Changing market needs is the main driver behind the decision by Bridgestone Southern Africa (BSAF) to close its bias tyre manufacturing plant in Port Elizabeth.
The company says this move is fully in line with the recently announced mid-long term business strategy laid out by Bridgestone Corporation, which plans to strengthen its core tyre business through focus on premium profitable growth segments.
BSAF has in recent years seen its financial performance come under pressure due to a variety of economic conditions and industry factors. In addition, Bridgestone’s Port Elizabeth plant is specifically geared towards the production of older bias tyres, which are globally in decline and being phased out in South Africa as it is an unprofitable market.
The effects of a shrinking economy and an influx of cheap imports compounded by rapid changes in the tyre industry has prompted BSAF to restructure its operations.
The agricultural industry is shifting to radial tyres, which are longer lasting, and the production of which is modern and high-speed. To produce radial tyres an investment in a completely new multi-billion-rand plant would be needed, which is not feasible in the current economy.
I spoke to CEO Jacques Fourie:
Why is the plant closure necessary?
Fourie: In recent years we have considered many other alternatives, including cost containment measures, the sale of the plant to a suitable buyer, export opportunities, government funding and possibly relocating different product lines to PE. However, while some of these options have been explored thoroughly, the current market dynamics make it extremely challenging to find a longer-term sustainable solution. These factors combined have created an environment in which the PE factory is unable to continue running, despite all efforts to sustain the operation.
Will any workers be absorbers elsewhere?
Fourie: Part of the process the company may implement is a redeployment and out-placement programme, where the company will look to preferentially redeploy employees internally where possible.
What will change and how does Bridgestone see its role in South Africa going forward?
Fourie: The closure of the PE plant was purely based on the specific industrial tyre products that were produced there and the shift in demand. The tyres being produced out of our Brits facility are still in demand.
Bridgestone is transforming to become a leader in advanced solutions and sustainable mobility. This strategy is built on three pillars including its core premium tyre business, trusted solutions and superior service network. The company is committed to its Southern Africa business and its Brits manufacturing facility will continue to be fully operational.
The reality is that the PE plant is simply unable to produce radial tyres, and to do so would need a substantial investment, which is not feasible at this time due to severe financial constraints. As Bridgestone also has sufficient capacity to meet existing demand, a plant reconversion would not be justified.
To preserve business continuity and competitiveness of BSAF in the long run, the proposed closure of the PE plant is the only viable option. The proposal to close the PE plant has been reached following very serious consideration and has not been taken lightly.
BSAF, employing more than 2 000 people, remains fully committed to its business in Southern Africa and its Brits manufacturing facility which continues to produce radial tyres for OEMs and replacement customers.