Mar 3, 2014

  • Special investment program totals over €1 billion by 2016

  • Plant construction and extension adds flexibility and enables market opportunities to be leveraged

  • Investments also cover high-tech testing and production capacities

  • Acquisitions and new franchise partners step up retail presence

  • International football sponsorship boosts Continental brand presence

This is a time of rapid progress for Continental. New tire plants are starting production around the world. And hardly have the opening ceremonies drawn to a close on one continent than they begin on another. The latest news on this front comes from South Carolina where the new production lines at the Sumter plant were officially inaugurated on January 28. The PLT tire production in Modipuram, India will start during the course of 2014, while back on October 29, 2013 the new plant in Kaluga, Russia had been opened. These were all significant milestones en route to the unparalleled expansion of production capacities at the Tire Division that will see potential global output rise by more than 20 million tires per year in the run-up to 2016. What is the largest investment program in the history of Continental currently totals more than €1 billion. The strategic goal is to arrive at a better global balance in the production sector in order to leverage regional market opportunities more effectively and thereby drive long-term growth. But expansion of production capacities is only one major building block. At the same time, Continental is investing not only in high-tech testing facilities and new technologies but also in boosting its retail presence and stepping up the international presence of its premium Continental brand.

Indian footprint enlarged
The starting gun for this special investment program was sounded in the second half of 2011. That was when Continental acquired the Indian company Modi Tyres Company Limited (MTCL). Renamed Continental Tyres India Limited, the company has since concentrated on the production and sale of cross-ply. Continental Tyres India Ltd. is based in Delhi and along with the Modipuram plant also has a production facility in Partapur. More than €50 million was invested in new production plant and equipment and the portfolio is soon to be expanded from radial tires for commercial vehicles to include radial tires for cars as well. With up to 800 new jobs being created, this will bring the size of the Continental Tire team in India to around 2,400 employees

New plant in Russia
In keeping with existing structures, in India Continental is initially targeting the replacement sector. In its expansion drive in Russia, by contrast, the Company will aim to meet the original equipment needs of leading vehicle manufacturers earlier than usual. Kaluga is home not only to numerous representatives of the international automobile industry but also to the European market leader Volkswagen. Begun in November 2011, construction of the Continental tire plant was completed ahead of schedule in less than two years and in the initial phase of the project offers capacity for four million car, 4x4 and van tires from the Continental, Gislaved and Matador brands. The Tire Division has invested some €240 million in Kaluga, initially creating 500 new jobs in the city which is located around 170 kilometers southwest of Moscow. The number of new jobs is set to rise to around 800 by 2015. Local production means an end to import duties and a sharp reduction in transport costs, leading to a marked rise in Continental's competitiveness in one of the most important single markets of the future. By relocating tire production to Kaluga, Continental is adding to its existing production facilities here for engine control units and electronic components.

Key milestone in the USA
While the investments in new production facilities in India and Russia above all serve to drive the strategic opening of new markets, the expansion in the USA is the result of a strong increase in demand for car tires from the Continental and General Tire brands - both in the replacement sector and as original equipment. By 2021, Continental will have invested more than US$500 million in the new tire plant in Sumter, South Carolina, which is considered a particularly important milestone in the expansion of the Company's tire business in the USA. Construction work started in June 2012. Start of production was originally scheduled for April 2014, but was brought forward by three months as a result of rapid progress with the building. By the end of the first project phase in 2017, annual production capacity will have reached around five million tires. Phase two, which runs until 2021, will see the plant ramp up to full capacity, turning out some eight million tires per year. By that time, more than 1,600 new jobs will have been created. In addition, investments totaling around US$129 million were made in expanding the US tire plant in Mount Vernon, Illinois. Most of these funds were channeled into the creation of additional production capacity for commercial vehicle tires, where annual output is to be increased to three million units.

Expansion in China goes to plan
Continental's expansion plans also include numerous existing plants around the world. These include the plant in Hefei, China, which came on stream in May 2011 with a planned annual production capacity of four million tires in the first phase of the project and which mainly supplies high quality tires for the Chinese and Asian markets. At present the plant is operating at a capacity of around three million car tires per year. In 2012 the portfolio was extended to include bicycle tires for the Chinese market. In the long-term, production capacity on the site of the Continental car tire plant in Hefei has the potential to reach 16 million car tires per year.

Investment in high-technology in Germany
Another facility that is benefitting from the global expansion of production capacities is the Korbach plant in Germany. By 2018 this established car, two-wheeler and industrial tire factory is to undergo a €40 million makeover, transforming it into a center of high-tech production and process development. This will create 60 new jobs in the particularly demanding field of 19-22-inch U-UHP tires for both the original equipment and replacement sectors. Annual output of these tires is slated to reach 400,000 units by 2018. Through this investment in Korbach, on the one hand Continental is investing in the ongoing growth of its product-specific expertise in PLT tire design, tread patterns, contours and compounds, as well as in the expansion of its tire production capacities worldwide. On the other hand, this bundling of expertise in Korbach will ease the burden on other production facilities, as well as providing a central location that will drive forward development of new high-tech processes for the tire plants around the world. Along with the Automated Indoor Braking Analyzer (AIBA) - the first test facility of its kind anywhere in the world, located at the Company's own Contidrom proving grounds north of Hanover - and the ContiLifeCycle plant for truck tire retreading and rubber recycling in Hanover-Stöcken, inaugurated in November 2013, the investment in Korbach is yet another example of the systematic implementation of strategic planning by the Tire Division.

Massive investment in stronger retail and brand presence, too
At the same time Continental is stepping up its international presence in the tire trade through acquisitions and the integration of additional franchise partners, preparing the ground for a long-term rise in the global volume of sales. As an Official Sponsor of the 2014 FIFA World Cup™ in Brazil and UEFA EURO 2016™ in France, Continental is also reinforcing the media presence of its premium brand Continental. By acquiring an extensive rights package from UEFA for the European qualifiers, Continental is assured of a presence in the immediate vicinity of the best players in Europe in the run-up to UEFA EURO 2016™, not least at away games played by leading nations such as England, Italy, Portugal, Russia, Spain and Turkey. In fact the rights package extends even further, also covering the qualifiers of numerous European teams for the 2018 FIFA World Cup™ in Russia, which will be staged between the fall of 2016 and the end of 2017.

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