01/09/2015

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KOREA (SOUTH): Tire makers' global output surges

With Hankook Tire leading the way, Kumho Tire and Nexen Tire have also been expanding their overseas factories or establishing new ones. When the new factories are in operation, their gross annual production is expected to reach 140 million tires, surpassing the locally produced total of 110 million for the first time, officials said. Hankook Tire--which has been aiming to become a global automotive parts maker through the participation of the recent acquisition of Halla Visteon--has set "global production expansion" as its 2015 management goal. The company has four on-going projects in the United States, Hungary, Indonesia and China. The company plans to invest $ 800 million in building its Tennessee plant whose annual production will stand at 11 million. It broke ground for the U.S. plant in October and will be completed in the second half of 2018. The company's three other projects will be completed by the latter half of 2015 as well. The 313 million Hungarian plant will add up 5 million per year, Indonesian will produce another 6 million, while China's Chongqing plant 5 million more. In 2014, Hungarian plant had a production capacity of 13 million, Indonesian plant, 6 million and China's three plants, 30 million. Kumho Tire formed a taskforce in August 2014 to build a Georgia plant in the U.S. The company initiated the project in early 2008, but had to put the project on hold since it has been undergoing walkout program. The $ 413 million project has been reactivated after seven years. When it is completed in the first half of 2016, it will produce 4 million tires. "North American tire market is expected to grow more than five percent each year until 2018, thanks to the recovery of the local economy. It is also near to Hyundai Motor's Alabama plant and Kia Motors' Georgia plant," said a company official. Nexen Tire also invested 1.2 trillion won and has been building its plant in Zatec, Czech Republic, since June 2014, to provide some 12 million tires to global carmakers such as Volkswagen and Skoda. The plant, slated to be completed in 2019, will be used as the company's strategic front to the European tire market. Its Chinese plant will also be expanded to include 10 million more tires. The three tire firms' overseas expansion proves their determination to become global players in the emerging markets as well as advanced markets. "In terms of technology including rolling resistance and breaking distance in rain, our tire makers don't lag behind those big-name global tire makers such as Bridgestone and Michelin," said a Korea Tire Manufacturers' Association official. Industry insiders say that local tires have competitiveness since they provide quality products at cheaper prices. According to Customers Union of Korea data, when the global top three tire makers' quality is rated at 100, the Korean tire maker trio's quality scored above 95. Others are watching the global expansion warily, since it means that companies are cutting local production. Out of the three big tire makers, only Nexen has a plan to expand local production. The capacity of its Changnyeong plant will be increased by 5 million by 2018. "Having overseas plants has more advantages than having local plants, since they don't have to worry about militant labour union or various government controls. Tire companies for now, without overseas plants, cannot maintain the current competitiveness," said an industry official. Source: Daily "The Korea Times", Seoul; 29 Dec 2014
(Syed Rashid Ali, Karachi, Pakistan)

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