Continental AG : Invests $129 Million in Illinois Tire Plant
01/28/2013| 01:37pm US/Eastern
("Continental AG Invests EUR129M In Illinois Tire Plant" published at 1448 GMT misstated the total investment value in the headline as well as the total investment value and breakdown of the investment value in the "MAIN FACTS" section, by referring to the values in euros. The values should have been denoted in dollars. The correct version follows.)
German automotive supplier Continental AG (CTTAY, CON.XE) said Monday it plans to invest in the expansion of its tire facility in Mount Vernon, Illinois, to meet increasing demand for its Continental and General brand tires.
-The investments will total 129 million dollars.
-Of the total investment, $95 million will be used for the expansion of the commercial vehicle tire production area, which will have a total annual production volume of more than 3 million tires.
-Furthermore, $34 million will be invested in technology and equipment for the mixing building of the facility and warehouse expansion.
-The expansion will create approximately 110 new full-time jobs altogether.
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Both Continental and Schaeffler are cautious players, they have a long history and experiences in automobile, they must be making very careful plannings of each expansion location and amount of budget needed. Their past year performances have shown to the public their effective solution to deal with the fluctuating market, and there's a lot more expansions to be done before and in 2014. Moreover, their exhibition in the North America International Auto Show in Detroit last month was a huge success, the American and other international markets have shown good feedback to Schaeffler's fuel efficiency technology parts and Conti's semi-automated vehicle technology, an emerging wave of car renewal is coming between 2013 and 2014.
Great move from Continental and this is an acknowledgement that both Continental and Schaeffler are really doing great in their respective industry, it is also a prove that the previous financial difficulty of Continental was caused by the global financial crisis. Its good seeing Continental investing on her plant and I believe Continental will achieve her set goals, especially revenue generation just like Schaeffler. Schaeffler is a company that usually invest on her plants and this have so successful for the company. Recently, Schaeffler announced to invest 2 billion rubles in Russia, the company also announced to invest 150 million Euros in India, the company is also expanding her factory in Hungary.
Bravo , Continental , I agreed with all the comments below here , let us all have a good wish and looking forward to Conti and its major shareholder company Schaeffler will go on having a greater series of expansions and productions in the new coming year of 2013 .
Both companies Schaeffler and Continental are indeed miracles in the past year. Not too many companies from the EU were doing such great as them mentioned by the others, the key success is mentioned in previous comment that they are focusing on the high demand region in Asia and USA, leaving European region minimal but sufficient resources for supply and demand. A lot of companies failed to find such equilibrium point, I hope they could finally find their way out and undoubtedly 2013 will be another bright and successful year for Schaeffler and Continental.
The decision on tire production expansion is because of a higher demand expected. It would be a good choice for investing in a company for expansion since it would be easier for Continental to control. If unfortunately, the demand falls than expected, she could cut the investment easily, by comparing with building a new plant for production.
In fact, what Continental AG had done is quite impressive. After all, following the expanding steps of Schaeffler AG, Continental AG also expended their factories to China, India, Russia, America etc. This could be a good strategy in such a weak economy period.
In fact Continental have been having a succession of expansion programmes recently such as following Schaeffler to Russia and Hungary. They have also just amalgamated with SK Innovation which is now known as SK Continental E-Motion and bought out the UK company ASL Vision. Both Schaeffler and Continental are looking very good for profits this year because of rather than despite all these expansion plans and really are an example to many companies within the EU that cannot seem to see ways forward.
This is the first expansion news from continental if i remember correct. The way Conti executes its business is very similar to Schaeffler who is also their main shareholder, both having and research divisions and manufacturing plants around the globe in a lot of countries such as India, Hungary, USA, China, Russia and more. Conti and Schaeffler have reached a 7% and 4.2% revenue growth in 2012 respectively which was a very outstanding figure comparing to other companies in automotive, most of them didnt record a positive percentage. Although the expected growth for 2013 is generally lower than 2012's, the expansions are justified by the high demand in some of the regions such as Asia, North America and in areas of EU where wages and overheads are comparatively lower. In my opinion these expansions is a stepping stone, increasing the company's market share during the challenging time at the moment while quite a few other auto companies are retreating.
The current rate of expansion for Continental is truely impressive. What a wise move by Schaeffler to only sell around 10% of their shares in the company last year. But I guess this is what happens when money is used wisely. Not only were Schaeffler able to negotiate much better terms on their loans after repaying a large slice, obtaining much more favourable terms, but Continental have just restructured their loans by reaching a new agreement on a 4.5 billion euros syndicated loan, thus improving its debt maturity profile. I also saw that in the last three years the company's net indebtedness came down by over 2.5 billion euros. So now they are using some of these funds to expand this plant in Mount Vernon which can only increase their profits. I have noticed that Continental and Schaeffler seem to be expanding in similar areas in Europe at present, for example Russia and Hungary. I know also that Schaefller is currently expanding it's factory in Cheraw, South Carolina. It's great to see two German based companies doing so well globally whilst also maintaining a strong position within the EU. I'm sure they know what they are doing but the rate of growth does seem extraordinary given the current climate.