Taiwan's tire makers to expand presence in North America

Taipei, July 6, 2004 (CENS)--Kenda Rubber Industrial Co., Ltd., one of Taiwan's leading manufacturers of rubber tires for automobile, announced it would spend hundreds of million New Taiwan dollars to acquire a U.S. company specializing in the production of high-speed automobile wheels.

With the acquisition of the U.S. company, Kenda targeted to poise as the largest producer of rubber tires for agriculture and industrial use and related wheels in North America within the next five years.

Hwa Fong Rubber Industrial Co., Ltd., another leading producer of automobile rubber tires, said it has been expanding the production scale of wheels in North America. The company targeted to raise the ratio of wheel sales to overall sales in North America to 25% in the next three years from less than 10% for the moment.

Because of the high costs in assembling wheels in the U.S. and the requirements that the wheels for special-purpose vehicles should use the iron and steel made in the U.S., at present approximately 99% of the wheels used in high-speed trailers and golf carts in the U.S. marketplace are made outside the U.S. and then shipped back for assembling in the U.S.

To meet the strict production requirements, some domestic firms of rubber tires, including Cheng Shin Rubber industrial Co., Hwa Fong, and Kenda, are stepping up the production of wheels in the U.S. They hope the production deployment in the U.S. can help them smoothly acquire orders in September and October this year. Of them, Kenda is the most aggressive as it would soon acquire an American firm specializing in wheels for agriculture and industrial use.

Yang Chi-jen, vice chairman of Kenda, said over the past few years his company has successively acquired three wheel plants, including American Tire & Wheel (ATW), which focuses on the production of high-speed rubber tires and wheels for agriculture and industrial use; Martin, which concentrates on the production of low-speed rubber tires and wheels for agriculture and industrial use; and Monitor, which specializes in the production of high- and low-speed rubber tires and wheels for agriculture and industrial use.

So far, only one of the above-mentioned three U.S. plants is still in the red. Kenda said it raked in combined earnings of NT$10 million from the three U.S. plants last year.

With a plant specializing in the production of wheels in the U.S., Hwa Fong said its U.S. subsidiary made earnings of NT$1.7 million (US$50,445 at US$1:NT$33.7) last year. Because of the introduction of such new products as radial rubber tires for trailers, the U.S. subsidiary is expected to see annual sales reach US$45 million this year.