Demand for truck, bus tires prompts Conti’s €1.2bn US expansion

Jackson, Mississippi – Continental AG’s decision to commit $1.4 billion (€1.25 billion) for a truck/bus tire plant in Mississippi reflects the firm’s belief that demand for its commercial tire products in North America will continue to grow above market pace.

Continental claims its commercial sector business growth in North America “has consistently exceeded the market over the last five years, and the company continues to see customer demand for its products – both new truck and bus tires as well as retreads growing beyond existing capacity,” Nikolai Setzer, Continental’s executive board member for the tire business, said.

Continental’s truck/bus tire market share in North America is estimated at roughly 7 to 8 percent, counting the Continental and General brands together, according to estimates by Tire Business, a sister publication of ERJ.

Conti anticipates breaking ground in the next several months on the plant at a site in Hinds County, Mississippi, 20 miles west of Jackson along Interstate 20. The state of Mississippi will purchase the site – said to be roughly 900 acres – and subsidize part of the plant’s construction, according to various media reports.

Production is planned to start by the end of 2019, Conti said, without disclosing the plant’s expected capacity. Employment is expected to reach 2,500 at full capacity, sometime in the 2020s.

Mississippi Gov. Phil Bryant said, “The positive impact this manufacturing plant will have on the region, the state and our automotive industry will be felt for many years to come. I look forward to the company’s success and longevity in Hinds County.”

Bryant called an extraordinary session of the Mississippi legislature on Feb. 4 to approve amendments to the Mississippi Code of 1972 – also known as the Mississippi Major Economic Impact Act – to provide for financial assistance and/or tax breaks for an industrial project of this nature.

“The company’s decision to bring 2,500 new jobs to central Mississippi speaks volumes about our dedication to developing the workforce of the future,” Bryant said, “as well as a business environment that spurs growth, expansion and innovation.”

Setzer said the project is part of Conti’s global growth strategy and a “first step” in addressing the firm’s commitment to grow its CV tire business in North America.

According to an Associated Press summary of financial assistance measures being mustered to support Conti’s decision to build its plant in Mississippi, state, regional and local governments are committing approximately $600 million in aid to the project.

The biggest single measure will be $263 million in bonds that the state and Hinds County will borrow to cover purchasing the site and preparing it for construction.

Conti will be given income, franchise, property and income tax breaks, valued at more than $300 million by a number of sources.

The Hinds County plant will be Conti’s third in the US and sixth in the Americas.

The German tire maker is in the midst of a $500 million project to double capacity of car and light truck tires at its 3-year-old plant in Sumter, S.C., and is wrapping up work at its Mount Vernon, Ill., factory complex on a five-year, $224 million investment to raise capacity, including output of wide-base single truck tires. At the ground-breaking for the Sumter plant in March 2012, company officials indicated there was sufficient room at that 330-acre site to accommodate truck tires alongside passenger and light truck tires. Conti’s initial investment in Sumter was $500 million.

Conti also has tire plants in San Luis Potosi, Mexico, and Cuenca, Ecuador.

The company recently disclosed it would begin selling OTR and farm tires in North America this year as part of a global effort to expand sales in those product areas.

Conti has been building its companion ContiLifeCycle retread business steadily the past few years in North America. To date it has 10 licensees in the U.S. and two in Canada, along with five plants in the U.S. under its BestDrive LLC subsidiary.

In prepared remarks issued ahead of news conference Monday afternoon in Jackson, Bryant thanked Setzer and the Continental team for choosing to invest in Mississippi and its citizens.

In return, Setzer thanked the state of Mississippi, Hinds County and the city of Clinton and Bryant for his leadership in bringing the project forward. “… (W)e look forward to a strong business relationship for years to come.”

Paul Williams, executive vice president, Continental Commercial Vehicle Tires, the Americas, said, “As we plan our growth, we have found this site provides significant advantages for a future tire plant in terms of its large skilled work force, as well as its deal location and infrastructure.

“The state of Mississippi has developed an outstanding business climate, and this site met all of our needs for projected growth in the near as well as in the longer term. We look forward to providing well-paying jobs with excellent benefits to the people of the Jackson area within the next few years.”