Production at Clairoix Site in 2010 a Possibility, Says MAG

Dubai’s Moaffaq Al Gaddah (MAG) Group hopes, according to numerous news sources, to complete an agreement to buy Continental’s Clairoix factory in France before the end of 2009. According to Fawaz Sabri, the company’s vice president for strategy and finance, if “they (Continental) sign (the due diligence process) by the end of this month, we can start the process on July 1, and by November or December could sign a final agreement … production would be in 2010.”

In response, a Continental spokesman confirmed the company had received a letter from MAG. “We’re evaluating it and will get in contact with MAG in due course,” said the spokesman. A price tag for any potential deal between the two companies has not been disclosed, however Sabri has said MAG could finance it using its own equity. He added that the group would establish a revolving credit facility for future “working capital.” He also said that the MAG Group will target an internal rate of return of 15-20 per cent from the plant over a five to ten year period.

OEM production at the Clairoix site, which currently makes up a quarter of production, is expected to end, and output is expected to drop from current levels of around eight million tyres a year to about three million, due to current market difficulties. Sabri comments that production could return to full capacity when conditions improve. A reduced level of production would require around 400 to 500 workers as opposed to the 1,120 currently employed. This means cuts will occur. “At the beginning, there would be job losses,” Sabri said.

The potential new owner already has its eye on future export markets. “Our first target is Africa because the transportation is not so expensive from France,” Sabri discloses. “Then [the] Middle East and Europe.”