Tyre Factory Closures ‘Should Support Price Discipline’
In the wake of Goodyear announced closure of its Amiens, France plant. Financial analysts have highlighted the ‘positive’ effect this will have on the tyre manufacturer’s “price discipline.” Amien has an annual capacity of approximately 6 million units, and its closure forms part of a Goodyear’s 15-25 million unit capacity reduction plan announced. When you factor in that the Amiens plant has between 800 and 1200 employees, the closure could result in cost savings of around $50 million, according to Deutsche Bank, with $700 million of gross cost savings expected this year.
Goodyear’s announcement follows a number of other capacity closures across Europe including: Continental closing its 8 million unit capacity PCR plant in Clairoix France; Pirelli closing its 4 million unit Maresa Spain factory, Michelin reducing its capacity in France, Italy and Spain by 14 million units. In the US capacity cuts have been even more stark with Cooper reducing capacity by 10 million units in Albany, GA; Michelin cutting 4 million units in Opelika; and Bridgestone eliminating 9 million units in Nashville. This all equates to around 40 million units of capacity reduction in the NAFTA region. And as a result of the supply demand balance, this is likely to “support price discipline” say the analysts.