Arconic has completed the sale of 100 per cent of its Russian operations to Promishlennie Investitsii LLC, the majority owner of VSMPO-AVISMA Corporation, for cash proceeds of $230 million. The sale was completed after the transaction received all required approvals. Arconic Inc. split into two companies in early 2022: the light metal technology firm Arconic Corp. and Howmet Aerospace Inc., which is responsible for the wheel manufacturer Alcoa Wheels.
Global tyre businesses have exited the Russian tyre business as a direct consequence of the Russian government’s decision to invade Ukraine. We all knew this was coming, following initial announcements from the likes of Michelin, Bridgestone and Nokian along those lines in the second quarter of 2022. However, the news that Nokian sold its much-lauded St. Petersburg operation to Tatneft at the end of October indicates that the exodus is underway. And that, in turn, means significant tyre production capacity within Russia has changed hands, something that has an inevitable impact on those departing, those remaining and the wider tyre business. In this column, we take a look at how Michelin, Bridgestone and Nokian have been negotiating their respective exits from Russia and ask what it might mean for the future.
Following its decision in March to suspend all manufacturing activities in Russia, Bridgestone has officially initiated the process of finding a local buyer for its Russian assets. The process of finding a buyer and closing any subsequent deal is expected to take “several months”.
Nokian Tyres’ is investing around 650 million euros in a new passenger car tyre factory in Romania. The new greenfield factory will be located in Oradea in the North-West of Romania, near the Hungarian border. The annual capacity of the factory will be 6 million tyres, with expansion potential for the future. According to an official statement, the site will also house a distribution facility for storage and distribution of tyres. Construction is scheduled to begin in early 2023 and the first tyres are estimated to be produced in the second half of 2024. Commercial tyre production is expected to start in early 2025.
Nokian Tyres plc has agreed to sell its Russian operations to Tatneft PJSC for approximately 400 million euros. The precise final purchase price will be affected by factors including net cash, working capital adjustment and foreign exchange rates. Confirming the news, Tatneft issued a one-paragraph statement saying the deal includes the plant in the city of Vsevolozhsk, in the region of Leningrad and that “the closing of the transaction and the purchase of assets is subject to a number of conditions, including obtaining approvals in accordance with Russian law.”
The EU ban on tyre imports from Russia has hit one company particularly hard: Nokian Tyres. Prior to February 2022, the Finnish manufacturer produced 17 million tyres a year in a factory near St. Petersburg, 82 per cent of its global output. Ten million of these were exported, mainly to Europe. This has no longer been possible since 10 July, with consequences for Nokian Tyres’ Central Europe sales region.
Since March, cumulative passenger car and light truck tyre imports to the European Union and UK have, for the first time, recovered to run above pre-pandemic levels. This is despite the well-documented impact of sharply higher ocean freight costs in this period, and disruption to production in some source countries. A newly published report by Astutus Research, “European PCLT Tire Demand and Supply Forecasts to 2026”, shows that in the first seven months of 2022, European (the EU-27 plus UK)* imports from outside the region were 11% higher than the same period last year and 5% higher than the equivalent pre-Covid period in 2019.
At a time when it is investing in new European capacity and exiting Russia, Finland’s Nokian Tyres has announced a reorganisation of its structure and management. These measures centre upon a combining of all Passenger Car Tyres commercial operations under the leadership of Anna Hyvönen, who currently serves as executive vice-president North America, Nordics and Vianor. Bahri Kurter, executive vice-president Central Europe at Nokian Tyres, is leaving the company to “pursue his career outside of Nokian Tyres.”
Even though ANO Rosgonki, organiser of the Russian Grand Prix, paid “better than good” to bring Formula 1 to the Sochi Autodrom, Stefano Domenicali stands by the decision to cancel this year’s event and to wipe it from future F1 calendars.
Due to the war in Ukraine and subsequent, tightening sanctions, Nokian Tyres plc has determined that it is “no longer feasible nor sustainable” to continue operations in Russia. The Finnish tyre maker’s Board of Directors thus decided today to initiate a controlled exit from this market. Exit preparations start immediately and Nokian Tyres will evaluate different options for its departure, with “due consideration to local employees and legislation.”
After suspending its manufacturing activities in Russia on 15 March, Michelin now confirms that it is “technically impossible to resume production,” due in particular to supply issues, amid a context of general uncertainty. It says Michelin Group is “therefore compelled” to plan the transfer of all of its Russian operations by the end of 2022.
Although the war in Ukraine and subsequent sanctions continue to “cause significant uncertainty” for Nokian Tyres’ operating environment, especially in regards to its business in Russia, on Friday the company reported that demand for its tyres has nonetheless remained good. For this reason, and after successfully implementing price increases to mitigate the impact of inflation, Nokian Tyres has raised its net sales guidance for 2022.