Continental Tire North America (CTNA) has acquired the majority ownership of a leading passenger, light truck and commercial tire company in Latin America — Compania Ecuatoriana del Caucho S.A. (ERCO).
The acquisition will give Continental a significantly improved competitive position in Latin America, through ERCO's strong distribution network in Ecuador and the Andean region, which includes the countries of Chile, Peru, Bolivia, Columbia, Venezuela and Ecuador, according to Continental. The ERCO Group is a vertically integrated tire business operated out of Ecuador and includes a tire plant in Cuenca, as well as associated operations including a rubber plantation, retreading plant, tire import businesses and various retail chains in the Andean region.
"Majority ownership of ERCO provides Continental with the ability to improve our entire value chain -- from the rubber plantation to the retail stores -- throughout the Americas region through ERCO's strong competence in the tire business," says Matthias Schoenberg, CEO of Continental Tire The Americas. "Our plan is to have ERCO manage the six countries of the Andean region so that we can expand our business in these critical growth markets which, together, have a larger population size than that of Mexico, but with faster growth."
"Continental will enable ERCO to dramatically improve its product portfolio, as well as its visibility throughout the region. In turn, Continental can expand our business and fully utilize the opportunities in these growth markets, through a complete footprint in the Andean region," Schoenberg adds.
Currently, ERCO sells Continental, General, and Barum brands. The tire plant in Cuenca produces both passenger/light truck tires as well as commercial truck tires, and is the only plant in the region capable of producing radial truck tires. ERCO's Share of market is 11 percent in the Andean countries with about 45 percent share in the local Ecuadorian market.
"We are pleased to have this strengthened association with a global brand like Continental," says Jose Cuesta Vasconez, President of the Supervisory Board of ERCO. "The access to the products and systems of Continental will enable us to continue our positive trend of growth throughout the region."
ERCO Group has experienced a 15 to 20 percent growth rate over the last four years and expanded its associated retail chain to 120 retail stores. ERCO Group employs 1600 people in its businesses.
Continental has held a 42 percent stake in ERCO since 1987, when the company purchased General Tire, which originally held the ERCO stock.
"This action is a logical evolution to a successful, long-term relationship between ERCO and Continental," Schoenberg states. "The strong reputation that ERCO has earned as a major employer, manufacturer and, most importantly, a good corporate citizen in Ecuador and the region fits well into our corporate culture. Continental is proud to be able to continue this outstanding level of performance for employees, customers and the communities of the Andean Region."
Over the last two years, Continental Tire has significantly increased its market share in Latin America by a focused growth strategy. The opening of a Sales office in Argentina in summer 2008 accelerated the growth even further. Continental Tire manages its Latin American operations with the exception of Mexico and the Andean Region out of its significant operations in Sao Paulo, Brazil.
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