Dunlop Nigeria Closing Its Tire Plant in Nigeria
Business Day Online is reporting that Dunlop Nigeria, after 45 years of tyre production Nigeria, will be closing its N8billion tire plant due to the persistent power cuts that has more than trippled the cost of production and reduced the company’s ability to make a profit.
… Dunlop plc, the nation’s only surviving tyre manufacturer is closing down its plant and will now import tyres from South Africa and other Dunlop factories around the world. Impaired by persistent power outage, epileptic gas supply, rising cost and failed government policies, Dunlop plc’s board has approved a “strategic redirection” of the company, ending its 45 years history of manufacturing and signaling Nigeria’s further descent into economic maelstrom. In particular, the company has suffered, like many other manufacturers in the country, from the inability of the Federal Government to solve Nigeria’s current most dangerous economic problem, inefficient power generation. This has severely crippled its production capacity.
Business Day also found that the company has for long suffered from inconsistent government tariff policies, some of which made nonsense of business plans predicated on production, a situation which placed importers of tyres at an advantage over genuine local manufacturers.
Dunlop produces both car and truck tyres in its factory at Ikeja in Lagos State. This accounts for 15 percent of tyre consumption in the country. The remaining 85 percent is imported into the country by big tyre importers such as Michelin, Bridgestone, Pirelli, and Goodyear as well as imports from Asia and eastern Europe.
This will result in the lay off of over 1000 people. It also means that in just over year, Nigeria will go from meeting 60% of her tire needs through local production to 0% after Michellin closed its plant earlier in the year.
This is in order to restore shareholder value in the company after recent losses brought about by huge extra production costs, 40 percent of which is accounted for by power outages. The company currently spends about N150 million monthly to generate the power it needs instead of paying about N40 million if they had regular power supply from the Power Holding Company of Nigeria (PHCN).
With the scaling down of tyre production by Dunlop, it means in less than two years, Nigeria has moved from meeting about 60 percent of its tyre demand, which was the combined capacity of both Michellin and Dunlop to virtually nothing, which will happen when and if Dunlop finally shuts down its production.
The tariff for truck tyres had been reduced by the government from 40 percent to 10 percent. Dunlop claimed it had built its ultra modern truck tyre facility at a cost of N8 billion on the basis of the 40 percent tariff on such tyres, adding that the policy reversal of the government meant it can no longer compete with imported tyres. The plant was commissioned in 2005 but began commercial operations in 2007, coinciding with government’s introduction of a lower tariff regime.
The 1,000 job cuts planned by the firm will be a big blow for those affected, some of whom have worked in the company for many years. The losses will eventually mean a loss of 80 percent of the current staff level.
Asked about the plans for the subsidiary of the company in Delta and Cross River states, Pamol, Mohammed Yinusa, the group managing director of the company, said the company plans to export the rubber it produced. Only recently, the company expanded the rubber production capacity of Pamol by 6,000 to 15,000 hectares.
I am not sure the government understands the severity of the problem. Dunlop is like an icon and for it to be closing its plant is a very very big deal
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donne4real | July 14, 2008