Toyo to exit China JVs with Maxxis, build own plant

ERJ staff report (TB)

OsakaA, Japan -- Toyo Tire & Rubber Co. Ltd. is dissolving its joint ventures in China with Taiwan's Cheng Shin Rubber Ind. Co. Ltd./Maxxis International and instead will build its own passenger tyre plant there at a site along China's coast at a cost of more than $105 million.

Toyo cited its need to “to respond to increasing tyre demands in accordance with the rapid progress of motorisation in the Chinese market” for its decision. Toyo said it will switch its relationship with Cheng Shin to a consignment manufacturing agreement, which will allow it to continue to supply customers until its own factory comes on stream, which it's targeting for year-end 2011.

Toyo did not disclose financial ramifications of its decision to end its joint ventures with Cheng Shin - Cheng Shin-Toyo Tire & Rubber (China) Co. Ltd. in Kunshan, China, and Cheng Shin-Toyo Tire (Xiamen) Co. Ltd. in Xiamen. Toyo owns 22.4 and 21.4 percent, respectively, in the ventures. The Kunshan plant makes passenger and light truck tyres while the Xiamen unit makes radial truck tyres.

Toyo is still searching for a site for its plant, which initially will have annual capacity for 2 million passenger and light truck tyres, destined primarily for the Chinese market. Employment at startup will be 400. The plant will be designed for expansion in accordance with market growth, Toyo said.

Cheng Shin/Maxxis and Toyo are the 11th and 12 th largest tyre makers in the world, with 2008 sales of $2540 million and $2410 million, respectively. This marks the first year Cheng Shin has outsold Toyo.

This announcement fulfills at least partially Toyo's disclosure last year that it needed to add up to 4 million units of annual capacity in Asia to help it meet its long-term growth goals.

Toyo and Cheng Shin teamed up in 1995 to build the plant in Kunshan, which came on stream in 1997. The Xiamen joint venture was established in 2002.

From Tire Business (A Crain publication)