For much of its history, tyremaking has been a multistage and highly labour intensive industry, involving building up the tyre carcass in layers manually on a drum. Each layer of material is often cut to length by hand before going off to be encased in its sidewall and tread components and then vulcanised. The introduction of automated processes has tended to be gradual and partial-evolutionary not revolutionary. Modern plants now have sequenced feeds and auto cutting of materials to the building drum, but the whole process would still be recognisable to the manufacturers of fifty years ago.
It is still a labour intensive industry and total costs are closely linked to labour costs in the regions in which each manufacturer operates. Continental has moved more than 50% of its manufacturing to lower labour cost areas in Portugal and eastern Europe; Goodyear has closed down high-cost operations in the UK in favour of lower costs elsewhere in Europe and several companies are increasing output from plants in south east Asia to supply their markets in developed economies. However, labour costs are not the only factor. Costs can vary greatly even within one region, as demonstrated by Michelin’s costs in four world regions. Compared with an average cost index of 100 worldwide, all regions had some plants producing over this average cost and some plants producing well below the average. Even Europe, the highest cost region, had one plant producing at 16% below the worldwide average.
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Variation in production cost by region 2000
| Average production index 100 | ||
| Production costs | Worst | Best |
| Europe | 152 | 84 |
| Asia | 125 | 71 |
| North America | 122 | 77 |
| South America | 129 | 73 |
Source: Michelin | ||
There are obviously other factors involved in reducing manufacturing costs. In the chemical industry a plant might cost $100 million to build, but the critical factor is the capacity utilisation. Below a certain load, for example 80%, the process loses money, but above that loading it is extremely profitable. Similar calculations apply to the tyre industry, but the running costs are totally different. Whereas a chemical plant is virtually automatic and runs with minimal levels of manning, a tyre plant is much more labour intensive and requires several hundred people. Consequently tyre plants have to operate at utilisation factors above 90% in order to be profitable.
“tyre plants have to operate at utilisation factors above 90% in order to be profitable.” |
The need to keep these plants running at full capacity is the main reason why the market has always suffered from over supply. This in turn leads to highly competitive pricing and inadequate financial returns for all the companies in the industry.
Until now, the only way out of this dilemma has been to aim to become the lowest cost producer in the industry. The solution was seen to be the establishment of large operations taking advantage of economies of scale. Goodyear’s Lawton plant has a capacity of 20 million tyres per year and in Korea, Kumho has built a plant at Kwangju with a capacity of 18 million tyres whilst Hankook has gone even bigger with its Daejon plant capable of 23 million tyres annually.
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By GlobalDataHowever, these plants could well be the last of their type as the segmenting markets have emphasized the need for flexible production of shorter runs of a product. Many more sizes and types of tyre are needed to satisfy market demand and the level of competition is placing much more emphasis on maintaining fill rates and always having supplies available. The new processes which have recently been announced could break this pattern completely. Not only will the capital costs be dramatically lower, but the labour costs will be down even more. A company with this type of cost structure would bring the operational break-even point down dramatically and would be able to operate profitably at levels far below its competitors.
First Michelin and then most of the other major manufacturers announced radical new manufacturing processes which promise dramatic improvements in capital cost, productivity, material saving and quality standards. Unfortunately, although proud to announce the general improvements, they are all extremely reticent about the details of their processes, so it is difficult to find out exactly how the tyre is made, let alone compare one company with another. However, cumulatively there is no doubt that a paradigm shift is taking place in the industry, which will change the economics of tyre manufacturing and the marketing fundamentals of tyre distribution.
Michelin C3M Process
The C3M system is reputed to stand for ‘continuous cold compounding by Michelin’. The first prototype plant was built in 1993, and in 1995, the first tyres produced by this process went on sale, but were merely introduced into the existing product range. Initial reports indicated that the tyres were not very consistent, but within a few months, the consistency improved dramatically. Eight plants have now been opened and the company is now operating the process in purpose-built plants in France, Sweden, Brazil and the USA, as well as C3M lines within existing factories where security is good.
The main advantages claimed for the process are:
- Capital costs about half of equivalent conventional plant.
