SEOUL, South Korea—Hankook Tire Co. Ltd. has committed $1.31 billion over five years to build car and truck tire plants in China and Indonesia with combined annual capacities of 17.5 million units, a production volume that should boost the firm's annual sales by $1 billion or more by mid-decade.
While the plant in China will be directed primarily at the domestic market, Hankook said half of the Indonesian plant's annual 6 million tire capacity will be dedicated to production for North America.
“The addition of a plant in Indonesia will directly benefit the U.S. market,” said Soo Il Lee, president of Hankook Tire America Corp. “Committing approximately 50 percent of the plant's expected capacity for passenger and light truck tires for North America will help us further meet the growing demand for our high-quality products in the U.S. and Canada.”
In Indonesia, Hankook will invest $353 million through late 2014 to build a 6.4 million-sq.-ft. plant at a site near Bekasi, an eastern suburb of Jakarta, Indonesia's capital. Hankook expects to break ground on the plant in the third quarter of 2011 and finish construction by September 2014.
The plant has convenient access to export logistics, as well as other production infrastructure resources such as electricity and work force, Hankook said, benefits that should reduce costs and enhance profitability. The plant location and design will allow Hankook the option of making further investments to meet additional needs, the company said.
In China, Hankook has selected a site near Chong-qing for a $954 million car and truck tire factory expected to be on stream by year-end 2015.
Hankook said it hopes to break ground on the plant in Liang Jiang Xin Qu, a district southwest of Chongqing proper, during the first quarter of 2011 and complete it before year-end 2015. The facility will be built with a capacity of 11.5 million car and medium truck/bus tires annually and will create about 4,600 jobs in the region.
The Chongqing plant, to be built on a 5.7 million-sq.-ft. site, will be Hankook's third in China. The others—a car tire plant in Jiaxing, Zhejiang Province, and a car, truck and farm tire factory in Huaian, Jiang Su Province—employ about 6,200 combined.
The new factories will be Hankook's sixth and seventh worldwide and will contribute to the firm's goal of producing 100 million units annually by 2014.
The company may have more capacity in the works as well, according to Seung Hwa Suh, Hankook vice chairman and CEO. “We will continue to seek for future investment opportunities in order to improve our production capacity and productivity, and will also show our commitment to the local communities,” he said.
Disclosure of the new projects coincides with the inauguration of expanded capacity at the firm's unit in Raclamas, Hungary. There company is in the middle of a two-year, $300 million project to double the plant's daily output to 70,000 tires by the second half of 2011.
Even though the project's only about half done, Hankook said the plant recently started using some of the expanded capacity and expects to ramp up quickly to 16,000 to 17,000 tires a day. The project added more than 624,000 square feet to the three-year-old plant and will create more than 700 jobs.
Hankook is on target to report sales of $4.8 billion or more, according to the firm's performance through nine months. Operating earnings for the nine-month period rose 22 percent to $467.8 million over fiscal 2009, resulting in a 12.9-percent operating margin for the period.