Logistics key to Continental decision to build in S.C.
By Chuck Crumbo
ccrumbo@scbiznews.com
Published Oct. 12, 2011
SUMTER -- Continental Tire’s plans to build a new plant in Sumter County have been hailed as proof that the Obama administration’s decision to crack down on imports of subsidized tires from China is working.
In September of 2009, the government launched a three-year plan to impose tariffs on Chinese tires — which were priced at least 25% less than tires made in the United States — to bolster the U.S. industry and spur job growth.
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| Commerce Secretary Bobby Hitt speaks during the announcement about Continental Tire’s plans to open a manufacturing plant in Sumter County. (Photo/Jim Hammond) |
When Continental Tire the Americas, which is based in Fort Mill, said in April it planned to build a new plant somewhere in the United States, theAlliance for American Manufacturing cheered the announcement and said “enforcing U.S. trade law works.”
But as far as Nikolai Setzer is concerned, tariffs had nothing to do with Continental’s plans to build a $500 million manufacturing facility in the Palmetto State.
“We have such a strong demand for our tires that it makes it necessary for us to increase our U.S. operations next year independent of external forces,” said Setzer, a member of Conti’s executive board and chief of the company’s global tire business about the tariffs policy on Chinese tires. Continental Tire is a subsidiary of Continental AG in Hanover, Germany.
Following last Thursday’s announcement at the Sumter Opera House, Setzer repeatedly stressed logistics was key to the company’s decision.
“It’s not driven by the outside environment,” Setzer said of the decision to build a plant that eventually will employ 1,600 workers. “It’s driven by our important KPIs (key performance indicators), which must be fulfilled.”
“We need a good logistics setup. Logistics are important for tires. We are close to a harbor here,” Setzer said, referring to the Port of Charleston.
The port, which is less than 100 miles from Sumter, is important to the tire industry because most raw materials used to make tires — like rubber and carbon black — are imported.
The port also is essential to exporting products, although Setzer said tires made in Sumter are expected to be used for consumption in North America.
According to the International Trade Administration of the U.S. Commerce Department, South Carolina exported $2 billion worth of rubber and plastic products in 2010.
Other advantages the state has logistically is its location between New York and Miami, its interstate highway system that connects the state to major cities along the Eastern Seaboard, and railroads.
“We have lots of customers on the East Coast,” Setzer said, adding that the plant will be supplying tires to automakers in the United States. “And we have suppliers close. It’s a great advantage for us to be close.”
South Carolina, which already is the No. 3 tire manufacturing state, could vault to first place by the time Continental’s facility is up and running in 2017.
Continental’s project, along with the $1.2 billion expansion of Bridgestone’s manufacturing facilities in Aiken County, and Michelin’s $200 million investment in its Lexington plant, will increase the state’s daily production capacity by 50% to 120,000 tires from the current figure of 80,000, according to statistics compiled by Tire Business, a trade publication for tire dealers.
As the state’s tire business grows, more suppliers and vendors are likely to follow.
For example, the same day Continental was making headlines in Sumter, DuPont announced the startup of a $500 million Kevlar manufacturing facility in Berkeley County near Charleston.
While Kevlar fiber is best known as the material that goes into making lightweight, bullet-proof armor for law enforcement officers, it also is being used to manufacture tires. According to DuPont, Kevlar was used in 1 billion tires that went to the automotive and aerospace industries in 2010.
DuPont could be an example of more investment and jobs that are likely to follow this year’s $2 billion worth of announcements by Continental, Bridgestone and Michelin.
“It’ll be interesting to watch how fast the supplier industry starts migrating toward South Carolina, further anchoring the state at the top of the manufacturing ledger,” Tire Business said an editorial in Monday’s edition.
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