Bridgestone has resumed rubber-rolling operations at its Tochigi refining facility two months ahead of schedule. Production was suspended after the building was destroyed by fire in September 2003.
Results have been published from the seventh Annual Morgan Stanley European Auto Conference. And an interesting industry overview came from both Continental and Pirelli.
Continental’s CFO, Dr Alan Hippe gave an overview of the company’s major business and an update on the decision to close tyre production in Mayfield, whilst Pirelli commented on its North American business strategy.
Sumitomo Rubber Industries Ltd., will increase production of Falken Tyres, Mordern Tire Dealer has reported. The company is “increasing capacity in all of our key areas,” said Richard Smallwood, Falken’s vice president of sales and marketing. Mr Smallwood continued by describing the scale of the increase in terms of units shipped, “this year we’ll be triple what we were in 1999. We have a number of large dealers who 100 per cent over last year.”
In the same interview Mr Smallwood also revealed that Sears Roebuck & Co., is again carrying Falken tyres. “Sears is a good representative of the brand,” said Mr Smallwood. “They do a good job selling our tyres and don’t create any conflict with our dealers.”
Michelin & Cie., one of Europe’s largest tyre makers, is set to open a tyre plant in Russia on 7 July. Both Interfax and The Moscow Times reported the information, citing an official at the company’s press service in Paris, who stated that the plant, based in the Moscow region, will produce 2 million car tyres a year. The company intends to expand this capacity to 6.5 million next year. The press service source said Michelin is investing $160 million in the plant.
Michelin, based in Clermont-Ferrand, France, planned to borrow $20 million from the European Bank for Reconstruction and Development for the Russian factory two years ago, on the understanding that the EBRD had would have a 49 per cent stake in the plant.
Chinese car manufacturers produced 30.5% more cars in May than they did 12 months ago. In May China produced 215,000 vehicles, 10.2% less than in April. Compared with previous growth rates, 30% looks relatively meager. In April 2003 production went up more than 42% and February 2003 saw a staggering 62% increase. To put number this into perspective, figures for March show that UK car production rose by only 7.4% to 163,123 units.
Workers at Ronal’s plant in St. Avold, France, have gone on strike in a protest against restructuring plans. The aluminium cast wheel manufacturers angered employees after using redundancies as a way of cutting costs. Part of the restructuring programme would have meant producing wheels for the high-quality aftermarket segment, but would have led to decreases in annual output.
Toyota will increase capacity at its UK plant in Burnaston to 285,000 vehicles by 2005 (220,000 at present). The addition investment will total 50 million pounds. The Japanese car maker has begun a program of increasing capacity in Europe to 645,000 vehicles from 500,000 previously.
Cooper Tire & Rubber’s first quarter results show sales at an all-time record high of $974 million; a Year-on-Year increase of 23 per cent. Net income increased by 56 per cent to $24 million (1Q 2003: $15 m). Tire Group operations showed a record turnover of $485 million, 23 per cent up on the 1Q 2003 figure of $396 million, and a 12 per cent increase in volumes and an improved mix. Sales of high performance tyres rose by 47 per cent, those of P-metric tyres were up 52 per cent and truck tyre sales were up 27 per cent. Despite this, operating profit was down slightly at just under $16 million. Raw material costs reduced operating profit by $18 million while product liability and litigation costs were $9 million higher than 1Q 2003.
Michelin is to raise its stake in Apollo Tyres from 14.9 per cent to 26 per cent over the next 15 months. The investment will happen when Apollo expands its passenger car radial manufacturing capacity. The two companies in the joint venture have also finalised their branding policy – while truck and bus tyres will carry both brand names, individual brands will be used for passenger car tyres. Michelin car radials will be positioned at a premium over Apollo-branded tyres to avoid any cannibalisation.
Superior Industries is to build a new wheel-manufacturing plant in Mexico, with construction starting this year and production beginning in mid-2006. Mexico was chosen because of cheaper labour costs, although the factory is expected to have a high degree of automation. Estimated cost of the plant is $60-80 million and it will have an annual production capacity of 2.5 million wheels.
Back in 1990 or thereabouts Pirelli had just bought Armstrong and were busy launching their own 4×4 range and relaunching the Armstrong Tredloc Kevlar belted tyre for the 4×4 market.
The motoring press was busy telling the world that the 4×4 sector had peaked and would be on the decline by the following year. So much for the crystal ball gazing of the motoring press.
Today the 4×4 sector holds some 5 per cent of the UK market share – it may seem more as most 4×4 vehicles have a longer shelf life that their conventional counterparts, so probably hold a slightly larger share of the overall car parc. It would be interesting to know what the DVLA figures would be on that enquiry.
