Conti confirms plans for Brazil tyre plant

By Liz White, ERJ staff

Hanover, Germany-Continental AG has confirmed that it is planning to invest a total of Euro 250 million to build two tyre plants in Camcari. in Bahia State, in Brazil.

It has also announced that it is discussing plans to expand its tyre production in Malaysia, where it operates a joint venture with Sime Darby.

“....we are continuing to broaden our activities in high-growth markets, as well as expanding our production in low-cost countries,” said Continental chairman Manfred Wennemer, in a statement on the company's plans. Wennemer added that Conti's strategy here includes a continuing search for a partner in China.

From the Brazil plant, the German tyre maker said, it aims to supply into the NAFTA region, adding that this region currently uses few tyres made in low-labour cost countries. This has been one of Conti's major tactics in Europe where it has steadily moved tyre production eastwards over the last decade.

The Brazilian operation will allow Conti to produce 30 percent of the tyres it sells into NAFTA at low cost, the firm explained.

The new capacity is “just what we need to turn our passenger car tyre business around in the NAFTA region, and to attain profitable growth,” said Martien de Louw, Conti's board member for car tyres. Conti has been struggling to turn a profit in its North American car tyre operations and in autumn 2003 announced production cuts intended to make its US plants more efficient. At the time, Wennemer said only 10 percent of the tyres it sold in the US were made in low cost areas, compared with 50 percent in Europe.

Production of passenger car tyres in Brazil-due to start in late 2005 or early 2006-will rise to 7 million at full capacity.

Conti said it will also build a 700 000-a-year capacity commercial vehicle tyre plant at the site, with start up planned for late 2006 or early 2007. Total employment in Brazil will be 1000 people, Conti said.

In Malaysia, “We are holding talks ... with our joint venture partner Sime Darby and are confident that together we will continue to broaden our very successful business activities,” said Dr Hans-Joachim Nikolin, who is Conti's board member for commercial vehicle tyres. An additional 200 jobs will be created in Malaysia by the expansion.

Continental Sime Tyre, a 50:50 partnership with Sime Darby, is starting to make Continental brand tyres at a plant in Alor Star in northern Malaysia, and the JV is also expanding its Kuala Lumpur plant, which focuses on tyres for commercial vehicles.