Nokian to reduce heavy tire production, 'temporary layoffs' likely

NOKIA, Finland—Heavy tire demand is slipping, and the market changing.

So Nokian Heavy Tyres Ltd. plans to adjust its production throughout the coming months. The moves are expected to impact 160 employees at the company's Nokia facility and likely will result in layoffs.

The Nokia-based tire maker said May 2 that it will launch negotiations to "adapt production" to meet the changing industry demands and expectations. Factors driving the change, Nokian said, are both production- and financial-based.

Nokian did not say how much production it intends to cut, nor did it say if or when it expects to reinstate current production levels.

Nokian expects that the adjustment measures could include layoffs of Heavy Tyre factory employees as well as shortened work days and weeks. Preliminary plans called for employees to take temporary, 90-day layoffs.

Negotiations are expected to last two weeks.

The production reduction moves come just about five years after the tire maker launched an $82 million, three-year expansion product at its heavy tires factory. That project aimed to increase capacity for the heavy-duty tires by 50 percent to 32,000 metric tons by 2021.

Overall, Nokian's 2023 first-quarter net sales dropped 25 percent year-over-year, coming in at around $261.9 million for the first quarter of 2023. Operating profit showed a $20.8 million loss.

Meanwhile, heavy tire sales were up 6 percent year-over-year to $75.5 million, according to the company's most recent financial report.

Operating profit for the segment was down about $2.7 million euros compared to the year-ago period, coming in around $10.6 million in Q1 2023. Nokian attributed the decrease in lower aftermarket volumes, driven by high inventory levels across distribution channels.

The tire maker noted that raw material unit costs (EUR/kg) in manufacturing, including inbound logistics costs, increased by 16 percent year-over-year.

Overall, the replacement ag tire market in Europe was hit hard during the first three months of 2023. The European Tyre and Rubber Manufacturers Association said its member companies reported a Q1 volumes plummet of about 39 percent when compared to the same period a year ago.

Unit sales for all ETRMA member companies was around 210,000 for the quarter.

Meanwhile, first-quarter European truck and bus tire sales dropped 18 percent to about 3 million units, according to ETRMA to figures.

Nokian's heavy tire segment includes products for agricultural, truck and bus, mining and other OTR applications.