MOUNT VERNON, Ill.—Continental Tire North America Inc. said it will spend more than $60 million to expand its passenger and light truck tire and its commercial vehicle tire operations at its Mount Vernon plant over the next three years.
Charlotte, N.C.-based Continental Tire North America said the investments will result in the addition of about 75 jobs at the Mount Vernon facility. More than 2,300 currently are employed there. The capital spending plan is on top of the previously announced $160 million investment in the factory, bringing total planned spending there since 2006 to more than $220 million.
CEO Matthias Schoenberg said the investment will allow for increased manufacturing flexibility enabling Continental to adjust to growing market demand for replacement tires, particularly in categories such high-performance and ultra-high performance that provide higher added value to both Continental and its customers.
Continental said more than $40 million of the investment will be directed to passenger and light truck operations for machinery and tooling. That will increase capacity by about 2 million tires per year. Machinery to be added will include new tire equipment, curing presses, carbon black distribution systems, automatic cutters and conveyors, according to Hank Eisenga, vice president of manufacturing at Mount Vernon.
Schoenberg said 2008 has been good thus far for the company's PLT business, bringing in double-digit growth in the U.S., Canada, Mexico and Brazil. “We have achieved this through lots of hard work in the plants and in marketing and sales, and through improving step-by-step our product portfolio, our quality and our customer service,” he said at a news conference in Mount Vernon announcing the investment.
He said tires CTNA started selling in the U.S. last year—such as the General Altimax, the Conti-brand CrossContact UHP line and a General-brand UHP tire—all have been successful.
Schoenberg also credited some innovative marketing by the firm's PLT group, including a program to give out free Magellan GPS systems with tire purchases. “In just a couple of weeks we increased our sales by close to $30 million by handing out 14,000 GPS systems,” he said. “These are the kind of things that really get our name out.”
In addition, about $20 million will be invested in the commercial vehicle tire operations to provide new and updated machinery and tooling to accommodate additional product brought in from Europe. As a result, Mount Vernon will make and supply more tires for the Canadian and U.S. markets and produce more than 90 percent of the tire maker's truck tires sold in the U.S., according to the company.
“The truck tire market is down,” Schoenberg said. “We have to protect the plant, but we invest into the plant to increase capacity because we believe in the future and we believe in the plant.”
The exchange rate situation had some impact on bringing truck tire production from Europe to the U.S. but wasn't the main motivation, according to the CTNA CEO. “Even if the dollar were much stronger it would still make sense just to be closer to the customer and to reduce the inventory we have in truck tires to react faster to customer demands.”
Bucking the odds
With the decline in the automotive market and the rising cost of raw materials, Schoenberg said CTNA has been fortunate to be in a position to counterbalance much of the tough issues facing the tire industry today.
“What do we do against that?” he asked. “We fight against it. We introduce new products. We improve our production costs. We balance our product portfolio and we continue transferring product from Europe to the U.S.”
Eisenga complimented the employees—who took a 10-percent wage cut at the beginning of 2006—for all the hard work they have put in while facing a difficult transition.
“With the type of investments we have today, we are still moving forward,” he said, adding that employee involvement activities are paying off. “Lean manufacturing initiatives are the way we can become more efficient in this operation, especially in a high-cost country like the U.S.”
He said that while the operation has made great strides, there's still room for improvement in lowering costs. “The bottom line is we must continue to expand our performance in all areas in order to prove that the investments in building and equipment and in people were the right decision for the company,” Eisenga said.
In recent years, CTNA has ceased tire manufacturing at Mayfield, Ky., and Charlotte—where it still mixes rubber—and sold off its off-the-road tire plant in Bryan, Ohio, leaving Mount Vernon as its only domestic tire facility. It also operates tire factories in Mexico and Brazil.
CTNA posted its first profitable year in a decade during 2007 and Schoenberg expects the Continental A.G. subsidiary to make money again this year. It did not reveal exact sales or earnings figures.