GPX Sells Rumaguma Factory to CGS

Industrial, OTR and specialty tyre manufacturer GPX International Tire Corporation reports it has reached an agreement with CGS of the Czech Republic for the sale of GPX’s Rumaguma tyre manufacturing facility in Serbia. The transaction is expected to close in the second half of September 2008 pending approval by the Serbian anti-trust authorities.

CGS is one of Europe’s largest agricultural tyre producers and manufactures these products under the Continental and Semperit brand names. Rumaguma has been producing tyres for CGS for many years and is currently the facility’s largest customer. As a result, CGS is well acquainted with the factory and the quality of the product produced at Rumaguma.

GPX purchased Rumaguma from the Serbian government in 2003 as part of a privatisation program being undertaken by the Serbian government at that time. Rumaguma, comments GPX, stands out as one of the most successful privatisations in Serbia. Since purchasing the facility in 2003, total employment has risen, wages have doubled in real terms and production has increased three-fold. In addition, GPX invested millions of dollars in Rumaguma over the last five years, as was required under the terms of the privatisation, to both modernise and expand the facility.

The decision to sell Rumaguma, says GPX, was not an easy one for the company. Rumaguma was GPX’s first wholly owned tyre manufacturing facility and the company says it holds a ‘strong emotional attachment’ to the factory. However, with the recent decision by the US International Trade Commission to impose duties on agricultural and OTR tyres from China, GPX must shift the focus of its Starbright factory in China from the US to Europe. This means that much of what is currently being produced in Rumaguma will be moved to Starbright. The Starbright factory, which GPX purchased in 2006, is a large and modern facility and can easily absorb Rumaguma’s production. In addition, Starbright can produce a broader range of products including radial farms tyres, forestry tyres, port tyres and underground mining tyres.

Along with the sale of the Rumaguma plant, GPX has agreed to transfer its Galaxy brand business in parts of Eastern and Central Europe to CGS. GPX will continue to have Galaxy brand tyres produced at Rumaguma for a period of time under an off-take agreement with CGS. This will allow GPX to be able to continue to support its original equipment and aftermarket customers without any risk of a supply interruption. Furthermore, GPX and CGS are exploring other areas of possible cooperation.

In conclusion, GPX says that “while we are sad to be selling Rumaguma, we are confident that this is the right move not only for GPX and its customers, but also for the hardworking and dedicated employees of Rumaguma. CGS is a world class company and we expect Rumaguma and its employees to continue to thrive under CGS’s ownership and management.”