Strategic review may radically affect future of Semperit

SEMPERIT (Ireland) made a pre tax profit of just under £5 million in 1995 compared with £4.6 million in 1994. The company in which two buyers have recently expressed an interest, is Ireland's only car tyre manufacturer. It is owned by the giant Continental group and is one of Dublin's most important employers, with an annual payroll of £20 million and a massive ESB bill.

The company's parent is currently undergoing a strategic review. Semperit said it is "continuing its efforts towards securing a viable long term future for, the plant and its 650 employees with the active support of IDA Ireland".

Semperit (Ireland) produces 3.3 million of the 42 million car tyres manufactured each year by Continental in Europe.

Although Semperit (Ireland) Limited is profitable, the parent company has grown through acquisition and is currently carrying out an in depth strategic study of its manufacturing operations worldwide.

The Dublin plant, along with Newbridge in Scotland, Traiskirchen in Austria and Stocken in Germany, is among the least efficient factories in the Continental Group, according to Continental's chief executive Hubertus Von Grunberg.

Continental's London based sales and marketing director for car tyres, Heinz Jurgen Schmidt, has declined to say if Continental will close any European plants. He pointed out that the firm might win new business through its low cost strategy. This would, callow it to retain some of the less efficient plants.

In any case, he added, Continental will always ensure that, new capacity comes on stream before it closes any plants. This means that all factories have at, least a couple of years to improve "performance before any decisions are taken on closure, he said.

Last year Semperit sought up to 70 redundancies at its Naas Road plant in Dublin. The cutbacks were part of a three year plan to make the tyre plant more competitive.

Industry observers say that Continental has too many small plants in Europe and that it needs large scale factories in other, growing markets such as Asia. The industry trend is towards large capacity plants in low cost producing countries. Globalisation and the expanding new markets of the east are also factors in the company's strategic study.

Continental Group has said it believes its core business is in Europe and the firm plans to keep it that way. However, it has recently been seeking tyre making partners in India, Indonesia and China.

At present, the Irish plant is performing well. Substantial developments have been recorded in the last two years, including the development of business with GM (Opel/Vauxhall) and the implementation of a major productivity improvement scheme.

Last year Semperit secured a £5 million contract to supply General Motors with tyres. Continental brand tyres, made in Ballyfermot, have been exported to Ellesmere Port, Luton and Antwerp. However, margins tend to be very tight on deals with motor manufacturers.

Continental is cutting, costs throughout its manufacturing operations by encouraging competition among all its factories and publishing internal league tables on performance.

Currently about 25 per cent of Continental's tyres are made in the firm's low cost plants in Portugal, the Czech Republic, Slovenia and Poland. Over the next two to three years, the company hopes to increase this to 40 per cent of production.

The remaining 60 per cent will continue to be made in higher cost plants but those tyres will be higher added value types, Continental says, where labour forms a lower percentage of overall costs.

In 1967, the first Semperit radial tyre appeared on the market and was hailed as a techno logical breakthrough. The same year Semperit (Ireland) was established on a 72 acre site ink Ballyfermot.

In 1989, a £25 million three year programme of expansion and restructuring was started with IDA assistance. The capacity of the plant was increased from 50,000 tyres to 85,000 tyres per week. An additional 152 jobs were created by a restructuring of shift patterns.