Michelin buys 10% GT

Michelin buys 10% GT

The Jakarta Post, Jakarta

In a bid to strengthen its production and distribution network
in Indonesia, the world's largest tire producer, Michelin, has
decided to buy a 10 percent stake in local tire maker and
distributor PT Gajah Tunggal (GT).

In its report to the Jakarta Stock Exchange on Friday, GT said
the French company had inked an agreement with it to produce and
distribute tires locally, under Michelin brands, for passenger
vehicles and light trucks.

"To strengthen the deal, Michelin has bought 10 percent of the
company's shares," said GT in the statement.

The company, which has produced at least 95.8 million tires
since 1993, refused to disclose the value of the deal, but
according to analysts it may be worth around Rp 600 billion
(US$67 million).

GT was founded by tycoon Sjamsul Nursalim, who now resides in
Singapore.

The company is the largest integrated tire manufacturer in
Southeast Asia, and ranks 23 among the world's top tire
producers.

Under the agreement, GT will also produce BFGoodrich, a tire
brand owned by Michelin. The tires will be allocated for the
replacement market.

Michelin controls 19.2 percent of the world's tire market,
with 52 percent of its sales driven by Europe, 35 percent by
North America and 13 percent by Asia, South America, the Middle
East and Africa.

The country's tire industry is facing surplus stock with
installed capacity reaching 37 million tires per year and demand,
22 million per year.

Also, cheap tires from China have been flooding the local
market, dealing a heavy blow to the industry here. The tires are
reportedly smuggled into the country, or undervalued during the
clearance process.