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With Top 10 Goal, What’s Nexen’s Next Move?

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logo-nexen-tireNexen Tire Corp. has made no secret of its primary goal – be in the global top 10 among tiremakers by 2017 – and now it appears its growth trajectory is keeping pace with its bold ambitions.

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Currently the world’s 23rd largest tire and rubber company with 2013 revenues of $1.58 billion, Nexen is a mere $2.46 billion – or one significant acquisition – away from meeting its top 10 goal.

Industry watchers have marveled at Nexen’s growth in recent years. Not too long ago, Nexen was a barely recognized brand, the distant third-wheel among South Korea’s three tire producers. Today, with aggressive efforts in Europe and North America especially, Nexen looms less than $2 billion behind Kumho Tire Co., which was crippled by devastating financial problems and is just now righted.

Though Nexen may not have an appetite for acquisitions (though there are some obvious opportunities), it does have a desire to build. Last week it signed paperwork committing itself to building a $1.17 billion passenger and light truck/SUV tire plant on 87 acres in Žatec, Czech Republic. Construction is said to be starting in 2015, and live production was reported to start in 2018.

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The plant will “eventually” have capacity to produce some six million units per year, and potential further expansions could double the investment to more than $2.2 billion, Nexen said.

It would be expected that Nexen would also add investment to its current three tire plants, two in South Korea and one in Qingdao, China. But getting into the top 10 is going to take more than a shiny new plant in Europe – already a strong growth area for Nexen – and dusting up its existing facilities.

So how long will it take for Nexen to make the leap to the Americas? Already, its South Korean brethren have settled on U.S. plants; Hankook Tire Co. is turning dirt in Clarksville, Tenn., and the on-again/off-again Kumho plant near Macon, Ga., is supposedly on again, with financing being lined up as you read this.

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Nexen could join them in the southeastern U.S., or make its own way with a plant in Mexico or any number of South American countries. In any case, Nexen will surely target OE pipelines as well as growing its replacement market positions in the U.S., Canada and Mexico.

Time will tell what Nexen’s next play might be. 2017 is less than three years away, so expect to see some action from the confident tiremaker.

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