Vipal and Fate Sign US$200 million Tyre Factory Memorandum of Understanding

Brazilian company Vipal, best known for its tyre retreading and repair materials, and Argentine tyremaker Fate have signed a memorandum of understanding with the Rio Grande do Sul State of Southern Brazil to set up a new tyre factory. The first bi-national industrial collaboration in the state, the Vipal/Fate project sees the companies invest around US$200 million in building a “farm equipment” and “aftermarket car parts” tyre plant. There has been no official confirmation of what brand the new tyres will be produced under, but Tyres & Accessories understands that this means production will focus on passenger car and van tyres.

In order to fulfil “the entrepreneurial feasibility needs” of the State, the government has selected the district of Guaíba for the location of the new manufacturing unit. According to the State government, the Guaíba region is in need of new investment to generate jobs in the area, but company representatives point out that while unemployment may currently be high, there is still a “complete infrastructure.” In this context Vipal/Fate’s investment is likely to be very welcome – the companies say they intend to hire 1000 people to work at the new factory. And this means they will have access to incentives based on the “Program Fundopem” which sees the postponement of up to 75 per cent of local Tax on Goods and Services (ICMS).

Vipal reports that, besides producing tyres employing “state-of-the art technology,” the factory will generate a “new and growing demand for gums and compounds to supply the production process” of Vipal Fate. “Moreover, all the other rubber units will directly benefit from the investment,” the company said in an official statement.

João Carlos Paludo, CEO of Borrachas Vipal, commented: “This factory is a landmark of growth and expansion for our businesses and will allow us to reap good rewards in all our units.”

Reports: Vipal Fate plant will make 7100 tyres a day

Prior to the official release of the factory news, Brazilian publication Economias reported that the deal came about after Vipal bought a minority stake in Fate: “We started as distributors of new tyres and already have 15 per cent stake in Fate,” the company quoted João Carlos Paludo as saying. The report also suggested that the agricultural new tyres produced in the joint venture factory will be branded Vipal Fate.

On the subject of the new plant’s capacity Economias reported that Paludo puts this at “7100 tyres per day” with other sources suggesting this output will come from 3000 tonnes of raw materials a month. Regarding construction time, the paper says it will take two to three years before the new plant is operational, however this is likely to be a conservative estimate and some sources suggest it could be twice this length of time.

In addition to the car, van and agricultural tyre joint venture factory building project, there has also been some talk of the two companies producing motorcycle tyres at another plant. According to Economias production of motorbike tyre products began in Bahia, Brazil in early April with Paluda reportedly saying: “I still can not give details, but sales begin this year.”

Journal de Commercio adds details of the OE-related thinking behind the deal. According to this local publication, the new Guaiba district is in “the former area of Ford” and Fate already supplies products to automakers with plants relatively nearby such as Volkswagen, Renault, Peugeot and Mercedes-Benz. With regard to when the plant with initiate production, Journal de Commercio hedges its bets with a 2013 start date – in the middle of the range already suggested.

The relationship between Vipal and Fate is said to have begun a year ago, with Vipal purchasing a 15 per cent stake in Fate in November 2009. San Fernando, Buenos Aires, Argentina-based Fate, reportedly exports 60 per cent of its estimated 6000 tonnes a month production to Brazil and is, according to Journal de Commercio, likely to focus more on “cargo vehicles” in the future.