Throughout Europe there is no let up in the demand for 4×4 vehicles – even in markets where an off-road excursion could find the driver in serious trouble with the law. The 4×4 has developed from a serious tool for the military and agricultural sectors to a plaything and fashion symbol for the wealthy and the aspirational. Figures from Goodyear show that the utility sector of the market, the pick up and hard core 4×4 enthusiast has hardly shown any movement over the past four years, nor is it expected to in the coming years. The value market has dropped to a steady level at 90,000 units per year across Europe, the middle market too is stable. However, the luxury and crossover sectors of the SUV market are starting to show tremendous growth with the luxury sector doubling its volume from the 2000 figure of 101,000 units by 2007 whilst crossover vehicles will quadruple their volume in the same period it is these two sectors almost alone that will take the 4×4/SUV market from its current 706,000 units per annum to 840,000 units per annum by 2007.
In tyre terms this reads as growth in every sector – winter, S and T, and H and V rated, the market volume jumping from a total of 2,089,000 units in 1997 to 7,885,000 in 2007.
The two largest markets in Europe for 4×4 tyres are the UK and Germany, followed by Spain, Italy and France each having in excess of 10 per cent of the market. Scandinavia, Benelux, Switzerland, Greece, Portugal and Austria each have shares between 2 and 7 per cent of the market. With the whole of Eastern Europe taking only 4 per cent of the sector.
That 4 per cent for Eastern Europe suggests that, as with other sectors of the tyre market, the developing markets in Eastern Europe offer a phenomenal capacity for growth in this sector. In fact, if the move to car ownership in the East matches that ion the west, then the ultimate volume of the market could make Goodyear’s figures appear conservative.
Chinese media reports that Japanese tyre makers are poised to boost their production capacities in China. Bridgestone Corp. plans to launch a new plant in the eastern city of Wuxi in September and will also triple the monthly output capacity of an existing plant for truck and bus tyres in Shenyang, to 90,000 units. The moves will cost Bridgestone a total of around 20 billion yen (100 million pounds). Yokohama Rubber Co. is due to double the annual production capacity of its passenger car tyre plant in Hangzhou, to 1.4 million units. Sumitomo Rubber Industries Ltd. will launch production in Changshu, Jiangsu Province, in April. Demand for passenger vehicle tyres in China grew to around 60 million units in 2003 and is expected to show an annual rise of 20 per cent in the future, demand for truck and bus tires, 80 million units last year, is forecast to grow even faster at over 40 per cent.
Tim Chesney, the Managing Director of Romney International Limited, the exclusive distributors of GT Radial brand tyres in the UK and Ireland, would like to state unequivocally that the recent story about PT Gajah Tunggal Indonesia (GT) being acquired by Michelin, is untrue. This story first appeared earlier this month in the US based ‘Modern Tire Dealer’ magazine. It was subsequently reported on the Internet sites of other trade press. Tim Chesney says that this account is without foundation and it should be disregarded. The extent of the inaccuracy of the story is shown in the supposed facts given by Modern Tire Dealer magazine. They quoted Gajah Tunggal’s daily radial tyre production capacity as being just 12,000 pieces when the correct figure is around 25,000 pieces, says Tim Chesney. He goes on to say that the reality is Gajah Tunggal has embarked on a major and exciting expansion programme. This will see the introduction of many new sizes, series and tread patterns, including the all new GT Champiro BAX asymmetric series and the Champiro BXT.
According to the Shanghai Daily, Michelin will continue to expand its Chinese venture by investing several hundred millions of US dollars in automobile tyre production plants. Expansion efforts are expected to continue for five years, at which annual production capacity will top several million units of tires, said Eric Jugier, chairman of Michelin (China) Investment Co Ltd. In 2001, Michelin established a joint venture with Shanghai Tire & Rubber with an investment of 200 million US dollars in exchange for a 70 per cent stake. Michelin also plans to add up to 200 retail shops in China this year. Jugier said he expected Michelin’s business to grow much faster than that of the industry as a whole. The Chinese tyre sector is expected to grow by about 30 per cent annually for the next five years. In 2003 there was a 36.7 per cent increase in vehicle manufacture and China is expected to produce 125 million tyres in 2004, one-third of which will be exported.
Continental AG plans to invest more than 250 million euro in building a new tyre production facility in Camacari (Bahia/Brazil) and expanding capacity in Malaysia with joint venture partner Sime Darby (car tyres in Alor Setar, truck tyres in Kuala Lumpur).
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