- Labour required only one tenth of normal.
- Floor space required also one tenth of conventional systems.
- Stock turnover increased ten times.
- Lower energy consumption.
Each building machine is focused around a metal torus, which is fixed in size and proportion, so only tyres of a particular rim size and width can be on that particular machine, although this still allows all variations in construction. This makes the individual machine somewhat inflexible, but as the machines are relatively cheap, a wider variety of them can be used, so the factory as a whole is very flexible. When a tyre of a different construction is needed, the machine is simply reprogrammed and the particular balance of ingredients fed into the extruder is altered.
All the rubber parts are built directly on to the torus, and the bead wire is fed in as a continuous process from a drum, as are the belts. The ply is knitted around the tyre in situ, passing around the bead wire to maintain structural integrity. This is probably the weak link in the process, as it takes the longest time. The torus is heated whilst building is taking place, and there is only a single heating/cooling cycle rather than many cycles in a conventional process. As the rubber is applied exactly where it is needed, less material is used and the tyre is lighter than a conventional equivalent.
Goodyear Impact Process
Goodyear’s new process technology was announced in early 1998, and it is an acronym for Integrated Manufacturing Precision-Assembled Cellular Technology. It makes claims of very large savings in the production process, though perhaps not quite as dramatic as Michelin.
- Material costs reduced 15%.
- Labour costs reduced 35%.
- Energy costs are lowered significantly.
- In-process inventory cut in half.
- Curing time cut by 20%.
- Initial investment significantly reduced.
- Floor space significantly reduced.
“little is known about the Goodyear process, but it would seem to be similar in concept to Michelin“ |
Again, little is known about the Goodyear process, but it would seem to be similar in concept to Michelin, as it is a cell-based process, but it is probably not so automated and it needs the introduction of some sub assemblies. The process involves forming and assembling components simultaneously, eliminating splices in critical tyre components and cutting process steps in half while improving quality. As it has not been under development as long as C3M, there are probably some significant improvements still to come. Despite this, the company is sufficiently confident to have announced that it will install the IMPACT process gradually in all factories. One interesting aspect of the system is that apparently old machines can be adapted to the system without major investment. However, if this is the case, it implies that the new process is, in many ways, similar to existing methods, and that would seem to undermine the claims that Goodyear has made.
Bridgestone Actas Process
Bridgestone’s advanced tyre assembly system is called ACTAS (Automated Continuous Tyre Assembly System). It is understood to be a completely automated process requiring only six operators to handle a plant with a capacity of 2,500 units per day. An automated tyre-building machine completely assembles the green tyre, including belts and beads, and extrudes the tread rubber onto the built carcass. It does seem to be very low cost, as a figure of $21 million for such a factory has been quoted, and at the same time, it is flexible as it can produce 65 different sizes.
Like all the big manufacturers, Bridgestone develops its own machinery in-house, and it has a high reputation for this aspect of its business. Full details of this process will probably never be known, but any development by Bridgestone must be taken seriously.
Continental MMP
Continental has taken a three-pronged approach to transforming the economic basis of its own production. It has introduced at its main Hanover factory a fully automated system for producing long runs of standard tyres in basic sizes. The system has little flexibility, but it does not need it as the demand for these tyres can sustain continuous production.
A second system development, in co-operation with Krupp Maschinentechnik, has improved conventional tyre building equipment in order to speed up the building process and developed a fully automatic tyre building machine called ESA or single stage builder. The ESA is reportedly capable of turning out a completed green tyre in less than 30 seconds, but it is believed to be extremely complicated as a machine.
These two are just improvements on the existing process, but it is the third approach, MMP or Modular Manufacturing process, that is the more radical. MMP is designed to make the manufacturing process more flexible by making use of large scale production capacities to manufacture what the company calls the ‘tyre platform’, the blank casing. This platform is partially cured before being shipped out to the specialised MMP satellite for final assembly. Here the individual tyre distinguishing elements-the tread, the sidewall and the belt package-will be added and final curing take place. It is possible that microwave curing might be used at this stage.
