GREENVILLE, S.C. — Michelin North America Inc. plans to spend more than $1 billion to expand production capacity in the U.S. and Mexico over the next seven years, including a new plant and upgrades at several facilities.
The tire maker announced Aug. 13 it will build a passenger and light truck tire factory in Mexico to support growing demand in North America. The plant will manufacture Michelin-brand products, including sport-utility vehicle and high performance tires, the company said.
Michelin plans to invest up to $740 million at the site through the end of 2014 and will employ up to 1,300 people at full capacity. Estimated production figures for the facility weren´t released.
The new plant announcement came one week after the company said it will spend about $350 million to expand and improve each of its major manufacturing facilities in South Carolina during the next four years. The investments — geared to meet demand across several Michelin product lines — will add about 100 manufacturing jobs to the total of 7,850 the Greenville-based company provides in the state.
The projects in South Carolina will be completed between now and the end of 2011, Michelin said. The new jobs will be phased in as the expansions progress and added capacity comes online.
The full investment and job growth figures-in both the U.S. and Mexico-are based on completing agreements with local, state and federal governments, the company said.
Building in Mexico
Michelin expects to begin construction on its Mexican plant-located in the city of Silao in the state of Guanajuato-in late 2008, with tire production beginning sometime in 2010. Both the federal government and the state of Guanajuato have told the company they are willing to assist with applications for grants and credits available through existing government programs, said Jim Micali, Michelin North America president and chairman.
The company has not completed plans and couldn´t say what the facility´s size will be, but it expects that when it is fully developed, the plant will be on par with Michelin´s larger tire factories in the U.S., Micali said. These include facilities in Greenville; Ardmore, Okla.; and Tuscaloosa, Ala.
Mexico is the ninth-largest tire market in the world, and Micali said the country represents the fastest-growing tire market in North America.
In the past four years, the passenger and light truck tire market has grown by 14 percent in Mexico, compared to less than 6 percent in the U.S., he said.
In that same period, the company´s replacement tire sales have jumped nearly 60 percent, outpacing the market more than four to one, he said.
Even with the growth, Mexico currently accounts for only about 3 percent of the company´s North American work force and has one production facility.
The country generally imports most of its tires from the U.S., Micali said. "With these factors in mind, it is important for Michelin to strengthen its manufacturing presence in Mexico in order to fully leverage the market´s growth potential," he said.
Both the new plant and the 300,000-sq.-ft. passenger and light truck facility in Queretaro will serve the Mexican market, as well as other North American supply needs, Micali said.
The tire maker also has its Mexican headquarters in Queretaro, plus it opened a Michelin retread technologies tread pressing plant there in July to serve the commercial truck retreading market.
The company will employ about 860 in the country after the tread facility is operating at full capacity.
South Carolina upgrades
Micali said that with increasing competition from Asian imports and high raw material costs, Michelin will remain competitive in the North American market by continuing to manufacture tires in "more efficient operations with skilled professional employees."
The company must continue to upgrade its plants, improve its productivity and reduce its own costs, he said.
The South Carolina investment will be divided among six facilities in four counties. Incentives include tax credits and fee-in-lieu agreements for manufacturers meeting set investment and employment levels, Micali said.
Several market areas have shown high demand for products, adding another reason the expansions are necessary for Michelin. The earthmover tire line, for example, has had constrained capacity for several years. "We simply can´t make these large mining and construction tires quickly enough," Micali said.
The Lexington, S.C., earthmover plant — which already spans 500,000 square feet — is slated for a 109,000-sq.-ft. brick-and-mortar expansion via the announced investment. That´s on top of an $85 million expansion there geared to boost capacity by 50 percent that began in 2006.
The other projects include:
— improvements to the tire-building operations in Greenville;
— modernization of equipment at both the Lexington passenger and light truck and earthmover tire plants;
— increased capacity for Michelin´s X One-brand single truck and military tires at its Spartanburg plant; and
— more production of semi-finished rubber products and bead wire to support the company´s tire manufacturing facilities around North America, buoyed by the modernization of equipment at its Sandy Springs and Starr plants in Anderson County.
Michelin did not break down the proposed investment among the individual projects.
Each site will receive new equipment, with upgrades planned for existing lines at the Greenville and Lexington passenger tire sites and new presses to be added at the Lexington earthmover tire plant, Micali said.
Work has just started on some of the projects, and Michelin expects to spend about half of the $350 million by the end of 2008.
Over the last 30-plus years-Michelin built its first modern plant in the U.S. in Greenville in 1975-the company has invested more than $2 billion in the state, Micali said, with "excellent results."
"This is our home and we have enjoyed a wonderful relationship with the state over these past three decades," he said.
In North America to stay
Over the past several weeks, Michelin has announced investments and acquisitions in North America totaling more than $1.2 billion.
In addition to the South Carolina and Mexico expansions, the tire maker announced July 31 it will purchase the Oliver Rubber Co. retread business from Cooper Tire & Rubber Co. for $69 million and also plans to spend $41.5 million to increase car and light truck tire capacity at its Bridgewater, Nova Scotia, site.
The company also committed $80 million to increase truck tire capacity-particularly for X One production-at its Waterville, Nova Scotia, plant.
Michelin did close its BFGoodrich tire plant in Kitchener, Ontario, a year ago, and reduced tire production by about a third at its BFGoodrich facility in Opelika, Ala. Both moves were made to cut capacity in the mass-market passenger segment, an area affected strongly by imports from lower-cost countries.
But Micali reiterated the company´s commitment to grow in North America and manufacture tires in the geographic zone where they are sold — 90 percent of the tires sold on this continent are made here, he said.
"We will continue to manufacture in North America as long as we can be competitive, productive and efficient," he said.
"Michelin is confident we can make the changes necessary to keep our North American manufacturing base competitive and productive. These investments will help us do just that."