With Eye on Future, Continental Opens Mississippi Tire Plant
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German tire manufacturer Continental AG celebrated the grand opening of its first plant dedicated to truck tires, the company said in an Oct. 16 news release.
Continental said the ceremony for the Clinton, Miss., facility — the first of its kind for the company in the world — marked the completion of the construction process, which began in 2016.
Continental celebrated a major milestone with the grand opening of the NEW Mississippi Tire Plant. We thank all guests, including the community, state & local officials, customers,suppliers,and the 250 employees for attending the event. Learn more here:https://t.co/7MVe6d3rvX pic.twitter.com/EHIXLanw11
— Continental Truck Tires (@ContiTruckTires) October 17, 2019
The plant is located on a 1,000-acre site close to Jackson, the state capital. Continental expects to have 2,500 employees when the plant reaches capacity in the next decade, according to company officials.
The plant will manufacture large-truck and bus tires for the U.S. market. Production is set to begin in early 2020, Continental officials said.
Company officials said Mississippi was a critical part of the Americas strategy, providing the best options to grow tire business in the hemisphere.
The completion of the new tire plant signifies a major step in a global long-term growth strategy named “Vision 2025,” Christian Koetz, head of the tire division and a member of Continental’s executive board, said in a written statement. And growth in the United States comes at a time when there is a slowdown in the global freight market, which Continental acknowledged in its last earnings release in August.
Norm Ball, principal of Ball Tire Industry Consultants of Kansas City, Mo., said Continental is making a big bet and a big investment in a highly competitive market. The big-truck tire market still is full of product rushed to stores during the freight boom, and competitors include Bridgestone and Michelin.
Employees listen at the opening of the Clinton, Miss., plant. (Continental)
“There’s a lot of new tires out there that may be out there for 18 to 20 months,” Ball told Transport Topics. “That’s rubber that won’t have to be replaced for a while.”
But the company, based in Hanover, Germany, believes the plant is a good long-term bet. Continental officials said customer demand in the commercial-vehicle segment has grown globally in the past 10 years, in demand for tire retreads and for new tires for buses and trucks.
“This is Continental’s first new plant dedicated to truck tires in the world,” said Paul Williams, executive vice president of Continental’s commercial vehicle tires division for the Americas.
Because tire costs are the No. 1 expense for maintenance departments of trucking firms, and the No. 4 cost overall, fleet maintenance managers develop loyalty to various brands, according to Greg Hart, principal of Hart Consulting of Valparaiso, Ind. Along with loyalty come managers’ strong opinions on tires and brands, which are forged by years of experience, Hart said. The experiences vary from firm to firm, with trucking officials dedicated to brands ranging from Michelin to Continental.
“If you line up 10 vice presidents of maintenance, there will be 10 different opinions,” Hart told TT. “It’s truly a personal preference. Everything is subject to opinion in our industry.”
Hart said he expects prices for truck tires to go up, even though the freight economy has slowed since the boom freight saw in late 2017 and the first half of 2018. Part of the rationale is that tire production goes down after a boom, Hart said.
“[Tire manufacturers] don’t see production as robust,” Hart said. “Supply goes down, and prices go up.”
Continental CEO Elmar Degenhart said in early August that the global market conditions were a problem.
“The current market environment is highly challenging,” Degenhart said Aug. 7, in an earnings release for the second quarter. “The key automotive markets of Europe, North America and particularly China are declining. We are responding to the declining market by ensuring rigorous cost discipline and enhancing our competitiveness.”
Continental sales were 11.26 billion euros ($12.6 billion), down 1% from 11.37 billion euros ($12.7 billion) in the second quarter of 2018. Net income in the second quarter of 2019 was down 41%, to 485 million euros ($540.7 million) from 822 million euros ($916.4 million) in the same period of 2018, Continental reported.
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