Conti to invest in Puchov, add engineering

Puchov, Slovak Republic -- Continental AG's acquisition of 51 percent of the equity in Matador AS' rubber business makes it the biggest suplier of passenger and light truck tyres in Europe, passing Michelin by a small margin, said Manfred Wennemer, Continental's chief executive. Conti has been the biggest supplier of these tyres to the OE sector for some years, but this consolidates the company's position as the region's biggest supplier by number of tyres manufacturedsaid Wennemer. Conti said it currently has capacity for 83 millionunits/year in the region, with factories stretching from Timisoara in Romania to Lousado in Portugal. Conti said it intends to defend and consolidate this lead with further investments in the Puchov region. Wennemer, speaking at a press conference announcing the closing of the deal in Puchov, said the company intends to make Puchov a new pole for engineering and testing of tyres, as well as for manufacture. The company intends to invest Euro 25 milllion in the short term to expand production at the Puchov car tyre factory and to establish a manufacturing and engineering centre in the Slovak town. The company has plans to invest up to Euro 160 million, but these will only be enacted if progress at Puchov meets the company's expectations in terms of costs and productivity. In addition, Continental will spend Euro 35 million to build a logistics and distribution centre to handle all Continental tyre products in the region. Current capacity for passenger car tyres at Puchov is 5.5 million units/year. Conti intends to increase this to 7.2 million units by 2009 with potential to increase that to 16 million units in the coming years. Wennemer said the factories in Puchov would be consolidated within the Continental manufacturing system. This, he said had been one of the pre-conditions of completing the deal with Matador. In addition, however, Continental intends to expand its engineering activities in the Slovak town. To support this, Contintel intends to transfer some of its technology activities to Puchov. Part of this is the machinery operations described below, but Accordong to Wennemer, other activites, incliuding test operations and computer modelling and simulation are likely to move from Hanover to Puchov. Dr Hans-Joachim Nikolin, member of mgmt board responsible for truck tyres said he expects that entirre activities are likely to move. "the intention is to transfer complete activities to Puchov not just in machinery operation but also in R&D. It does not make any sense to have those shared responsibilities between high- and low-cost regions, because usually what happens then is that the low-cost facilities do some kind of work, but not necessarily the proper work. That is not what we want to do. In R&D we want to give as well as in engineering, complete tasks to the teams over here [in Puchov] so that they have responsibility for something and that they can also measure what they are doing. Wennemer said Conti may in the future buy more of the shares in the Matador rubber operations, but in the short term, he felt that furter purchases would be driven more by the need of the Matador Holding company for funds, than a strong desire by Continental to acquire more shares in the company.