Although the platform for a specific size of tyre will be the same for all the brands that use it, the final stage of manufacture will determine between 50% and 70% of the tyre’s performance characteristics.
A dedicated MMP finishing plant is designed to operate viably at volumes as low as 500,000 tyres a year and is flexible enough to accommodate runs as small as 100. This is not a substitute for existing manufacture, but a supplement to it, and overall Continental expects to reduce operating costs by between $29 million and $40 million a year and to improve cash flow by about $50 million, because of reduced inventories and more efficient distribution.
Essentially, the process will be used for tyres where the annual demand is relatively small, for example 20,000 or 30,000 units each year. It can also be used to break into new markets, as the investment costs would be insignificant compared with the $300 million cost of a world scale factory. At present, it is using the modular system at plants in Austria and Germany and at a plant in San Fernando, Argentina, operated by its technical affiliate, FATE. In addition, its new plant in Timosoara, Romania, and a plant planned for Brazil are designed around the system.
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An example of a Pirelli Modular Integrated Roboticised System – MIRS |
Pirelli MIRS
In late 1997, Pirelli introduced the Flexi system at the Breuberg plant in Germany. This can produce large, high performance car tyres in batches as small as 100 units. However, the system, which was developed by the R&D department in Milan, is regarded as only the first stage of a much wider change in manufacturing techniques. The emphasis from the start was to achieve higher quality standards, which is why the first production was high-end products.
A new system has been developed to apply the same quality standards and flexibility to the larger volume ranges of tyres. This MIRS concept stands for Modular Integrated Roboticised System and came on stream at an experimental level in late 1998. It now has a line in full production in Milan and has said that it will invest $500 million to have 80 MIRS units in operation by 2003.
The process is used to produce an entirely computer controlled product which requires no direct labour input. A plant capable of producing 1 million tyres per year would occupy just 3,500 sq metres and have an investment cost of €41 million excluding the basic building. It would employ 104 people spread over five shifts to supervise the process. Each line takes up just 350 sq metres and Pirelli envisages establishing “pocket factories” near the markets.
Implications for the industry
Despite the lack of detail about these new processes, they are different approaches to the same problems. In terms of innovation, the Michelin C3M process is probably the most revolutionary, although both Bridgestone and Goodyear appear to be working on similar lines. Continental and Pirelli have concentrated on solutions to allow them to make small quantities more efficiently than they have previously been able to.
However, it is no coincidence that the five new processes under development have been announced by the five biggest tyre manufacturers. These are the companies that have the resources to develop new processes, and it is very much to their advantage to do so, as it means widening the production gap between them and their smaller competitors.
If the cost savings are as significant as indicated by the companies, this will put enormous pressure on the smaller companies that have not developed their own technology. The companies with the lower cost base will not only be able to improve their own finances, but will also be able to introduce extra margins throughout the supply chain. Not only would this improve their customers’ margins, but it would put further pressure on the smaller manufacturers.
However, changes do not take place quickly in the tyre industry, and it is unlikely that Michelin or Goodyear will accelerate their investment programmes to install the new processes as soon as possible; because of the implications this would have for employment. Where they might take advantage of it, though, is in building small flexible plants for specific markets or for specific customers such as the vehicle manufacturers. However, whichever route they take, it would appear that the advantage is beginning to swing back to the large established companies rather than the aggressive newcomers.
However, no advantage lasts forever and there are now signs that smaller manufacturers may gain access to similar new technology. VMI and Berstorff GmbH have been collaborating for the past five years on automating tyre manufacture by linking Bersorff’s tread extruders with VMI’s tyre builders. The first practical test of this technology is now undergoing trials at the Cooper-Avon factory in England. At the same time, Toyota is championing a new manufacturing system being developed by Fuji Seiko KK in Japan. This is claimed to reduce the size of the manufacturing plant by 95% and to eliminate a lot of the component preparation and assembly. Toyota has no interest in going into tyre manufacture for itself, but it is trying to persuade its suppliers to consider the new process.
This article has been taken from Global market for tyres, just-auto.com’s exclusive new report which also assesses market characteristics, technical and marketing trends as well as providing detailed regional analysis and an industry outlook to 2005. |
