SHANGHAI — Continental A.G. has picked Hefei City in Anhui Province as the site for its first tire plant in China, ending a decade-long search that included an aborted attempt at a joint venture.
The factory will cost $220 million and begin operating by 2010 with an initial annual capacity of 1 million passenger tires by 2010, Conti said.
Conti´s choice of Hefei has both logistical and cultural significance, according to Klaus Kreipe, general manager, Continental Tires (Shanghai) Co. Ltd., since October 2006.
Draw a line from Guangzhou, China´s southern commercial hub, to Beijing, China´s capital; find the point on that line that gives you the shortest distance to Shanghai, China´s business epicenter-and voila-you have Hefei City.
That´s not the only reason, though, Kreipe said. Hefei offers something a German company would find tough to ignore, a mass of Chinese engineers who speak German and understand German engineering ways.
For more than 10 years, the German state of Lower Saxony has had an exchange program with the University of Hefei. As a result Hefei has a German-speaking qualified Chinese work force. Lower Saxony´s provincial capital is Hanover, Conti´s headquarters.
Hefei "is a future boom town," Kreipe said. The plant will focus on the local market. It will be a "factory made for China."
Anhui province is also home to auto makers Chery Automobile Co. and Anhui Jianghuai Automobile Co. Ltd. However, although he acknowledges their presence, Kreipe said, "These are not the top reason for going there."
Plant construction will begin mid-2008. The factory is expected to employ more than 1,100, and production eventually will rise from 1 million units in its first year of operation to 4 million annually.
Recruitment and training have commenced, with the biggest employment increase to occur in 2009.
Kreipe said quality is absolutely achievable in China "if you have the right quality systems, rules and mindset to make quality."
The facility will focus on Conti brand premium tires-the ContiPremiumContact 2 initially-starting with 15-inch size and moving rapidly to 17- and 18-inch tires.
After considering two separate joint-venture partners before Kreipe joined the company, Conti opted for the wholly owned route. "I have learned JVs are not the best solution," because of conflicts of interests, he said.
Conti is busy establishing its presence in China with a distribution network selling imported Conti tires. In October, the company opened a 64,560-sq.-ft. regional distribution center in Shanghai that has a capacity to store 80,000 passenger tires.
The regional distribution center supplies distributors, who then supply retailers in different regions. The best retailers then are permitted to open Conti Certified Service stores.