Jochen Etzel, CEO of Continental Tire the Americas LLC, discusses his vision for Continental’s future, how he views the market and more.
MTD: Without getting into financials, tell us about Continental Tire the Americas LLC's first half. What were some of the highlights and some of the challenges?
Etzel: We began 2024 to a slow start, with continued pressures from inflation, high interest rates and consumer hesitancy in purchasing. This is not surprising given the economic environment and governmental efforts focused on slowing inflation. We are also witnessing geopolitical unrest in some of the markets.
Another challenge in Q1 was the significant increase in imports coming into the U.S. from Asia. We continue to monitor raw materials, shipping costs and other risk factors on the manufacturing side that could potentially impact on our supply chain. Despite these early challenges, we remain optimistic that business will strengthen in the second half of the year. We continue to see a growing trend in larger rim diameters, which is further driving investment in our manufacturing facilities.
Our digital services solutions are creating opportunities for further profitable growth. With rising costs and a fluctuating economic environment, truck fleets are focusing expenses. They are seeking digital tire monitoring, enhanced retreading solutions and service visibility to help manage their operational efficiencies.
Continental’s digital solution suite provides our partners the ability to easily monitor their tires, with the goal of providing the lowest overall driving cost. For example, our new Gen II tire sensors allow the user to check their air pressure via Bluetooth on the ContiConnect mobile app. Real-time data enables our partners to optimize their tire investments.
MTD: During your tenure as CEO of Continental Tire the Americas, what are some of the top changes you've seen in the North American tire industry? What are the most significant changes you've seen within your company?
Etzel: The evolution of larger and heavier PLT tires has required adjustments in our manufacturing facilities to accommodate this change in size and weight and has resulted in plant investments in North America. Continental is a leader in tire production technology and our tire portfolio has grown and adapted to meet evolving customer demands for on- and off-road products over the years.
On the truck side, the emergence of integrated solutions has resulted in Continental offering fleets a complete service offering to ensure the lowest overall driving cost. Our ContiConnect digital tire monitoring service allows fleets to capture and monitor tire pressure, temperature and mileage data in real-time. More than a basic TPMS system, the ContiConnect digital tire management system provides valuable insights into every connected tire, notifies changes in tire health now and over time and provides a safer, more cost-efficient operation.
Since becoming the chief executive officer for Continental Tire the Americas and head of the Business Area Replacement Tires the Americas in July 2011, there have been vast changes in the North American tire industry. Several tire manufacturers have either built or expanded manufacturing operations in the Americas, including Continental. In fact, in the past 13 years, Continental opened tire manufacturing plants in Sumter, S.C., Morelia, Mexico, and Clinton, Miss., allowing us to provide critical supply to meet the demands of our customers in the Americas markets.
Finally, I am proud to see how the Americas Tire business and team has grown. Our Americas Tire business area currently employs over 13,000 people in North and South America.
MTD: Continental Tire the Americas has invested more than $1.5 billion in U.S. manufacturing over the last 10 years. Why? How do these investments benefit Continental tire dealers in North America?
Etzel: We strategically invest in our manufacturing locations and operations to be in the market, for the market. Our dealers count on us to provide the supply they need to meet the demands of their customers.
Our investments in the last decade and our success with our dealers can be attributed to our dedicated and focused team members at our manufacturing facilities. It is correct, in the U.S. alone, we have invested more than $1.5 billion in our Mt. Vernon, Sumter and Clinton locations. Continental is marking three milestone anniversaries in 2024. including the anniversaries of three key plants: five years in Clinton, Miss.; 10 years in Sumter, S.C.; and 50 years in Mount Vernon, Ill.
Continuous investment in our manufacturing facilities guarantees an efficient and safe environment for our team members and production to meet our customer needs. The investments in our plants and in our employees provide our dealers with premium products and unparalleled service, which is paramount for their success and bottom-line results.
North America is a strategic growth market for our tire business. With six manufacturing facilities in the Americas, we continue to reinforce our focus and commitment toward the Americas market and the dealers and distributors committed to reaching the end users.
MTD: Are you satisfied with your U.S. plant capacity utilization or is there still some headroom? What further manufacturing or capacity investments are you planning?
Etzel: Most businesses aim for maximum plant capacity. In reality, we have to balance capacity with post-pandemic factors, such as staffing and supply chain, workforce attrition, plant upgrades, material supply and other demographic factors. There is always room to grow and our ambition is to meet the demands of the market with the range of products and sizes we produce. The basis for our ongoing commercial success is operational efficiency at our manufacturing locations in the Americas.
Our state-of-the-art production plants and tire warehouses support efficient and environmentally compatible production. In North America, the company has made significant investment in the last decade, specifically to increase the capacity for manufacturing larger and heavier tires. We continually evaluate our manufacturing plans and change out equipment to keep up with trends. Many of our plant locations were designed for future expansion and we will leverage these opportunities as needed to meet demand and future strategies.
