Pirelli takes up the challenges in the United States

Although the results of the Pirelli group have improved during the first nine months of this year, it is the tyre business that really shines. What was taunted by analysts as the “old economy” two years ago now represents the pearl of the company. That tyres participate in the company’s turnover with “only” around 45 per cent, but with an EBIT of 174 million Euro for the first nine months in the face of expected 194 million EBIT for the company as a whole says it all. As in previous years Pirelli’s General Manager Tyres Francesco Gori travelled to Las Vegas in order to deepen contacts to the market, from which the Italian tyre manufacturer still expects a lot in the future.

On the largest tyre market of the world, the USA, Pirelli was not very lucky during the last 20 years. From all of this nothing is left. There is nothing in common and the two keep out of each others’ way. Nevertheless, Pirelli did not give up the US market. After the MIRS factory started in Rome/Georgia earlier this year, ever more strongly, the Italians will generate a turnover of approximately 250 million Euro this year with American customers and for the second time in a row will end a financial year in Northern America with a profit. This is all the more remarkable as that the initial costs of the MIRS factory are to be borne. This time Pirelli is taking the difficult and time-consuming route into the market via the OE manufacturers. But a glance on Pirelli’s OE business, which shines with high growth rates, is worth while: here Pirelli proceeds rather selectively; anyway, the Italians do not supply bread and butter tyres with weak margins. On the one hand it concerns high-quality ultra high performance and expensive Off-Road tyres, which are manufactured in Rome, and on the other hand the company supplies tyres from the Brazilian factories into the American original equipment to customers such as Ford and Chrysler. Beginning next year, Gori says, a considerable volume will also come from the newly built Brazilian tyre factory in Salvador (Feira de Santana, Bahia). This factory is considered as particularly efficient and economical, so that the OE business in Northern America might be good fun not only under volume criteria, but will be profitable as well. And concerning sales prospects Pirelli shouldn’t have any real worries, because right now there are dozens of dimensions that are homologated with General Motors, these will be followed by orders. Thus the growth in the North American OE market will continue.

However, also on the American replacement market Gori has set himself and his staff ambitious goals. According to Gori the tyre manufacturer succeeded in finding new dealers, that were interested in Pirelli, and these in sufficient numbers. Tyre dealers observe the market very closely and notice quickly, in which direction trends go and with whom they should form a coalition, in line with Gori’s perception. The good position within the OE business, in addition with predominantly high-quality tyres, let Pirelli become ever more a valuable partner for the replacement business. In the last few years Pirelli grew in North America annually by almost 20 per cent and this is what Gori wants to realise for the coming years, too. However, with all optimism Gori refers to the extremely hard competition in North America, where each manufacturer wants to maintain ground. Pirelli could improve drastically all services, delivery speed, etc., and even concerning the prices the tyre manufacturer was able to position the brand better than last year. “But,” acknowledges Gori, “we are still far away from what we want and what we have to reach.”

North America is the big challenge for Pirelli, here the Italians find larger growth prospects even over years, which must be exhausted. The termination of the co-operation with Cooper was in reality, at least it looks that way today, a completely new beginning in Northern America. Concerning the costs of distribution and services over the whole of the continent, Gori calms down: there was no problem, everything is on schedule.