Goodyear expanding capacity for higher-margin tires

Boston, Massachusetts – Goodyear is budgeting nearly $800 million (€533 million) through 2019 to boost production capacity for high-value-added (HVA) tires – essentially those with rim diameters of 17 inches and greater – in a bid to stay ahead of the demand curve for such tires.

Goodyear disclosed the expansion projects – at plants in the US, Mexico, South Africa, China and India – during its recent briefing with financial analysts in Boston.

Goodyear projects demand for HVA passenger tires will double worldwide by 2020 to 444 million units. This growth follows a doubling in demand from 2015 to 2020 to 222 million units, according to Laura Thompson, executive vice president and CFO.

Thompson also noted that the industry margins on 17-inch and larger tires is $16 per tire higher than on tires smaller than 17 inches.

Taken together, Goodyear’s expansions will result in 20 million units of additional annual capacity for the larger-rim tires, Thompson said.

Specific projects outlined include:

* $125 million through 2018 to add 2 million units of annual capacity at Lawton, Okla., and Fayetteville, N.C. Goodyear declined to provide a breakdown between the two plants. The added capacity is targeted at OE customers.

* $210 million through 2019 to increase capacity at Pulandian, China, by 3 million units a year;

* $115 million to add 1 million units of HVA capacity at Aurangabad, India.

* $290 million to $300 million through 2019 to install 6 million units of annual capacity at San Luis Potosi, Mexico.

* $20 million in 2017 to add 1 million units at Uitenhage, South Africa; this spending is part of a $50 million investment disclosed in September 2015.

In addition, Goodyear added 3 million units of annual capacity for the larger-rim tires at plants in Europe in projects wrapping up in 2016.