HANOVER, Germany—Continental A.G., reacting to shrinking tire demand, is planning production cuts and a plant closing in Europe, along with the elimination of 1,900 jobs.
The company said it will close its Clairoix, France, passenger tire plant by March 31, 2010. It also will phase out truck tire production at a site in Hanover by the end of the year and cut output by 20 percent at its Puchov, Slovak Republic, facility.
The Clairoix shutdown will affect 1,120 employees and remove 8 million units of tire capacity, and the Hanover change will cut 780 jobs and 1.4 million units of truck tire production, the firm said. The intention is to balance production capacity with shrinking demand.
The moves will affect 1,120 employees in Clairoix and 780 in Hanover, Conti said, and remove 8 million units of passenger and 1.4 million units of truck tire capacity annually.
The Puchov cutback follows an announcement in September that the firm would reduce truck tire manufacturing 6.5 percent through the end of 2008 at three European factories: the Puchov plant and sites in Otrokovice, Czech Republic, and Stoecken, Germany.
Conti has concluded the competitiveness of its tire divisions can be maintained only by closing the two plants with the highest costs, said Hans-Joachim Nikolin, executive board member in charge of the tire divisions. The company is talking with employee representatives at the facilities to discuss the next steps it will take, and what assistance will be provided to the workers.
The tire maker didn't disclose what costs it expects to incur related to the closings or what annual savings it might accrue from the reduced employment.
Conti cited a steep drop in original equipment tire sales and a marked deterioration in replacement markets for its decision.
The company said it doesn't expect the markets to recover sufficiently in the short- and medium-range future for it to make optimum use of existing capacities.
The German manufacturer expects to have overcapacity this year of roughly 15 million passenger and 1.7 million commercial vehicle tires.
European OE and replacement truck tire demand fell 20 percent and 15 percent, respectively, in the fourth quarter, and the trend accelerated through January and February, Conti said. Likewise, passenger OE tire demand fell 20 percent in the fourth quarter and more than 30 percent in the first two months of 2009.
Nikolin said that since fall Conti has done much in reaction to the slump, including production flexibility, the reduction of surpluses on working time accounts, longer plant vacations, the capping of contracts for temporary workers and shorter working hours for core staff.
However, in the face of a stubborn slump in demand, the firm's short-term measures no longer are sufficient, the executive said.