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Alliance CEO talks plans for GPX properties

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Alliance Tire Group gained several things through its acquisition of many of GPX International Tire Corp.'s assets, not the least of which are two well-established brands (Galaxy and Primex) and an entree into the U.S. medium truck tire market.

In this interview with www.moderntiredealer.com, Yogesh Mahansaria, CEO of Alliance's global operations, discusses his company's plans for Galaxy and Primex, how the GPX deal came about, and Alliance's focus for 2010. (For background about GPX's Chapter 11 filing, see Alliance Tire to acquire GPX International's assets, posted Oct. 27, 2009 on www.moderntiredealer.com.)

MTD: How did the GPX deal come about? Were you in talks with GPX prior to their bankruptcy filing?

Mahansaria: We got in touch with GPX prior to... (its) bankruptcy. Before GPX filed, they were trying to see if there were strategic buyers they could sell the business to, and among the many companies they contacted, we were one of them.

We felt that their business was complementary to our long-term goals so we had multiple rounds of discussions over the months preceding the bankruptcy. We signed a memorandum of understanding with them, and following that, GPX filed bankruptcy. So we had been in touch with them for some months preceding the bankruptcy.

MTD: What are your plans for the Galaxy and Primex brands in the U.S.?

Mahansaria: These are well-established brands in the North American OTR market. Galaxy, in particular, has been around for a very long period of time. Alliance has historically been more agriculture tire-focused, whereas Galaxy and Primex have made their name more on the industrial, earthmover and forestry sides of the business.

So we feel these are complementary products and we intend to develop all three brands (including Alliance) on a long-term basis, not only in the U.S. but on a worldwide basis.

MTD: Do you plan to segment the three brands in some way?

Mahansaria: That is not our intention. We see it being segmented by end user categories. We see Alliance predominantly being an agricultural brand. On the other hand, Galaxy has a very comprehensive range of industrial, OTR and construction tires. It has some agricultural tires.

MTD: Galaxy has always been known as an OTR/construction tire brand. Does this open new doors for Alliance in the U.S.? Does Galaxy put you in the OTR business in the U.S.?

Mahansaria: Galaxy’s lines and distribution are very complementary (with Alliance) and it allows us to cover a much broader (range). The entire GPX engineering team is continuing with Alliance. We believe they are a very important part of the success of the Galaxy business.

MTD: Alliance gains control of GPX’s truck tire program thanks to the purchase. Can you discuss GPX’s truck tire program and your plans for it?

Mahansaria: GPX was the sole U.S. distributor for the Aeolus brand of truck tires. Aeolus is one of the largest truck tire companies in China. They make a very high quality product. We intend to continue developing the Aeolus program. We think it allows us to offer a good value proposition to our commercial tire dealer network.

MTD: Last year Alliance opened a new plant in India. Can you bring us up-to-date on the plant’s progress and its production levels?

Mahansaria: My family together with Warburg Pincus, which is one of America’s largest private equity funds, acquired Alliance in July 2007. (Note: Warburg owns the majority of Alliance’s shares.) At that time it became apparent to us that to develop this business on a long-term basis, we needed to augment the high-technology production base we had in Israel with a more competitive manufacturing source. We started thinking about putting a plant in India.

In late 2008, we signed a memorandum of understanding to develop the plant, and we broke ground on the plant in July 2008. We were able to start production at the plant in early December 2009.

The plant represents a total capital commitment of $100 million. The plant ramp-up is ahead of schedule. We are operating today at about 35% capacity. We expect to be able to (produce) half a million tires per year (at full capacity).

MTD: How many plants do you have in Israel, Alliance Tire's home country?

Mahansaria: We have one other plant in Hadera, Israel.

MTD: What is the plant’s annual capacity in terms of units?

Mahansaria: About 300,000 units.

MTD: How many of the units that  are made in India will be shipped to the U.S. vs. other markets?

Mahansaria: We would expect that 20% to 25% of Indian production will come to the U.S.

MTD: Any plans to transfer production from Israel to India?

Mahansaria: We have moved certain low-added value tires to India because the manufacturing costs made it difficult to be competitive. We really see Israel as our center of production for the high technology, cutting edge products we make, like our radial flotation tractor tires.

We have the plant in Israel, we have the plant in India and importantly, we have good relationships with good vendors in China, which came to us via the acquisition of the GPX business. We think that is also is a very important part of our overall value proposition.

MTD: Last year, we spoke with Manny Cicero, president of Alliance's U.S. subsidiary, who explained Alliance’s plans to improve its distribution infrastructure in the U.S. Alliance now has a distribution center in Tennessee, which has been very critical. Do you want more warehouses in the U.S.?

Mahansaria: We would expect to eventually add more distribution centers in the U.S., but they will not be 2010 projects. We view 2010 as the year we consolidate the acquisitions we have made in the U.S.

MTD: Has the global recession impacted Warburg’s access to credit or capital?

Mahansaria: I don’t believe so. Warburg invests capital from long-term committed funds, so when they make investments they’re not going to banks and borrowing money. They have long-term commitments from maybe U.S. pension funds and other large international investors. So to that extent, it has not been affected by the recession.

“In the last few years we have invested a lot of capital in building a very sound, long-term plan between the (development) of the India plant and the acquisition of GPX’s assets. We think in North America there is a situation for Alliance” to build its business.

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