NAIROBI, Kenya—Sameer Africa Ltd., the former Firestone East Africa Ltd., is ceasing tire production at its 47-year-old factory in Nairobi and instead will outsource production of its Yana brand tires to producers in China and India.
Sameer has notified workers and customers it plans to close the Nairobi plant by Sept. 30 and shift production to offshore sources. The firm's board of directors said its “offshoring” of Yana tire production will result in a one-time charge of $7 million and thus will impact fiscal 2016 earnings negatively by more than 25 percent, based on the firm's earlier earnings forecast.
The company said the decision will result in an undisclosed number of production-related employees' losing their jobs. The company has attempted to mitigate the number affected by redeploying some to other jobs in retail and distribution. Employment stood at 527 as of December 2015.
The company said it will continue to engineer its proprietary Yana brand in-house to ensure an “unchanged” supply to customers in East Africa and will continue to expand distribution of its Summit Tyre brand and continue to distribute Bridgestone tires in Kenya, Tanzania and Uganda.
The company operates 27 Yana Tyre retail centers in four African nations and has announced plans to open more.
Company executives hinted at the closing earlier in its 2015 annual report and at its financial results news conference.
The company's decision comes after two straight years of corporate net losses totaling nearly $1 million, on sales of about $82 million.
Management also cited several other reasons for its decision, including the collapse of efforts to secure a strategic technical and equity investor; the continued adverse impact of imported, subsidized tires from the Far East; and a lack of government support for domestic manufacturers.
The company was established originally in 1969 as a joint venture between Firestone Tire & Rubber Co. and the Kenyan government.
Bridgestone retained Firestone's share of the business when it acquired Firestone in 1998, but Sameer Investments Ltd. gradually increased its control of the business over time. It continued to produce Firestone-brand tires under license until 2007 when Bridgestone's technical aid agreement with the Nairobi-based company lapsed.
The Nairobi facility is Kenya's only tire plant, with capacity for car, light truck, truck/bus, farm and OTR tires. It was rated at 340,000 units/day, according to the Global Tire Report
The company said it was finalizing agreements with two unidentified manufacturers, one in India and another in China, in order to avoid any interruption in the supply of Yana tires to the market.