Tyre giant invests R350m in PE
DESPITE regular strikes and the high cost of doing business in South Africa, Continental AG will this year invest R350-million in its Port Elizabeth plant.
Since 2009, the firm has invested R470-million in new technology and equipment at the factory and this year's investment will be the largest investment in Continental Tyre South Africa by the German parent company in at least five years.
During his annual visit to the Bay factory this week, Continental AG tyre division head Nikolai Setzer said the investment would be in the passenger tyre manufacturing side as well as ramping up the underground mining tyre capacity of the Port Elizabeth plant.
"This is a great opportunity for Continental Tyre SA to expand our footprint into the sub-Saharan region. Ramping up for underground mining tyres is one of our high investment strategies, which fits with our worldwide strategy to grow faster than the market," Setzer said.
The Bay plant makes everything from passenger, truck, mining and agricultural tyres for the African and South African markets.
However, Setzer said with the new investment it would be able to specialise globally in producing high volumes of underground mining tyres.
Setzer has been visiting South Africa for the past 15 years, sometimes twice a year, and admits that justifying investments in the country took a lot longer to explain to the Continental AG board, than investments in other parts of the world.
"I always explain that we have been producing tyres in South Africa since 1948 – we belong to South Africa and we know how to handle its challenges," Setzer said.
Feeling the pressure of cheap imports, Setzer said labour and political instability, the high cost of electricity, as well as the weak rand had made doing business in South Africa a challenge.
Producing tyres was an energy intensive business and up to 60% of the raw materials used to make the tyres in South Africa were paid for and imported in US dollars or euros.
Continental Tyre SA managing director Dieter Horni confirmed the company had suffered significant losses with the protracted Numsa strike last year.
Setzer said: "The business side could be better. It is getting more cost intensive to produce tyres in South Africa. This is why we work on growth strategies, such as intensifying our production of the underground mining tyres. In the first phase we will ramp it up locally but we should start exporting by 2016."
Continental Tyre SA employs 1632 workers, including administration and sales personnel. Setzer said because producing underground mining tyres was labour intensive, the investment could mean long- term job growth opportunities for Nelson Mandela Bay.
"We have very experienced employees and have families that had worked for generations at the factory. We have more and more South African experts working all over the world, some as plant managers.
"We work hard at growing people globally by developing and training their Conti DNA," Setzer said.
Other than investing in underground mining tyres, another growth strategy of Continental Tyre SA was to make the best performing tyre in the country for high-end vehicles, as well as supplying to its dealership division, ContiTrade, which offers after-sales customer support.
"In the truck segment we offer the cradle-to-grave retreading solution worldwide where our technology enables us to re-use the tyre for a second or third lifespan, by conserving the rubber and steal casing. This can only be done with truck tyres and not with passenger vehicle tyres. We will be intensifying this technology in South Africa," Setzer said.
Globally Setzer said Continental AG was looking to expand its Asia- Pacific footprint and was investing in several technologies, including experimenting with the Russian dandelion, the roots of which have the same consistency as rubber and could one day be used to make tyres. - Cindy Preller
