Cooper Tire & Rubber Co. (NYSE: CTB) recently announced a plan to increase ownership in its joint venture tire plant in Guadalajara, Mexico, from 58% to 100%.
The Findlay, Ohio-based company has been involved in a venture partnership at the Corporación de Occidente (COOCSA) plant with Trabajadores Democráticos de Occidente (TRADOC), which has owned 42% of the plant since 2008.
TRADOC is a workers union formed in 2004 to own and operate the COOCSA plant. The tire plant is around 625 miles from the Texas-Mexico border.
"Full ownership of COOCSA is an important step in our strategic plan to optimize our global manufacturing footprint with cost-competitive production of quality tires to meet market demand, in this case throughout Latin America, as well as in North America," Cooper Tire chief executive Brad Hughes said in a release.
The COOCSA plant manufactures passenger car and light truck tires, producing 6.5 million tires in 2017. The plant ships the majority of its tires to the U.S., with Brazil as its next largest customer.
The deal is still pending government approval and other conditions. It is not expected to be finalized until early 2020. The price of Cooper Tire's acquisition of TRADOC's 42% ownership stake in the factory was not disclosed.
Cooper Tire (CTB) recently reported third quarter earnings of $0.58 per share, beating consensus estimates of $0.47 per share. Chart: FreightWaves SONAR
Six other tire companies also have factories in Mexico: Goodyear, Continental Tire, Bridgestone Corp. (two plants), Michelin, JK Tyre & Industries (three plants), and Pirelli Tire.
Mexico exported around $1.1 billion worth of tires from January through August 2019, according to ustradenumbers.com. Port Laredo was the top gateway for tires imported into the United States, accounting for almost $800 million through August.
Cooper Tire began a business relationship with TRADOC in 2008, when it initially invested $31 million for a 16% stake in the COOCSA plant. Cooper Tire then bought an additional 42% of the plant from Llanti System, which sold its stake in 2008.
Cooper Tire & Rubber Co.'s deal to acquire 100% ownership of the COOCSA plant is not without controversy.
The plant has been owned and operated by TRADOC since 2005. TRADOC is a workers co-operative that successfully staged a two-year strike against the plant's previous owners, Germany-based Continental Tire.
By the end of the strike in 2005, TRADOC took over operations of the plant as a workers cooperative. At one time, as many as 1,250 people worked at the plant. After five years at the plant, workers become eligible to be part of the ownership cooperative.
The approval by TRADOC members to sell its 42% ownership stake took place Nov. 2, with 535 members of the workers union voting.
From the attendees, 387 voted in favor and 146 against the deal with Cooper Tire, according to Jesús Torres Nuño, president of TRADOC.
"This decision was reached after a long debate, in addition to extensive prior information to all members, of all the details of the proposal, which consists of a very important payment for the price of TRADOC shares and the rehire of all the more than 1,100 members," Nuño said in a release.
However, some members of TRADOC wanted to halt the vote, telling union members not to sell their shares to Cooper Tire until analysts could determine a fair value.
"It is unfortunate that we managed to defeat Continental Tire, keep the factory, produce millions of tires in 15 years. It finally returns to the beginning of the story: The plant is again controlled by a transnational company, but with another name, Cooper Tire," Jaime Hernandez Ortiz said in an interview with El Economista.
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