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Go-between helped to cement key tire deal

Updated: 2013-08-12 03:00
By Cecily Liu (China Daily)
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It was founded in 1890 as the Coventry Radiator and Presswork Co in the English Midlands, famous for its automotive industry. The firm traded under the Coventry Presswork banner following a management buyout in 1987 and was bought by the French group Lebranchu in 1991.

The French sold it following a management buy-in with GIL Investments Ltd, a British investment company primarily targeting manufacturing businesses, in 2004.

But early last year, GIL Investments said it wanted to sell Covpress because of internal changes at the company, Jones says.

By then, Covpress had grown into a globally renowned supplier of car body parts, with customers ranging from Jaguar Land Rover Automotive Plc to Nissan Motor Co and Renault SA and employing more than 450 staff in Britain.

Its connections with big carmakers was particularly attractive to Yongtai because it could help Covpress sell its tires in Europe and continue to supply them when they start to manufacture in China, Jones says.

This eastward shift in automotive manufacturing is spearheaded by companies such as JLR and General Motors Co, both of which are now building factories in China to supply the local market.

"Because major car companies are looking to manufacture in China, to supply them now would be a useful starting point," Jones says.

This process is like "getting the foot in the door" in Britain and on the continent first, he says. Although ownership of Covpress will not guarantee Yongtai the opportunity to supply tires for Covpress' current customers, he says, it does increase Yongtai's chances.

Jones says the combination of Yongtai's financial strength and TIA's expertise in the tire industry will present a persuasive case for automotive companies in Europe, in knowing that there is continuity of supply.

Yongtai, founded in 1996, quickly grew to have annual sales of about $4.15 billion and is considered to be the "equivalent of Michelin in China", as You puts it.

Also fast growing is TIA, which was founded in 1999 and has annual sales of about $131 million. Its focus is now the after-sales tire market, but Jones says TIA's management has plenty of expertise to offer in helping Yongtai supply the European original equipment manufacturing market.

"(European carmakers) want continuity. They see our growth and they think, 'We're not going to lose them in six months'," Jones says.

There may be other ways to make better use of Covpress' resources, including setting up a separate Covpress manufacturing center in China to supply the country's automotive industry, he says.

Because the deal has only just been completed, Jones says, Covpress' previous management will remain in charge until an operational review determines how to run the company. But current employees should not worry because Covpress will keep manufacturing in Britain and possibly employ more workers locally, he says.

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