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September 06, 2019 03:18 PM

Editorial: Gold rush of new U.S. tire factories cooling down

Rubber & Plastics News Staff
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    Leo Michael

    The boon in building new tire manufacturing factories in the U.S. appears to be cooling down. The third foreign-owned tire company in the past year—second in just the past two months—has put the brakes on previously announced projects that represented more than $1.6 billion in proposed investment.

    India's Balkrishna Industries Ltd. (BKT), a producer of off-highway tires, is the latest to suspend plans to open a tire plant on U.S. soil. It was less than a year ago the firm said it would spend $100 million on the project, saying it would boost business with North American equipment makers along with exporting tires to nearby countries.

    But just as quickly as the plans were laid out came the decision—announced in its latest financial statement—that the firm was stopping planning work on the U.S. factory, along with word from a company executive that said it was unlikely the topic would be resurrected anytime soon.

    The BKT disclosure follows closely behind word that China's Qingdao Sentury Tire Co. Ltd. had put on hold its plans to build a $530 million car and light truck tire plant in Troup County, Ga. That proposed tire factory was announced in September 2016 and was supposed to be operational by the end of 2018, but only minor site preparation work was all that was completed. In addition, Sentury late last year consolidated separate U.S. sales organizations, one of which was attached to the Georgia plant, and the executive hired in 2017 to head up the project now has another job.

    And the largest project of the three—a proposed $1 billion consumer tire factory slated for South Carolina by China's Wanli Tire Group—was said last year to be in "neutral." The Orangeburg County Development Commission hadn't ruled out the project completely, but reportedly had begun showing the proposed site to other prospective clients.

    There's nothing that necessarily ties the demise of the three projects together, as each tire maker has different reasons for changing course.

    BKT cited difficult business macroeconomics and "volatile" climate conditions. The Indian firm's overall business seems to be strong, with sales climbing nearly 13 percent in its most recent fiscal year, and the tire maker continues with projects to invest $200 million in its home factories.

    The Development Authority of LaGrange in Georgia said the Sentury Tire project stalled because of the uncertainty of an initial public offering for the company in China. The LaGrange organization said uncertainty with the trade relations between the U.S. and China caused the agency that approves IPOs in China to put Sentury's offering on hold and, with it, the ability to finance the project.

    For Wanli, a company source said the state-owned company was evaluating alternative locations in Southeast Asia and Middle/Eastern Europe.

    After going through nearly two decades where the U.S. saw virtually no investment in new tire production facilities, the large number of projects that went forward in the last decade certainly has changed the face of tire manufacturing in the U.S. But with these three projects now fading away—with one other in doubt—the gold rush of new domestic tire facilities may have run its course.

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