Tire and wheel maker Titan International Inc. has completed the purchase of Continental Tire North America Inc.'s Bryan off-the-road tire plant, 19 months after Conti began trying to sell the factory.
The two companies sealed the $53 million deal July 31, and Titan took over the plant the next day. The site posted sales of about $125 million for Conti in 2005, and has the capacity to build about 245 large tire units per day. The facility employs 325.
Quincy, Ill.-based Titan officially had been negotiating with Conti to buy the factory since April, but the two sides had been talking about it informally dating back to last year, said Maurice Taylor Jr., Titan CEO and chairman. The company was one of three suitors that entered talks to buy the Bryan site since January 2005.
Titan was able to overcome the key hurdle-working out a new contract with the United Steelworkers, which represents the 270-strong hourly work force there-the others could not.
Rick Holcomb, Continental Tire North America senior counsel, said the Charlotte, N.C.-based company is pleased with the terms of the sale, and it meets its goal of exiting the North American OTR business. The firm's overall strategy is to focus on passenger, light truck and commercial tire manufacturing, said Manfred Wennemer, CEO of German parent company Continental A.G., in a statement.
The company particularly is satisfied to get a deal done in the wake of a long process with several interested parties, Holcomb said. Titan had no real advantage over the other two companies, but was able to get the union agreement done, he said. ``That was the major issue.''
A huge majority of USW Local 890 members ratified a new four-year contract with Titan on July 30, with more than 80 percent taking part, said John Bowling, the local's unit chair. The pact runs through Aug. 1, 2010.
``We're very pleased with the results,'' Bowling said. ``This has been a long, grinding process, and we're glad it's finally over.''
The company and union also negotiated with Germany's Rosler Group and its U.S. subsidiary, Rodos Giants L.L.C.; and Pensler Capital Corp., which owns specialty tire maker Denman Tire Corp. Titan even aligned itself with Rodos in August of last year in hopes of getting a piece of the Bryan plant and gaining entry into the OTR market.
None of those efforts, though, were successful, as Bowling said neither Rodos nor Pensler were able to get close with the union on some major issues.
The new agreement includes general wage increases in each of its four years, improved health care insurance, more secure pensions and plant closure protection, Bowling said. ``It's a good agreement, and we're happy that Titan is committed to building tires in the U.S. and particularly right here in Bryan, Ohio,'' he said.
Taylor said the USW's overwhelming support of the contract in Bryan is a good indication that he and the union are committed to the same goals: making money and keeping jobs in the U.S. Before this past year, Titan and the USW had an icy relationship at best, highlighted by the two longest labor strikes in tire industry history at the company's Des Moines, Iowa, and Natchez, Miss., farm tire plants from 1998-2001.
But in December the tire maker completed a contract with the work force in Freeport, Ill., as part of Titan's purchase of Goodyear's farm tire business, and extended a contract with USW Local 164 in Des Moines. Titan now has labor peace in Des Moines, Freeport and Bryan running into 2010.
Continuing to grow
Titan will utilize a licensing agreement with Conti to sell Continental- and General-brand earthmover and mining tires in North America, in sizes ranging from 21 to 51 inches, Taylor said. He praised Conti for the job they've done and the products they've made in Bryan and believes the work force there can do even better in the future.
``No one in North America can match our cost structure for producing tires,'' Taylor said. ``We pay a fair wage and benefits and we run our own factories. We think you can build tires in North America and we plan on building the best tires in the world.''
Titan expects the sales from Bryan will add about $125 million to its annual revenues, and Taylor said he wants to raise that figure over time. He plans on doubling production by adding equipment and upgrading automation capabilities so Titan can take out some of the labor-intensive jobs in the plant.
Including the capacity at the farm tire plants in Des Moines and Freeport, Titan offers tire sizes from eight inches up to 51 inches to a variety of specialty markets, he said.
The $100 million purchase of Goodyear's farm tire business was expected to add $250 million in annual sales. That means Titan, which posted sales of more than $470 million in 2005, could be an $800 million-plus company by the end of 2007.
``We're not done yet; we're just waiting for our next spurt,'' Taylor said, only half-joking. ``We will continue to grow.''
Titan's most recent quarterly report reflected its external growth. The company posted net sales of $175.2 million in the second quarter, a 30-percent jump from 2005. Net earnings were up a third to $5.6 million as well.
Taylor called it a positive quarter for the company, particularly given an estimated 5-percent decrease in demand for agricultural equipment in the U.S. and increasing raw material costs.
For the first six months of 2006, Titan reported net earnings of $14.2 million on sales of $357.8 million, compared to income of $15.4 million on sales of $270.8 million a year earlier.
The price of Titan stock, which is traded on the New York Stock Exchange, closed at $18.51 per share Aug. 2.