LEON, Mexico—Michelin has started construction in Mexico of its 21st factory in North America—eight years after the global economic crisis of 2008 forced it to postpone the project.
“I'm really excited because a few years ago, in 2008, I had to come to this country to postpone our investment because of the crisis,” Michelin CEO Jean-Dominique Senard said. “At the same time I was incredibly impressed by the way the Mexican authorities took the news. So coming back with the decision (to revive the project) is a joy.”
Senard had earlier hosted a groundbreaking ceremony at the 242-acre site in central Mexico where the French tire company is investing $510 million in what, according to one senior executive, will be Michelin's first greenfield passenger tire plant in North America in three decades.
In a speech, Senard said the León investment is the tire maker's largest investment anywhere in 2016.
“The last time we launched a greenfield passenger tire plant in North America was over 30 years ago,” said Scott Clark, executive vice president and chief operating officer of Michelin North America. “So this is not something we do every day. This is a big deal and this is exactly the right place to be and at the right time.”
The factory, which will employ 1,000 when finished in late 2018, will be within a three-hour drive of 18 car maker assembly plants, Clark said. It is located in a new industrial park called Leon-Bajio, which stands beside the Leon-Silao highway.
The facility will have an annual installed production capacity of between 4 million and 5 million Michelin-brand tires, mostly in 18-inch-plus sizes for North American original equipment and replacement markets.
The plant's output will “reflect the tremendous growth in the SUV, CUV and pickup markets, followed closely by high-performance tires,” Clark said. Most of the replacement tires will go to the U.S. and Canada, he added.
The plant, which will cover 1.5 million square feet, will have its own rubber mixing capabilities, according to the executive—something which he said is “not completely unique in the Michelin group.”
Asked about possible expansion plans, he said: “We take it one step at a time. We have almost (240 acres), which is an enormous amount of space. The likelihood of the plant expanding is very high.”
“There's no plan as we speak to expand (this plant). But it's bound to expand one day,” Senard added.
Michelin already employs 700 in Mexico, primarily at a plant in Queretaro, 107 miles southeast of Leon, which makes non-Michelin brand tires such as BFGoodrich, Uniroyal, Taurus and Tigar. The plant has an installed annual capacity of 2 million tires.
Pete Selleck, chairman and president, Michelin North America Inc., said that Michelin has “figured out how to operate within Mexico's labor laws, which has given us much more confidence in taking this huge step (in Leon).”
He said that “labor issues” forced the company to mothball the Queretaro facility between August 2000 and April 2002.
“We had a situation that was untenable. I was involved. We tried to resolve it.”
Closing the plant, he said, was “one of the most difficult decisions” as it meant several hundred jobs were lost.
Referring to the Leon project, known internally as MX2, he added: “I've been with the company for 34 years, and so for me it's very gratifying to see us reach this point.”
Idelfonso Guajardo Villarreal, Mexico's federal economy secretary, told the groundbreaking ceremony's audience of several hundred that by year-end 2018 the Mexican tire industry's annual installed production capacity will be 31 million, compared with 21 million today.
“The new Michelin investment in Mexico represents a vote of confidence that strengthens the positioning of Mexico as an investment destination, because it comes from a company with a long tradition in the industry and widely recognized for its commitment to innovation,” Mr. Guajardo Villarreal said.
Miguel Marquez Marquez, governor of the Estate of Guanajuato, Mexico, called Michelin's arrival the "most important investment for Leon so far" and said the tire maker's investment "will trigger social and economic development...."
Leon Mayor Hector Lopez Santillana said Michelin's choice of Leon recognizes the strengths we have and our ability to become an international economic actor.
"With this new plant, Leon will provide greater dynamism to the expanding automotive sector in the Bajio region. We are confident that together, we will open a new era of opportunities and shared development.”