Kumho Tire Co. Inc. has selected Macon, Ga., as the site for its first plant in the United States. In the following question and answer session, Kumho officials explain why the company decided to build in the U.S. and other topics pertaining to the factory.
1. Why has Kumho decided to build a plant in the U.S.? The U.S. is the home of automobile industry and is the largest tire market in the world. Kumho’s U.S. sales have grown tremendously in the last six years, from $150 million to $565 million. Kumho can reduce its distribution costs and increase market share in the U.S. by establishing a manufacturing plant here.
2. What factors weighed in Kumho’s decision to build the plant in Georgia rather than another location (such as another U.S. state or another country)? The state and local officials in Georgia put together an excellent incentives package. The incentives, combined with labor costs, proximity to transportation and customers, and other factors made Macon, Ga., the best location for Kumho’s plant.
3. What will the cost of the plant be? Our estimated cost for the first phase of the plant is $165 million. This first phase will give result in an annual production capacity of 2.1 million tires. If our market share continues to grow as we expect, we will have to eventually expand the plant. We anticipate spending another $60 million to expand and increase the plant’s annual capacity to 3.15 million tires.
4. Do you anticipate ever expanding this plant, and if so, when do you think that might be? The plant will be designed and constructed with expansion in mind. We anticipate expanding the plant as long as Kumho’s U.S. market share continues to grow, and we expect that growth to continue because we have so many outstanding dealer partners.
5. Will the tires be for the replacement market or the original equipment market? Tires produced at the new plant will be used for both the replacement market and the original equipment market. The majority of our business in the U.S. has been in the replacement market, but our OE business is growing. We expect to sell 1.2 million OE tires in 2008, and twice that many in 2009.
6. Will the tires produced be sold in the U.S. or exported to other countries? Tire produced at the Georgia plant will be sold mainly in the U.S. market.
7. Will the workforce be unionized? No. We consider our employees partners, and as such we pay them competitive wages and offer excellent benefits. We’re looking forward to working with excellent employees to make this a successful venture for everyone.
9. Korean culture is obviously different from U.S. culture. Do you anticipate adopting any Korean business methods in the way your U.S. plant is run, and do you anticipate adopting any U.S. business methods in the way other Kumho plants are run? We fully respect the local culture and will strive to harmonize the merits of Korean and U.S. cultures so that all employees can work together in a thriving, successful environment.
10. This plant will use advanced versions of the equipment that is used in Kumho’s automated plant in Korea. Can you talk about some of the ways in which this plant will be more advanced? The equipment that will be adapted in our new plant will result in a highly automated system that will be an upgrade from that of our automated plant in Korea. The main process will be automated, resulting in excellent quality control.
Kumho officials also said they "will consider building additional plants (in other regions)... after careful investigation. We will look at original equipment market opportunities and take into consideration our ability to be profitable."