SOUTHFIELD, Michigan – Continental AG, the world's fourth-largest tiremaker, is spending around $524 million (370 million euros) and adding around 1,200 jobs as it builds a new plant in the south of the U.S. and expands an Illinois factory to meet growing demand.
About $224 million will be invested in the plant in Mount Vernon, Illinois, to boost annual tire production capacity by 4 million before 2014. The plant in the south may cost around $300 million, said Matthias Schoenberg, CEO of Continental's North and South American tire unit.
"Our sales growth over the years here has been so much stronger than the growth of capacity despite all the investments we made," Schoenberg, who will take over as head of the company's fluid-technology unit in July, said in an interview. "That's something we hope we'll change through this investment."
Tiremakers including Continental, Goodyear Tire & Rubber Co., Bridgestone Corp. and Cooper Tire & Rubber Co. are scrambling to keep up with demand after closing factories during the worst U.S. recession since the Great Depression.
Continental approved the plan this month to build a tire factory in the south, closer to vehicle production in South Carolina, Alabama, Georgia and Tennessee. The company expects to choose the location before October and have it operating as early as 2013. New plants typically employ about 750 workers, Schoenberg said, while declining to give a specific figure for the planned factory.
Production at the Illinois factory this year will rise 8.1 percent to 12.5 million tires, said Bruce Wells, plant production manager. The company plans to add about 444 jobs with the expansion. Continental employs about 2,670 in Illinois now, a 30 percent increase from 2005, Wells added.
Continental sells three out of every four tires it makes to retailers such as Discount Tire and Wal-Mart Stores Inc. The Illinois factory, Continental's largest in the Americas, has been running at full capacity this year, Wells said.
Workers at the 74-acre site make 35,800 tires a day, including 27,700 car tires for customers including Ford Motor Co., General Motors Co., BMW AG, Honda Motor Co. and Hyundai Motor Co. The remainder are for commercial vehicles.
Car tires accounted for 22 percent of the company's 26 billion euros ($37 billion) in revenue last year. Continental's other products include turbochargers and devices that connect vehicles with the Internet.