Kenda eyes additional capacity after selling Cooper JV stake

ERJ staff report (TB)

Columbus, Ohio -- Kenda Rubber Industrial Co. Ltd.'s decision to sell its 50-percent share in Cooper Kenda Tire Manufacturing (Kunshan) Co. Ltd. joint venture was based on the Taiwan tyre maker's need to tap into expanded production capacities earlier than the Cooper venture could deliver, the company said recently.

Cooper disclosed March 2 that Kenda had agreed to sell its share in the 4-year-old Chinese venture for $116.5 million. Cooper anticipates completing the deal by March 15 and renaming the venture Cooper Kunshan Tire.

American Kenda Rubber Ind. Co. Ltd., the Columbus-based U.S. subsidiary of Kenda Rubber, stressed in a prepared statement that the transaction had no impact on the supply of Kenda-brand products because the joint venture was obligated to make only Cooper- and Cooper associate-brand tyres for the venture's through 2012.

Instead, Kenda expects to be able to reinvest some of the proceeds of the sale in expanding capacity at other company plants, including its headquarters factory in Yuanling, Taiwan, where the company is installing capacity of up to 1.5 million radial tyres, Kenda said.

“We're excited over the possibilities this will offer Kenda to continue to develop into a stronger brand,” said Bob Phoenix, vice president of sales (automotive), for American Kenda.

At the same time, Kenda is evaluating other alternatives to increase capacity, including building a plant, according to American Kenda President Jimmy Yang.

“With Kenda's new automotive tyre plant in Taiwan scheduled to open later this year,” Mr. Yang said, “we believe the transaction (to sell the joint venture stake) will allow Kenda to increase investments in our future growth.”

Cooper and Kenda invested $200 million jointly in 2005-07 to build the car and light truck tyre plant in Kunshan, which opened in early 2007. Daily capacity there now is 12,000 units.

Besides its plant in Taiwan, Kenda makes tyres at three plants in China and one in Vietnam. With 2009 tyre-related sales of $698 million, Kenda was the No. 27 tyre maker in the world last year.

From Tire Business (A Crain publication)