FRANKFURT, Germany-If vehicle industry investments are a valid measure of future tire demand, a flood of tire plant expansions soon will come to Latin America.
European and American automobile and truck manufacturers in Brazil and Argentina recently announced expansions totaling more than $12 billion. That will bring on stream the capacity to produce nearly 500,000 units per year.
Tire makers have yet to show their hands in this particular card game. But executives from the major tire companies all have pointed to the increase in vehicle plant projects in South America when asked about their chances for future growth.
One recent study estimated the easing of trade barriers among ``Mercosur'' economic cooperative partners Argentina, Brazil, Paraguay and Uruguay will lead to a market of more than 2 million vehicles annually by the year 2000.
Latin America's tire market is dominated by three manufacturers-Goodyear, Bridgestone/Firestone Inc. and Pirelli Group-which control up to 75 percent of sales in the region. The remaining quarter is split among a dozen relatively small, local producers and Groupe Michelin's Brazilian subsidiary, which produces only truck tires.
For Pirelli, Latin America represents nearly 25 percent of global sales, 27 percent of operating earnings, 33 percent of in-place capacity, and 31 percent of employees.
South Korean manufacturers Hankook Tire Manufacturing Co. and Kumho & Co. also have carved out niches in Latin America. Both claiming to gain 10 to 12 percent of their global sales from the region, putting them on par with several of the local producers.
The joker in the deck is Corporacion Industrial Llantera S.A.-better known as Hulera Euzkadi.
The Mexican company has grown into a global top 20 tire maker through its acquisition of General Tire de Mexico S.A. de C.V. It has secured long-term technical and commercial affiliations with Continental A.G.
Forecasts of tire and rubber growth show annual increases of 3 to 4 percent, although the raw numbers can be misleading in that they don't reflect the parallel change to radial capacity from bias ply.
Less than 30 percent of truck/bus tires produced in the region are radial, according to ``World Tire Industry,'' an Economist Intelligence Unit study from early 1995.
EIU estimates the region's 1995 demand at 36 million truck tires and 20 million car tires, with Brazil accounting for about 45 percent and Mexico 25 percent. The passenger OE to replacement ratio is 1-to-21/2, and for truck tires it is 1-to-6, according to EIU figures.