Continental, Nokian set to open tire plants in North America in 2020

DAYTON, Tenn.—Nokian Tires and Continental A.G. are making progress and are on schedule for new manufacturing facilities in North America, increasing capacity and incorporating new technology.

Both companies are aiming for 2020 commercial production deadlines for their facilities, which are both located in the southern U.S., with Nokian in Dayton and Continental in Clinton, Miss.

Nokian's new site, about 45 minutes away from Knoxville, Tenn., covers 830,000 square feet and will serve customers across the U.S. and Canada, producing car and light truck tires specific to North America, according to the company.

A ramp-up phase will lead up to the site's start of commercial production, and exteriors and the production building are near complete, said Wes Boling, marketing communication manager for Nokian. Equipment installation is proceeding on schedule and hiring has begun.

Nokian is investing $360 million into the facility, which will be the company's first production plant in the U.S., Boling said. The company has two others globally: its flagship location in Nokia, Finland, and a large plant in Vsevolozhsk, Russia, near St. Petersburg. Developing a North American footprint is a step in line with the company's growth strategy.

"The large scale goal we reference all the time is trying to double sales in North America by 2023," Boling said. "To be able to build the plant here is obviously going to increase our inventory, enable us to tailor products to this market and serve our customers more effectively."

It also allows the company to expand its offseason presence in regions of North America where the company hasn't historically been as strong, he said.

"To see the plant coming on board is seeing those goals come to fruition. It's a tangible embodiment of what we've been talking about for so long and what so many people have been working toward," Boling said. "It continues to give us powerful optimism about the strategy we put in place."

The Dayton facility will run with a capacity of 4 million tires each year, and the capability to store an additional 600,000 tires onsite, the company said. Expanded inventory in the U.S. frees up inventory elsewhere globally, which means greater production capacity for the Nordic, Central Europe and Russian markets.

"We make currently about 17 million tires a year in Russia, so we're able to focus that number toward the market that Russia is serving, and then the vast majority of the products we're making here in North America will stay here," Boling said.

On top of freeing up more inventory, the site will lighten distribution times to market, aligning production with sales demand across the globe, he said.

The site will incorporate heavy automation, building on technology used at the company's Russian plant, Boling said. The process will use sensors in its mixing technology for raw materials, as well as in its calendering, extruding and other processes.

It also will use technology to assist with its sustainability efforts, as part of a company-wide drive to lower overall carbon dioxide emissions, he said.

"We're very committed to installing premium technology that's going to make this a very low-emissions plant," Boling said. "It's going to make us a good neighbor to the surrounding community."

In 2018, Nokian's goal was to reduce its overall CO2 emissions from production processes by 20 percent. At present, the company has almost doubled the goal by reaching a reduction of 38 percent, Boling said.

"We're looking to keep those emissions at a strict minimum in Dayton as well," he said. "We think that as advanced as our other two plants are, this one's going to be even more advanced, just by the nature of technology evolving and our investment."

Nokian has hired its first 50 employees for the new facility, and sent them to Europe for six weeks of training at its other factories in Finland and Russia, Boling said. Once they return, they'll have a grasp on Nokian's processes and equipment, and can start the ramp-up process at the Dayton plant.

"The equipment at our Russia plant is the best approximation of what we're going to have in Dayton, so it's going to give them the exposure they need to understand how to work with our technology," Boling said.

The trip also will provide cultural training, immersing them in the company's culture and giving them time to build connections across job titles, Boling said. The hires in the group range from line workers to managers.

"We want each of those people, when they come back, to really be ambassadors for our culture and our processes," he said. "We're going to be bringing on another 150 people or so by the end of the year, so we want these folks to really be saturating the organization and being leaders in their own way, even if their title doesn't say 'manager,' because of the opportunity they've had themselves with who we are."

Beyond Nokian's year-end hiring goals, the firm plans to have a total of 400 employees at the Dayton facility, bringing on more after the large-scale hiring phase this year, he said.

A head start

Continental reached a milestone in its construction process with the opening of an on-site employee training center last November at its Clinton location. The center will share the site, which covers about 1,000 acres, with Continental's new tire manufacturing facility. The total investment is $1.45 billion.

The employee training center will support the recruitment and professional development of employees for the facility under construction, and houses classrooms, computer labs and technical equipment, said Michael Egner, project manager for Continental. The company will partner with Hinds Community College in Raymond, Miss., to drive employment.

"The training center itself reflects our approach in terms of the quality perception, and also in terms of what kind of a company Continental is," Egner said. "You will see in the training center a lot of branding, but on the other hand, also elements that are reflective of our company culture.

"This is giving us a very nice head start here with the building, where you see all these core values and these branding elements come together to start creating the right mindset and the right atmosphere. What a great thing to have that more than a year ahead of start of production," he said.

