GREENVILLE, S.C.—Michelin North America Inc. is expanding and contracting two separate Canadian operations affected by growing demand and overcapacity.
The more recent news is the company will close its BFGoodrich passenger and light truck tire plant in Kitchener, Ontario, effective July 22, due to overcapacity in a shrinking North American mass market passenger tire segment. Michelin will shift production to its other North American BFGoodrich tire units, all located in the U.S., the company announced Feb. 2.
The Kitchener site houses about 1,100 salaried and hourly employees.
About a week earlier, Michelin said it will invest $80 million to expand production of its X One-brand wide single truck tires at its Waterville plant.
The Greenville-based tire maker is adding the capability to meet increased demand of the X One, which was introduced in December 2000, a Michelin spokesman said. The $80 million will cover tire-building equipment and technical and manufacturing employees, he said.
Michelin said the mass market passenger tire segment in North America has been decreasing in size over the past several years, plus it is experiencing "intense cost pressure" caused by increased imports from lower-cost competition abroad. The 44-year-old Kitchener plant, with an estimated daily capacity of about 17,000 tires, produces BFGoodrich-, Uniroyal- and private- and associate-brand passenger tires, primarily for the U.S. market.
"The decision to close the Kitchener plant was very difficult," said Guy Pekle, president of Michelin North America (Canada) Inc. "BFGoodrich has made significant investment in the plant, as well as its three other North American plants. However, overcapacity continues to exist in this segment of the market.
"The competitive nature of today´s tire industry requires the company to invest and maintain production in the plants that can compete successfully in an increasingly difficult global market."
Michelin and the United Steelworkers union, which represents about 1,000 hourly workers in Kitchener, reached a contract agreement in August 2004. Language in the pact included no-plant-closure security, but the deal lapses July 22, the designated shutdown date.
The agreement reached in 2004 followed a two-months-plus strike in Kitchener, prompted by the union´s claims the company wanted too much—including an overall 15-percent slash in labor costs—in concessions.
Michelin will serve its customers through its tire manufacturing plants in Opelika and Tuscaloosa, Ala., and Fort Wayne, Ind. Hourly workers at those locations also are represented by the USW, and ironically, benefited from the same non-closure language the Kitchener plant had when their master contract was ratified just days after the Kitchener agreement. The company at the time also committed $150 million in capital expenditures at the four facilities to produce higher-margin, branded tires.
Michelin said it will work with appropriate government agencies, the community and the union to help make the transition for affected employees as smooth as possible, including separation pay and benefits. The firm also is establishing a Michelin Development Program to assist in the creation of new jobs from various industries within the Kitchener community.
The shutdown will not affect Michelin´s other Canadian facilities, all located in Nova Scotia.
One of those Nova Scotian plants, the Waterville truck tire facility, will phase in about 75 additional jobs as its X One project—slated for completion by the first quarter of 2007—progresses. The non-union plant employs about 1,000 with an estimated daily capacity of about 4,200 tires, according to Rubber & Plastics News´ 2005 Global Tire Report.
"This investment and the assignment of the revolutionary X One tire production to Waterville is a testament to the skills of our people and their ability to deliver and remain competitive in the global tire market," said Grant Ferguson, plant manager at the Waterville facility. "Investing in our plant helps to ensure long-term competitiveness, future employment and continued economic support for our community."
The criteria used in choosing the Waterville site—which produces truck, industrial and earthmover tires—for the expansion are proprietary, the spokesman said. The province of Nova Scotia committed a $9.4 million cash incentive to the project, which will be rebated to Michelin as the $80 million is spent, he said.
Post-completion, the 24-year-old Waterville facility will be the second-largest truck tire plant in Michelin´s global network, behind only its Spartanburg, S.C., factory, the company said. X One tires for the North American market are produced in Spartanburg as well.
The success of the X One tire line in the market has been a key driver for the expansion, Michelin said. The wider tires—the typical section width of an X One tire is 11.1 inches, compared to 7.2 inches on a standard dual tire—replace dual tires with one single tire, thus converting 18-wheel tractor-trailers to 10-wheelers.
Michelin also touts the X One as delivering significant fuel and weight savings to trucking fleets: between 4 and 10 percent in fuel costs and increased payloads from 800 to 1,300 pounds. The tires are built with the company´s patented InfiniCoil technology, a stabilizing belt construction running perpendicular to the radial ply to optimize wear and tear, Michelin said.
The project will benefit Waterville but also company plants in Nova Scotia supplying the tire manufacturing facility, the spokesman said. Michelin´s Bridgewater facility produces wire products and its Granton site will provide rubber materials.
Michelin had no announcements to make regarding any expansions or additions at those plants as a result of the Waterville upgrades.