Nokian Tyres investing 106 million euros in new European factory

Nokian Tyres is expediting “plans to invest in new production capacity in Europe” in response to the sanctions against Russia, where the company has significant levels of tyre production. Specifically, Nokian’s board of directors will cut the dividend payable to shareholders by 106 million euros to fund the new capacity. Nokian Tyres will also increase capacity at its factories in Finland and the US with a view to becoming more geographically diversified in its manufacturing operations.

Comparing Nokian’s new European tyre factory plans with the cost of the company’s Dayton, USA plant, which cost 350 – 400 million euros, the dividend reduction strategy would raise around 25 per cent of the funds needed to finance the new plant.

Writing in a statement published on 8 April, Nokian executives explained that move is a direct consequence of Russia’s invasion of Ukraine: “Because of the war in Ukraine, the company starts to expedite its plans to invest in new production capacity in Europe.”

Nokian had already previously warned that the war in Ukraine has caused “high uncertainty related to Nokian Tyres plc’s operational environment and manufacturing capacity.” That initially meant that Nokian Tyres is no longer investing into production in Russia. But by continuing to operate the passenger car tyre factory in Russia, the company says it “wants to make sure that the factory is controlled by Nokian Tyres”.

As a result, Yale School of Management rated Nokian Tyres’ response to sanctions against Russia as “C” on it’s A to F scale. Yale

Furthermore, Nokian representatives are emphatic that their Russia operations cannot be seen as supporting the Russia regime: “Shipments of passenger car tyres to Russia have been suspended. All Nokian Tyres’ heavy tyres are designed and manufactured in Finland. Tyres for trucks and buses are designed in Finland and produced in the EU. Sales and distribution of heavy tyres to Russia has been stopped. Nokian Tyres has never sold tyres to the Russian army, and the Russian Federation is not a customer of Nokian Tyres.”