Hankook Tire Manufacturing Co., South Korea's largest tire maker by sales, has shortened its list of possible locations for a sixth factory with an estimated price tag of $1 billion to three Southeast Asian countries, even as its chief executive said the company is open to acquiring existing production facilities, at home or abroad, if they are up for sale in the market.
The world's seventh-largest tire maker by sales, which already has factories in China and Hungary, wants to tap into the robust demand it sees in Southeast Asia as it tries to expand its global presence to boost growth and cut costs.
"We will decide on the site for the sixth plant by June out of three countries--Indonesia, Malaysia and Vietnam--to expand into Asean countries," Suh Seung-hwa, who also serves as Hankook's vice chairman, told Dow Jones Newswires in an interview Wednesday.
He said Asean has a population of more than 500 million, of which Indonesia has a population of more than 200 million, hinting that the country may be selected as the site for the plant.
The company will start building the plant next year once the site is decided by June, Suh said. "It usually takes about a $1 billion in building a new plant," he said.
In an interview with Dow Jones in September, he said the company was considering building the plant in Vietnam, Thailand, Malaysia, Indonesia and India, while a seventh plant could be developed to serve North America, with Mexico as one of the candidates for its location.
Hankook's global output capacity is expected to reach 87.5 million units by the end of 2011. It has two domestic plants, two in China and one in Hungary--the total output of which was 80 million units in 2009.
In China, Hankook plans to increase its production from the two plants for local use rather than exports to maintain its top position this year in the country, where it accounts for about a market share of 20%.
For 2010, it is aiming for an operating profit of KRW399.5 billion on sales of KRW3.183 trillion, by focusing on emerging markets such as the Commonwealth of Independent States and Southeast Asia.
Full-year net profit sharply rose to KRW350.24 billion in 2009 compared with KRW25.41 billion a year earlier due to higher product prices, lower raw materials prices and a weak won. Operating profit rose 36% to KRW348.41 billion, while sales increased 6.3% to KRW2.812 trillion.
Hankook Tire said while it is expanding its overseas production facilities to cut logistics costs, customs tariffs and for faster delivery, the expansion won't be at the expense of domestic capacity. The company said it aims for a domestic market share of about 60% in five years, compared with 54% now.
He said Hankook Tire is still in talks to supply original equipment tires to BMW AG and Toyota Motor Corp. It has supplied original equipment tires to global car makers except for Benz, BMW and Toyota.
Original equipment tires, which are supplied in large volumes to car makers, have narrower margins than replacement equipment tires, which are sold in retail shops.
(Source: irco.biz)
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