America, said Tom McNamara, executive vice president of sales and marketing, Giti Tire (USA) Ltd.

“This will put us closer to the market, ... (where) input is quicker and closer,” he said during a question-and-answer session. “We look at the OEs and where they're going. Being closer to everything is a distinct advantage.”

As for Giti's key reasons for pulling the trigger on this investment, Tan said the firm needs to diversify its risks, become less reliant on imports and increase its supply chain to be closer to the customer.

Giti generated nearly 17 percent of its $3.8 billion in fiscal 2013 sales—or $640 million—from business in North America, where it goes to market under the GT Radial, Primewell (exclusive to Firestone Auto Care Centers), Dextero (exclusive to Wal-Mart Corp.) and Runway brands.

The company claims to be represented by more than 6,500 retail points of sales in the U.S. and 740 in Canada. It operates four wholesale distribution centers in the U.S., in California, Georgia, Illinois and Texas.

McNamara said Giti already is increasing efforts to build its sales force in anticipation of the expanded capacity. Tan said production from the U.S. plant will supplant imports to an extent, but that Giti will continue to make use of its global assets in China and Indonesia.

The new plant will incorporate cutting-edge automation, Tan said, using equipment sourced from North America, Europe and Asia.

“The level of automation will be much higher than (our) existing plants,” he said. “We look at the whole value chain. Automation/manufacturing is one part of it, as are logistics, cost of shipping raw materials, ... time to market, etc.”

The manufacturing operation will incorporate a number of green aspects, the executives said, including energy and water savings initiatives, use of natural light and the possibility of solar technology.

“On top of that,” Tan said, “we as a corporation strive for zero carbon emissions” including the use of offsets through entities like Conservation International, which sponsors forestry conservation projects throughout Asia.

On a more global note, Tan said two issues concern him the most: volatility in raw materials supply and “creeping protectionism.”

Materials pricing volatility can create a whiplash reaction throughout the supply and manufacturing chain, “creating disruption in supply, demand and pricing,” he said.

On the global trade front, Tan said that new investment in tire manufacturing creates lots of jobs and in turn can lead to protectionist policies.

“We need a balance of capacity creation and free trade,” Tan said.