Conti breaks ground on Mississippi tire plant

CLINTON, Miss.—Mississippi Gov. Phil Bryant has a history in the tire business, but the $1.45 billion commercial tire factory Continental Tire the Americas is building in central Mississippi shows he definitely has moved up the food chain from his early days in the industry.

After presiding over the Nov. 3 groundbreaking ceremonies at the 1,000-acre plot outside Clinton that will house the Conti plant, the 61-year-old, second-term governor recalled how the year he graduated from high school he worked at Big 10 Tire Co. changing tires 51/2 days a week.

“That's what got me in college,” Bryant said. “I know tires. I've changed a bunch of them. It is a good business and a product people always need.”

The Conti truck and bus tire plant will be the third tire complex in Mississippi and the second opened during Bryant's governorship, joining the commercial tire facility Yokohama Tire Corp. opened last year in West Point. Cooper Tire & Rubber Co. has operated a tire factory in Tupelo since 1984.

While Bryant still gets nostalgic from the smell of new tires in a store or factory, he likes his position now more than during his days at Big 10 Tire. “It takes me back to those days,” he said. “I'm glad I'm not breaking down tires anymore, but I sure am glad I'm opening tire plants.”

The governor called Conti's facility the largest manufacturing investment in Mississippi history, adding that he feels the state-of-the-art plants the tire industry now constructs are a good match for his state's work force. “The middle skills we have here in Mississippi in abundance fit the manufacturing of tires,” he said. “We have advanced technologies that will be here in this plant. People have to understand, this is not just throwing around heavy tires.

“This is going to be automation and robotics. This will be an advanced manufacturing site for us. But we think we're very good at it, and we're looking to maybe have more in the future.”

The road to Mississippi

While the ground has been broken in Clinton, site preparation will take more than a year, with construction starting in 2018. Conti expects machine installation to begin in March 2019, and the first truck tires are forecast to roll off the production line in December 2019.

The building footprint for the first phase will span more than 700,000 square feet. Long term, Conti said it plans to spend more than $1.4 billion and create 2,500 jobs when the factory reaches full capacity over the next decade.

Talks between the state and Continental have been going on for a couple of years leading up to the announcement of the facility in February. On Feb. 4, the Mississippi legislature passed in one day a measure that approved $263 million through the Mississippi Major Economic Impact Authority for site acquisition and preparation, infrastructure improvements and work force training. Various sources also estimated the firm will receive franchise, property and income tax breaks valued at more than $300 million.

“This is the first new plant, globally, for the truck tire business in more than 10 years,” said Nikolai Setzer, a member of parent Continental A.G.'s Executive Board and head of the company's global tire business.

Bryant and Setzer seem to have developed a good working rapport as the project has moved ahead. “He's a car guy,” Setzer said of the governor. “He works on cars. He loves motorcycles. He's really down to earth. He could be a tire guy.”

Bryant said projects such as these take a “sort of CEO to CEO approach. One of the things I do as governor is try to stay directly involved in projects such as these. I want Niko (Setzer) to be able to call on my cell phone, and we'll continue to do that.”

Setzer said the new truck tire facility is part of Conti's Vision 2025, a growth strategy the German company embarked on in 2010. At that point, about 75 percent of the Tire Division's revenues came from Europe.

It was clear Conti had to look for growth opportunities either in markets like China that were growing, or in regions such as the U.S. and North America, where it had a good presence but underdeveloped market share. “Since 2010 we have been planning this growth constantly,” Setzer said in an interview following the groundbreaking.

Thus far, the approach has seen Asia-Pacific grow to 10 percent and North America to 25-30 percent of Conti's tire business, he said. North American tire sales totaled $2.85 billion in 2015, ranking it fourth overall in the continent.

During that time, Conti has invested $234 million at its existing U.S. factory in Mount Vernon, Ill., opened a new car and light truck tire factory in Sumter, S.C., and already embarked on a second-phase, $500 million project in Sumter.

Setzer said Mount Vernon has been expanded to near its maximum, so Conti knew it soon would need a second truck tire facility in North America. The company considered putting the new plant at the Sumter site, but the thinking was there was enough activity with the new expansion at the South Carolina plant without the additional burden of adding a truck tire factory.

“We clearly saw that it's more safe and secure to do it here,” Setzer said.

Like all of the other new tire plant projects that have sprung up in recent years in the U.S., Conti chose a Southern location. Setzer said in the end it is the overall package that matters, from location and infrastructure to government support and availability of a strong and committed work force. And Clinton fit the bill on all accounts.

“I've seen many land plots, not only in the U.S. but around the world,” Setzer said. “This is the best spot which I have ever seen. This place is born to be a tire plant, and we're damn proud to have it for our plant.”

Paul Williams, Conti executive vice president of commercial vehicle tires for the Americas, added that the main truck tire markets tend to be California through Texas, Georgia and Florida. The Mississippi location also puts it near where natural rubber comes in from the port of New Orleans, and in proximity to synthetic rubber plants, carbon black suppliers, steel cord makers and other material suppliers.

“Your inbound logistics are less being based here in the Southeast than in the Midwest,” Williams said.

Growth in truck tires

The second truck tire plant was necessitated by Conti's ability to grow its commercial business above market rates for several years, he said. The executive confirmed the firm's truck/bus tire business—including both Continental and General brands—is somewhere around 7-8 percent in North America, but that has been increasing.

“It's a matter of focusing on the products, especially in truck tires,” Williams said. “You instantly recognize the performance on the truck tire because it's a B2B and not a (business to consumer) business. The fleets take care of one of their highest cost assets, which are the tires. So if you get the tires to perform, they start to sell.”

Conti also has spent a lot of time developing its sales approach, he said, by increasing its sales force and adding technical competence so it can be more of a resource for fleet customers. “So if there are any tire issues, the first person to call would be the Conti people, because we'll be able to go in and tell them exactly why this product is working in this application and not that application,” Williams said.

Boosting its retreading activity through its ContiLifeCyle unit has been another key to growth for the commercial tire business, he added. For the past five years it has been making treads for retreading at a facility in Mexico—recently passing the 1 million tread mark—and is adding another such plant in Mount Vernon.

“As an organization committed to delivering the lowest overall driving cost, we can't just be a new tire manufacturer,” Williams said. “You need the retreading.”

Future plans in Clinton

Setzer said the site and plant in Mississippi will be designed to allow for future growth, with Conti envisioning a “mega plant” there.

The scope of the project in terms of investment and people is not typical of what Conti normally does, he said, noting the scope of a new plant in Russia was significantly smaller in initial planning.

“But we know the U.S. pretty well,” he said. “It's the biggest truck tire market in the world. We have a solid base, a strong team. We know what we do, and we know the customers, so we can plan in a different way than we do in other markets.”

The Clinton facility, though, likely will expand beyond truck/bus at some point in the future. “We want to make sure that we have all the opportunities later on to grow both in terms of size and in terms of product,” Setzer said. “We don't want to be restricted by land plot or by infrastructure that will not support a bigger plant later.”