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November 20, 2017 01:00 AM

Triangle eyes North Carolina for tire plants

Tire Business Report
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    WEIHAI, China—Triangle Group Co. Ltd. has identified North Carolina as the preferred site for a pair of tire plants—one for consumer and one for commercial tires—that it would like to build in the coming three to four years.

    Triangle outlined its possible scenario for building the plants in the U.S. in a filing with the Shanghai stock exchange and published on CNINFO.CN, a Chinese website for financial declarations.

    The document spells out specifics for the proposed plants—5 million passenger/light truck tires and 1 million truck/bus tires a year at a combined cost of $580 million—but stresses that the project is at the "investment intention" stage and has as yet not been submitted to the company's shareholders for consideration nor to any relevant Chinese or U.S. authorities.

    The document also does not identify any sites in North Carolina, stating that investment policies, conditions and other details are still under negotiation and therefore there is a "certain degree of uncertainty in site selection."

    Nonetheless, the document—reviewed by the Triangle board of directors at a Nov. 12 meeting—spells out some of the reasons Triangle is considering this route, including:

    • The desire to optimize the company's global production layout;
    • The ability to "effectively" avoid trade barriers; and
    • The possibility to accelerate the firm's presence in the U.S. "as well as build a presence in nearby markets such as Canada and Mexico."

    Franklin, Tenn.-based Triangle Tire USA declined to comment on the document or its contents.

    The filing spells out a two-phase timeline for the project.

    Phase one, for the consumer tire plant, is slated to break ground in 2018 and will take two to three years to finish. Phase two, for the commercial tire plant, will start construction in 2020 and take two to two-and-a- half years.

    Triangle said in the filing at least 30 percent of the funds will come from the company's own capital, the rest from bank loans.

    Both phases are expected to break even within six years upon completion, Triangle said.

    "Of the 290 million light vehicle tires sold in the U.S. in 2016, about 40 percent come from domestic manufacturers," the filing stated. "With the recovery of U.S. manufacturing and the country's growing car parc for light trucks, commercial replacement tire shipment is forecast to rise steadily at a 2 percent annual rate over the next five years."

    In the filing Triangle notes that it has 20 years of experience selling to the U.S. market and has established both a research center and sales arm to serve the markets.

    Triangle also notes in the filing there are a number of risks that could delay or derail the project, including local laws, regulations, policies, business environment, trade, financing environment and policies, exchange rates, international political environment and economic situation, and other factors.

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