HANOVER, Germany—Continental A.G. plans to build a tire plant in the U.S. and will expand its existing factory in the country.
The German firm's supervisory board OK'd the investment for the greenfield tire plant, Conti Chairman Elmar Degenhart told shareholders at the firm's annual meeting April 28 in Hanover.
In a separate move, Conti announced at a May 12 press conference it will expand its Mount Vernon, Ill., facility adding machinery and 444 jobs to the site's work force of 2,500. The project will take three years and cost about $224 million.
The new factory probably will produce consumer and commercial tires, a Continental spokeswoman said, even though Degenhart's comments at the annual meeting focused on the need for passenger and light truck tire capacity. Conti has formed a site selection committee, she said, and should decide on the location of the facility by the end of the third quarter.
Degenhart said the German tire maker wants to cover rising demand in the NAFTA region, including the U.S. market, with local production, “so there are plans for a new factory there, too.”
The Conti chairman said the plans are proof of the turnaround the company's passenger and light truck tires division has achieved in the Americas region.
“Back at the beginning of the new millennium, the passenger and light truck tire business incurred massive losses in the region,” he said. “Today it is profitable, and, at the same time, a growth area.”
Degenhart credited the Americas' management team for the turnaround and said the investments planned “demonstrate that we are convinced of more success.”
Conti's tire businesses in North America reported sales of $2.03 billion last year, according to figures in the firm's annual report. This represented growth of 25.8 percent, which Conti said outperformed the market in both the passenger/light truck and commercial vehicle sectors.
Consumer and commercial tire-related sales in the region were $1.39 billion and $567 million, respectively.
Conti operates two tire plants in the NAFTA region: in Mount Vernon—co-sited with its GTY Tire truck tire joint venture—and in San Luis Potosi, Mexico.
In Latin America, Conti has tire plants in Camacari, Brazil, and Cuenca, Ecuador. It has earmarked expenditures of $210 million through 2015 to double the size of the Camacari plant to about 9 million car and 700,000 truck tires.
The expanded output will serve both NAFTA and Latin America, according to Renato Sarzano, general manager of Continental Tire in Latin America.
As recently as 2006, Conti had three tire plants in the U.S. It closed a plant in Mayfield, Ky., that year and phased out tire manufacturing that same year at a factory in Charlotte, N.C., where the firm also had its headquarters before moving it to Fort Mill, S.C., in 2009.
Mount Vernon expansion
The planned expansion in Mount Vernon is spurred by significant growth in demand for the company's tires throughout the North American region, Matthias Schoenberg, CEO of Continental Tire the Americas, said at the May 12 press conference. “Adding production capacity to meet the demand was essential. And the Mount Vernon employees earned this investment as they continue to prove that they are competitive on a global level.”
The tire maker will receive about $19 million in tax breaks over a 15-year period from the state of Illinois to help the company with its expansion, state officials said. Schoenberg noted that “Illinois offered us competitive incentives to create these well-paying jobs with excellent benefits for the people in southern Illinois.”
Unconfirmed reports had been circulating that Continental was considering building a new factory in Indiana rather than expanding the Mount Vernon plant before the May 12 announcement. But that speculation ended when the Illinois state legislature and Governor Pat Quinn approved the multimillion dollar tax break.
Of Continental's $224 million investment in the Mount Vernon factory over the next three years, about $171 million will go for new machinery and equipment while $53 million will be directed for building and infrastructure. The plant's tire capacity is expected to increase by nearly 4 million annually.
Employment at the facility has grown by about 400 jobs since 2006. The additional 444 full-time jobs will boost total employment at the site to nearly 3,000 in the next three years.
Continental's investment in the Mount Vernon plant is part of the company's comprehensive growth strategy for its tire operations worldwide, the firm said.
The tire manufacturer has spent more than $220 million during 2006-2010 at Mount Vernon to expand capacity for passenger, light and medium truck tires.
Mike McNulty, Rubber & Plastics News senior reporter, contributed to this report.