Dunlop Nigeria Seeks Government Bailout, Buyers for Equipment

The company formerly known as Dunlop Nigeria, now known as DN Tyre and Rubber Plc, is looking an increasingly unlikely candidate for reopening its tyre manufacturing plant – shut since December 2008 – with a request for a governmental intervention fund of 10 billion naira as yet unheeded and the company searching buyers for its “multi-billion naira” manufacturing equipment.

In an interview with DN Tyre and Rubber’s secretary, Olufemi Babayemi, The Nigerian Compass reports that some of the company’s creditors are calling for the company to wind up, while staff numbers have shrunk from 1,200 to 70 in two years. The Independent Shareholders’ Association of Nigeria is behind the request for the country’s government to produce the bailout, with investors’ capital a casualty of the company’s ongoing stalemate.

The Nigerian news source quotes Chief Sunny Nwosu, ISAN’s national coordinator on why the government should foot the bill: “the present predicament which Dunlop is going through was caused by government’s inability to ensure policy stability required for business growth and profitability. The fact is that before Dunlop went to the capital market for its multi-billion naira expansion project, the policy on tyre manufacturing at the domestic level was suitable for operations of local companies.

“Unfortunately, it was shortly after the company had secured funds for its expansion projects and other repositioning efforts that the import duty regime on tyres was reduced to encourage imports and made local manufacturing highly unprofitable. This created the problem from which the company found itself ever since. So, it is government that pulled the company down and I think it is reasonable and in the national interest that the Federal Government should do something urgently to save the company from liquidation and shareholders’ funds from going down the drains.”

Babayemi extends the point, saying the government’s change of heart on tariffs, which were reduced, meant that locally produced products “competed poorly with the imported counterpart”, blaming the policy switch for the exit of Michelin in 2006.

While the company has no intention to move – according to Babayemi – it does not appear the company is in a hurry to restart manufacturing, unless the Nigerian government acquiesces to their requests. The Compass quotes her saying: “We have not completely shelved the idea of manufacturing. We are talking to the government and they have not said no. We are still looking at the possibility of restarting manufacturing. The closure of Dunlop plant does not only affect Nigeria, it affects the entire West African sub region. We believe that is a sufficient reason why the government must show interest. They have shown a lot of interest, they have come, and we believe that at some time in the future, we will resume manufacturing of tyres.”

At present, the company imports tyres from India, and is looking to broaden its sourcing to China in the near future. While all this evidence suggests the game is up for tyre manufacturing, Babayemi argues the sale of equipment will not necessarily rule out a volte face on production, suggesting the machinery cannot be left inactive for long and that the acquisition of new equipment would be necessary in that event.