CTNA Plans to End Charlotte Production

Continental Tire North America (CTNA) says it will suspend production at its Charlotte, North Carolina tyre plant in mid-September. CTNA has already threatened to cut production in half at the plant, laying off some 513 workers in total over two separate reductions, the first scheduled to take place 15 March and the other in June.

“Due to skyrocketing costs for energy, raw materials and health care, CTNA cannot continue to operate the Charlotte plant with our current manufacturing cost structure,” said Alan Hippe, CTNA’s president and CEO. “Because we have so far been unsuccessful in restructuring our labour agreement with the union to significantly reduce manufacturing costs, CTNA must take immediate steps to reduce its costs.”

Hippe said the decision to suspend production at the plant “is not irreversible,” but cuts are needed to make the plant “competitive with other Continental tyre plants worldwide.” The suspension of tyre production in Charlotte did not come as a surprise to market analysts or the USWA union that represents plant workers.

Analysts at Deutsche Bank adjusted their 2006 estimates to include a 100 million euro charge for restructuring at the site (the company’s Mayfield closure cost nearer 71 million euros.

Following the news production at the Charlotte plant is expected to drop from 6.5 million passenger tyres in 2005 to between two and three million in 2006, according to the analysts. The balance is expected to be sourced from the company’s factories in Brazil, Indonesia and Europe. Analysts estimate that this could save the company approximately $20 million annually.

However, Deutsche Bank analysts point out that closure of Continental’s Charlotte facility doesn’t help the company’s low brand equity and North American replacement market share (4 per cent against an OE share of 20 per cent).

“The news today is totally consistent with CTNA’s inability to understand and operate in this environment,” said USW executive vice president Ron Hoover. “We view it as another step in CTNA’s pre-determined plan to abandon the North America market.”

Hoover continued: “CTNA is incapable of devising business and marketing strategies to enable them to compete here,” said Hoover adding: “Its refusal to provide necessary information and its inadequate bargaining proposals have hindered negotiations and violate federal law,” said Hoover. “It stopped production at its plant in Mayfield, KY about a year ago and is now actively seeking to sell its Bryan, Ohio facility. It has extracted concessions from workers at its Mount Vernon, Illinois plant and is spending enough money there to patch together production as it brings its new Brazilian plant up to speed.”