Apollo celebrates milestone event

GYONGYOSHALASZ, Hungary—In a country filled with relics and buildings that date back several centuries, one of the world's most technologically advanced and environmentally efficient facilities officially opened.

More than 1,400 Apollo employees, vendors, dealers and dignitaries—including Hungarian Prime Minister Viktor Orban—were in this rural Hungarian city on April 7 to witness Apollo Tyres Ltd. inaugurate its first greenfield plant outside of India.

Another 16,000 Apollo employees worldwide watched the ceremony unfold over the Internet, as the $505 million car and truck tire plant manufactured its first tire.

The plant, Apollo's sixth worldwide and second in Europe, opens with the capacity to produce 5.5 million passenger and light truck tires and 675,000 commercial vehicle tires per year once Phase I is complete. The highly automated, state-of-the-art facility will produce both Apollo- and Vredestein-brand tires for the European market.

"This is a proud and historic moment for Apollo Tyres," said Neeraj Kanwar, vice chairman and managing director of the Gurgaon-India based Apollo.

"It's the culmination of years of planning, hard work and people living the values cherished by Apollo of working as one family to make this dream happen," Kanwar said. "I thank all of our colleagues that have made this plant a reality."

The 1.6 million sq.-ft. plant is situated on a 178-acre plot of land located near Gyongyoshalasz, a community of 2,500 surrounded by rolling hills and greenery about 50 miles east of Budapest. The inauguration comes as the tire maker is celebrating its 40-year anniversary.

Kanwar and Orban, along with Kanwar's father, Apollo Chairman Onkar Kanwar, broke coconuts together on a foundation stone as part of a traditional Indian ceremony that is said to ensure future success.

Onkar Kanwar said the plant symbolizes the strengthening relationship between Hungary and India.

"This support is reflective of the long and friendly relationship that India has shared with Hungary," the elder Kanwar said.

"I would like to say that the seed that we have planted over the past two years has grown into a large tree and now bears fruit," he said. "I am confident that this not only will fuel the growth of the company, but take our nations to the greatest heights. Our aim is to create a benchmark manufacturing facility here."

Orban returned to the plant to celebrate the inauguration 24 months after he helped lay the foundation stone at the plant, calling the project one of "national importance."

"We are not welcoming just another project, but one of the world's most modern projects: an investment of the highest standards, an investment we may be proud of both in terms of its spirit and its quality," Orban said. "This is important for us Hungarians. This is not an assembly facility, and this does not simply employ conventional technology. Here we are welcoming an investment which sets out to create one of the world's most modern factories, and, in the form of a factory, to embody the quality of spirit which we Hungarians are so proud of."

Orban said the Hungarian government has contributed $55 million to the project, which he said is vital for the Hungarian economy to grow.

"The Kanwar family are not foreigners, and they are not foreign investors in Hungary," he said. "You have become part of the great family that is the Hungarian people, and therefore in the context of this investment, we should welcome you to the great family of the Hungarian people."

Others on hand for the inaugurations were Peter Szijarto, Hungary's foreign affairs and trade minister, and H.E. Rahul Chhabra, India's ambassador to Hungary.

The Hungarian facility is Apollo's second in Europe. The other is located in Enschede, Netherlands, and operates under the Apollo Vredestein B.V. name. It produces high-end passenger and specialty tires.

The tire maker's largest facility is located near Chennai, India, one of four located in the country. Those four have the capacity to produce 1,450 metric tons of tires per day, and the Netherlands facility produces another 195 tons per day.

Apollo, the world's 17th-largest tire maker, has more than 16,000 employees worldwide, with sales of $1.8 billion in the fiscal year 2015-16. Europe accounts for about one-third of Apollo's global sales.

With the Hungarian plant operational, work continues on another factory under construction on the southeast coast of India.

Sights set on North America

Apollo now will turn its attention to bolstering its presence in the North American market, specifically the U.S. and Canada.

"The U.S. plays a real important part of us in our growth strategy," Najeer Kanwar said. "Given now that we have two domestic markets, which is largely Europe and India, our next stop has to be the U.S."

He said he is not interested in expanding into China.

In order for Apollo to enter the U.S. successfully, Kanwar said the firm first must have product available to cover 70 percent of the market. Currently, Apollo has product to service 5 percent of the market. Apollo would use the Vredestein passenger tire brand as its main U.S. product, and once that is established, perhaps introduce the Apollo brand for heavy commercial trucks.

Currently, Kanwar said Apollo's U.S. market share is very small.

"We as a company have never focused on the U.S.," he said. "There was no main, clear customer strategy."

Steven Smidlein, a former executive at Goodyear and DaimlerChrysler, has been working over the past year to lay the foundation for Apollo's move into the U.S. Smidlein is Apollo's senior vice president for North America.

"Once we create a market and a brand, we would have to look at setting up a tire factory," Kanwar said. "Now I'm talking four to five years. But the whole thing is to create the market for the U.S. customer, and that is what Steven and his team will do."

Kanwar said his company already has looked at three or four states to consider as sites for a new plant but said it's too early to disclose specifics. He said his goal is for 10 percent of Apollo's revenue to be driven by the North American market within five years.

Apollo's growth in Thailand is an example of what the firm plans for the U.S. market. Two years into the process of establishing a presence there—which Kanwar described as a very competitive landscape—the tire maker is crossing the $60 million mark per year.

"Because of that success, I have full confidence we'll be able to do it in the U.S.," Kanwar said.

Kanwar said he would be open to an acquisition despite a highly publicized $2.5 billion merger attempt with Cooper Tire & Rubber Co. in 2013. The deal collapsed late that year.

"You know I'd gone in for Cooper and I burnt my hands over that," Kanwar said.

He said organic and inorganic growth offered both pros and cons.

"Organic is something I can make, but it takes time," he said. "But I don't get any dirty baggage, which could be unions, culture, product strategies, quality, and to change that takes much more pain.

"I'm not opposed to inorganic growth, but it has to be something that fits with the organization, fits with the culture, fits with synergies between Apollo and the acquisition. We are open to it. We keep looking around, and if something comes up, and it matches, and it's a good advantage, we'll look at it."