MTD: Continental Tire the Americas, unlike some of its competitors, has eschewed company-owned distribution in favor of developing its network of independent tire dealers and distributors. Why has Continental taken this approach and what are the benefits of it?
Etzel: Continental’s strategy is to partner with our independent dealers. We want these dealers to manage their growth and find solutions for their specific challenges. Our representatives work closely with these dealers to deliver our product portfolio, supply, training, service and a great value proposition, no matter the geographic location or size. Providing a streamlined and balanced portfolio is important to many independent tire dealers. These dealers are not looking for more complexity in what they stock, unless it provides a unique value.
MTD: There has been a tremendous amount of consolidation among North American tire distributors and dealers. What are your thoughts on the M&A activity that's taking place? Does it change Continental's North American dealer strategy?
Etzel: As new players emerge, there are new opportunities, efficiencies and benefits, which can lead to lower costs, consistent and improved customer service. It can open doors to access new dealers and form new relationships. With some of the acquisitions - including service centers, retread facilities, retread plants and even auto care centers - tire dealers can expand their geographic and service offerings to customers for both business and personal mobility needs. This can benefit both customers and shareholders.
Our Vision 2030 program is focused on the customer-centric alignment of the organization and all its business activities. The North American market is a growth driver for the Continental global tire business and our strategy is to continue developing partnerships with independent dealers - understanding that with ongoing consolidation, there will be opportunities, as well as challenges.
MTD: What can Continental tire dealers expect to see from the company during the second half of 2024 and into next year?
Etzel: Dealers can expect to see announcements about new Continental and General Tire brand tire launches in Q3. Dealers can also expect to see our continued focus on customer centricity and the same unparalleled level of dedicated support and supply of our premium tires, backed with our Total Confidence Plan. This industry-leading plan is an all-inclusive package of warranties and services that includes a limited warranty, mileage warranty, flat tire roadside assistance, customer satisfaction trial and road hazard coverage. We will continue to support our dealers with our programs to help them grow.
And dealers involved with commercial retreading as part of their business can now take advantage of the new Continental Retread Solutions Development Center in Rock Hill, S.C., which develops process improvements and provides our Continental Retread Solutions Partners with hands-on training.
The focus in the truck and bus tire segment is on our Conti360° fleet services and digital solutions. Continental recently launched ContiConnect Lite, a bridge between tire sensors and tire management that is a simple and free-of-charge gateway to selected ContiConnect functionality for those who have Generation II sensors or Continental intelligent tires, but have not yet signed up for a Yard Reader or a Live system. In February, a new valve cap sensor was also added to the portfolio of digital tire monitoring products and services. The sensor works with all of Continental’s digital tire monitoring solution products, including ContiConnect Live Truck and Trailer, ContiConnect Yard and ContiPressureCheck.
MTD: What's your vision for the next five years for Continental Tire the Americas?
Etzel: I am proud of what we have achieved during my tenure and we continue to lay the foundation for strong market performance in the future. With our premium portfolio of passenger, truck and specialty tires, Continental will champion innovative peak performance in tire technologies. In the future, this will be complemented by our ever-expanding service offerings and aligned with the different customer segments. The trend of longer-lasting, fuel-efficient, exceptional-handling, comfortable-riding tires will continue to drive the industry. We will continue to strive for the best-in-class supply and fill rates to leverage our premium product portfolio.
Continental will remain among the market leaders in the OE PLT market, including the electric vehicle (EV) segment. The demand for our products by leading EV manufacturers will remain strong. Our products are already meeting challenging performance requirements of the segment that includes mileage, efficiency and low noise. The same performance criteria used in our existing product portfolio aligns with the EV criteria. In 2023, Continental supplied tires to five of the world's highest-volume manufacturers of fully electric vehicles in the Americas. Continental adds value by not adding additional EV-specific fitment complexity into the market.
Continental will continue its journey to become the global leader for service-based digital solutions in the (truck tire) market. We will continue to expand our extensive range of tire services, allowing customers to proactively monitor the condition of their tires with the aid of sensors, software, data, algorithms and the cloud. Tires will be serviced or replaced precisely when necessary, leading to a substantial increase in safety and productivity, while cutting costs.
Continental will continue to invest in growing our production capabilities and capacity. These investments are allowing us to offer more volume with advanced technologies for our partners in North America.
Under our Vision 2030 strategy, we will continue our ambition to become the most progressive tire manufacturer, in terms of environmental and social responsibility. Our ambition is to achieve carbon-neutral production for all tires by 2040 and to use 100% sustainably sourced materials in our tire products by 2050. We pursue a holistic approach to make material sourcing, production and use of our tires, as well as the retreading and recycling of end-of-life tires, as environmentally friendly, energy-efficient and carbon-neutral as possible.
In the next five years, I see governmental agencies changing their approach to sustainability to include additional regulated requirements. As an example, Connecticut recently became the first state to pass extended producer responsibility for tires to ensure that all discarded tires are properly collected to eliminate illegal tire dumping.
