April 6, 2016 / 7:07 PM / 2 years ago

UPDATE 2-France's Michelin plans $510 mln plant in Mexico -documents

(Adds details of presence in Mexico, paragraphs 10-11)

By Alexandra Alper and Dave Graham

MEXICO CITY, April 6 (Reuters) - French tire maker Michelin plans to build a $510 million plant in central Mexico that will produce around 5 million tires a year and could be expanded to double production by around 2020, documents showed.

The plant in the state of Guanajuato will begin production in 2017, and will produce passenger and light truck tires, mostly for the North American market but also for Europe and Asia, according to two documents seen by Reuters.

Some of the production will be sold directly to customers as replacements, while others are destined for production lines of Mexico’s growing auto sector.

“Michelin has a long-standing commitment to strengthening its operations in North America. While Michelin’s interest in expanding in the region has been the subject of speculation in recent months, the company is not announcing any specific details at this time,” a company spokesman said in an emailed statement on Wednesday.

Guanajuato has become a major hub for automakers, with both Toyota and Ford announcing new plants in the state last year.

Rival tiremaker Goodyear Tire & Rubber Co also announced a new $550 million plant in the central state of San Luis Potosi last year.

Mexico, the world’s seventh largest auto producer according to the International Organization of Motor Vehicle Manufacturers, entices auto producers with its low labor costs, free trade agreements and proximity to the United States.

The plant is expected to create over 1,000 jobs, both documents showed. Reuters could not verify when construction would begin but a Mexican official familiar with the talks said that the announcement could come as soon as this month.

Depending on market conditions, the plant could be expanded to produce another 5 million units annually and employ an additional 750 people by around 2020, one of the documents said.

The company currently has one Mexican plant which is located, along with its headquarters, in the central state of Queretaro where it employs about 640 people.

The tiremaker scrapped earlier plans for a $740 million plant in the state of Guanajuato in 2008, citing slow demand in North America.

Michelin, based in Clermont-Ferrand, central France, is pushing an overseas expansion strategy while cutting costs and is struggling to defend its namesake brand’s higher prices against competition from Chinese brands.

In November 2015, the company said it planned to close some European plants and boost production at others in a reorganization aimed at coping with tougher competition and the impact of years of economic crisis in the region. (Additional reporting by Luis Rojas and Joanna Zuckerman Bernstein; Editing by Simon Gardner and Bernard Orr)

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