Construction of the about 900,000-sq.-ft. manufacturing facility itself is still going to schedule so far, with machine installation and testing taking place in March, Egner said. The start of production is planned for January 2020, with some trial production starting in October.

"It's something that they, especially our engineering team, is very proud of, that we get really the latest technology in-house when it comes to tire production," Egner said.

The facility will focus on truck and commercial vehicle tires, the second in the U.S. producing for the Continental brand, alongside a facility in Mount Vernon, Ill., he said. Continental also has a passenger tire production facility in Sumter, S.C., which recently broke ground on an expansion that will add new capabilities to the production line. The Clinton facility will be able to produce 750,000 truck tires per year, with a ramp-up period from the start of its commercial production.

Looking ahead, more development phases will eventually be on the way for the Clinton facility, Egner said. Part of the memorandum of understanding committed Continental to long-term investment in the site, though whether that looks like an expansion of truck tires or an investment in passenger car tires isn't yet defined.

"The memorandum is laid out to the year 2028, and within that time frame we will see additional phases to come," Egner said. "The good thing is that the whole layout of the site is prepared and ready for that. So we have the flexibility and also the long-term planning that we can basically say 'OK, the next phase is either that one or that one,' and figure it out."

Continental said the site will create about 2,500 jobs by 2028.

The production facility on the site includes a utility building and a warehouse for inventory storage, Egner said.

Market fit

Continental is focusing on truck tires with the Clinton plant because of increased market demand, Egner said.

"Looking into our growth strategy, it requires more truck tires in the U.S. from Continental," he said. "That's basically where we follow our overall strategy that we want to produce in the region, for the region."

For Nokian, it has been important to keep an eye on macro trends as demand in the automotive market has slowed in the U.S. recently, and use that data in making projections, Boling said.

"We think our market, the premium tire market, will continue to grow as we tailor our products to meet a larger portion of the market," Boling said. "Even though the market itself may not be expanding, we feel like our product offering, our marketing approach, our inventory—we think there's still a lot of drivers out there that deeply value safety and sustainability that will be drawn to our message once they've heard it, and once they've had a chance to buy it."

Because Nokian's presence has traditionally been smaller in places like the Southeast U.S., the West Coast and some areas of the Midwest, it has considerable growth potential, he said. That possibility is what the company is looking for to reach its goal of doubling sales by 2023. Reaching those numbers seems ambitious, but in the previous five-year period, Nokian accomplished the feat.

"Obviously, it's always tougher, if you double it once, to double it a second time," Boling said. "It's not an easy task. We knew that when we set it for ourselves. But we do think that regardless of what the larger market trends are telling us, we're still such a niche player that we think enough people can appreciate what we offer, that we can still grow at the rate that we need to grow."

Though Boling was not specific about what types of car and truck tires the Dayton facility would produce, freeing up overall capacity within the company will allow it to make tires that are specific to North American markets.

"It lets us launch some products that are tailored to this market," he said. "Whereas before, I think in a lot of cases we were taking amazing tires that fit this market but also were made to fit Central Europe and the Nordics. It enables us to buckle down just that much more specifically."

He did not share details for upcoming products, but said the market would see more region-specific products in the coming years.

One of the reasons Continental chose Mississippi for its new facility was because the location was complementary to its other U.S.-based sites, Egner said. It allows the company to reach local markets more quickly and easily than its existing locations.

Mississippi also had established infrastructure and availability of skilled labor, Egner said. The training center and partnership with a local community college will secure a strong pipeline of educated and trained employees. Clinton also is near the state's capital of Jackson, which also has access to other universities and colleges.

Continental also was able to secure a combination of incentives through the local government, though Egner did not disclose details. Being close to the capital also puts Continental in proximity to regional officials.

"Here, you get good responsiveness. You get accessibility in terms of being available to talk," Egner said. "That helps also having good communication from the officials. Also, the Mississippi Development Authority did a very good job in bridging communications."

The ability to build a strong employee base and engagement with local officials was an important deciding factor for Nokian as well, Boling said.

"It's been really amazing. We've gotten a lot of excitement in the community," he said.

A large portion of the company's current hires at the location are from Rhea County, where the facility itself is located, he said.

With commercial production in sight for both plants, it's important to be able to capture that energy and use it to push through to the deadline. Like Nokian's immersion trip overseas, Continental plans for its training center to energize a work force ready to see the developing facilities in action.

"I have a team that is highly motivated and unbelievably hands-on," Egner said. "Having people with the right mindset is really the differentiator. We have great machines and latest technology and a streamlined layout. That's all fantastic, but you need the right people, and specifically the right mindset."