FORT MILL, S.C.—Continental Tire North America Inc. has purchased a majority stake in Compania Ecuatoriana del Caucho S.A. to significantly improve its position in Latin America.
The company acquired an additional 8 percent of the Cuenca, Ecuador-based tire manufacturer and distributor to give it a 50-percent interest in the business, according to Matthias Schoenberg, CEO of Conti's Americas tire businesses. Terms of the deal weren't released.
Conti also becomes majority owner of a rubber plantation, retreading plant, tire import businesses and various retail chains in the Andean region, which includes Bolivia, Chile, Columbia, Ecuador, Peru and Venezuela.
It plans to use the company—better known as Erco—as a base to expand its presence throughout the Andean region, he said, noting that it gives Conti greater access to Latin American markets than it had in the past.
Conti previously owned a 42-percent share of the business, established in 1962 as a subsidiary of General Tire & Rubber Co. Continental A.G assumed ownership in 1987 when it acquired General Tire.
Increasing its stake in Erco ties in with Conti's strategy for the Americas, Schoenberg said. “The Andean region is a fast-growing market,” and Erco will serve as both a manufacturer of tires for Latin America and a distributor of Conti's products in the region.
“This completes our footprint in Latin America,” he said. “We'll produce tires there, but only for the Andean region.”
Erco, which employs about 1,600 in all of its businesses, also will distribute Continental's tire brands for smaller lot sizes made in the U.S., Brazil and Mexico, Schoenberg said. All large-volume sizes will be made at Erco's plant, which produces passenger, light truck and commercial tires. It's also the only factory in the region capable of producing radial truck tires. In fact, it recently invested $15 million to add capacity for the tires at its Cuenca plant.
As a Conti affiliate, the company sells Continental-, General- and Barum-brand tires throughout the region. The business has had 15- to 20-percent annual growth during the last four years.
Fort Mill-headquartered Continental will soon begin its integration with Erco, Schoenberg said. “We always had a technical agreement with them, so the plant is up to speed.”
Erco manages the six countries of the region for Conti, he said, “so we can expand our business in these critical growth markets, which, together, have a larger population size than that of Mexico, but with faster growth.
“Continental will enable Erco to dramatically improve its product portfolio, as well as its visibility throughout the region,” the Conti executive said. “In turn, Continental can expand our business and fully utilize the opportunities in these growth markets.”
Conti, which employs nearly 133,000 at about 190 locations in 35 countries, estimated Erco's share of the Ecuadorian market at about 45 percent and at 11 percent throughout the region.
Schoenberg pointed out that the investment in Erco is a good sign for the tire industry. “Finally, someone is investing again.”
On another positive note for the Americas operation, he said Conti has been able to avoid layoffs of permanent personnel at its plant in Mount Vernon, Ill., although about 180 temporary employees were let go because of the weak economy. The factory, which has been the focus of heavy investments from the company in the last few years, employs about 2,300.