Tyre manufacturer Bridgestone has proposed the closure of its 84-year-old manufacturing plant in Port Elizabeth and on Thursday issued Section 189 retrenchment notices to around 250 employees at the facility.
In another blow to South Africa’s industrial manufacturing capacity and the coastal city’s economy, the group announced the proposed closure in a statement issued on Thursday. It claimed the move is due to declining demand in “older bias tyres” that are made at the plant.
Bridgestone Southern Africa (BSAF) noted that adapting the plant to radial tyre manufacturing would cost substantial investment in a constrained market.
The group has a radial factory in Brits in the North West and Moneyweb reported last year that around R400 million has been invested in that facility as part of a R700 million investment in SA.
“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,” it said.
“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 group noted.
“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,” it explained.
Commenting on the move, BSAF CEO Jacques Fourie added: “The bias industrial and off-the-road tyres manufactured at the Port Elizabeth plant, which have since been trumped by a growing trend in the production of radial tyres globally, has meant a steady decline in market demand over the years, eroding profitability for BSAF.”
He said despite all efforts to sustain the operation, it was these “technical and economic factors combined” that have created an environment in which the factory is unable to continue running.
“To preserve the competitiveness of BSAF and a sustainable future for its employees, partners and stakeholders, the proposed closure of the PE plant is the only viable option,” added Fourie.
Meanwhile, BSAF also noted the proposed plant closure is fully in-line with Bridgestone Corporation’s recently announced “mid-long-term business strategy”, which aims to strengthen the group’s core tyre business “through focus on premium profitable growth segments”.
“The announcement confirms the company’s dedication to implement this strategic framework. BSAF has as of today [20 August] initiated a Section 189 notice and a consultative process in compliance with the South African Labour Relations Act,” it pointed out.
“The proposal to close the PE plant has been reached following very serious consideration and has not been taken lightly. In recent years the company has considered many other alternatives, including cost containment measures, the sale of the plant to a suitable buyer, export opportunities, public 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,” the group added.
BSAF has made assurances that it will exercise due diligence to ensure compliance with all legal requirements and accepted practices, as well as to ensure that all 252 affected employees are treated fairly and supported through the transition.
“We realise the impact the project will have on the personal lives of PE employees and we are committed to mitigate the impact of the proposed closure. Fair severance packages will be provided and where possible, skills will be redeployed,” said Fourie.
BSAF, which employs more than 2000 people, said it remains fully committed to its business in Southern Africa and its Brits manufacturing facility, which continues to produce radial tyres.