MOUNT VERNON, Ill.—Continental Tire the Americas L.L.C. is expanding its Mount Vernon tire manufacturing plant for a variety of reasons, not the least of which is its need to add production capacity in North America.
The other drivers behind its decision to invest $224 million over three years to expand passenger and light truck tire capacity by nearly 45 percent at the factory include fill-rate shortages and a state tax credit.
In addition to expanding needed passenger and light truck tire capacity, Conti's commercial vehicle tire division will increase capacity at Mount Vernon by 15 percent by December 2012, bringing annual truck tire capacity to 3.15 million tires. The first 5-percent increase already has been achieved, Conti said.
The physical expansion at one of the tire maker's largest facilities will add 444 full-time jobs and increase capacity by nearly 4 million passenger and light truck tires annually, the company said.
About $171 million of the planned investment will be used for new machinery and equipment, while the remaining $53 million will be directed at infrastructure upgrades.
The company “is experiencing significant growth and demand for its tires throughout the region,” said Continental Tire CEO Matthias Schoenberg. “Adding production capacity to meet this demand was essential.”
When the expansion is complete, the plant's employment will reach nearly 3,000 workers producing about 13 million tires annually.
“The driving force of this investment has been the tremendous growth we've experienced in our passenger and light truck business over the last years. So we've been able to expand our business faster than the market and we've been able to increase our market share in North and South America with both our brands, the Continental tire brand and the General tire brand,” Schoenberg said during the May 12 groundbreaking ceremony at the plant.
It was about a week earlier, on May 6, that Illinois Gov. Pat Quinn signed legislation that allows Conti to claim $22 million in incentives through the state's Economic Development for a Growing Economy, or EDGE, tax credit on the condition the tire maker agrees to create at least 350 jobs, retain at least 2,400 employees in Illinois and make a capital investment of at least $200 million.
The state's EDGE program is offered to companies looking to build facilities in Illinois and used to retain firms on the verge of leaving the state.
Conti has been wrestling with fill-rate shortages—ranging at times from 45 to 55 percent—and has been increasing daily output at its plants in Mount Vernon as well as Camacari, Brazil, and San Luis Potosi, Mexico, for two years.
Conti announced earlier in the year that among these plants, the Mount Vernon plant would see the greatest capacity increase—18 percent—in 2011, which is in addition to the production boost expected with the expansion plans, according to company officials.
In addition to the Mount Vernon expansion, parent company Continental A.G.'s supervisory board recently approved funding for a greenfield tire plant in North America. Schoenberg said Conti is looking at locations in the southern U.S., and a site will be announced later in the year.
Meanwhile, the GTY Tire Co. truck tire joint venture housed in the Mount Vernon plant has adjusted its ownership. An agreement was reached to dissolve the partnership with Toyo Tire Holdings of Americas Inc. The GTY venture, formed in 1988 by Toyo, Conti and Yokohama Tire Corp. of America, and now involves only Conti and Yokohama under terms of a mid-January pact that settled Toyo's lawsuit against Continental and Yokohama.
According to Schoenberg, Toyo's 16-percent ownership in the venture has been divided between Conti, which now has a 59-percent stake, and Yokohama, with a 41-percent share.