Marangoni Benefitting From Its Differentiated Structure

Times are hard; for some they are even too hard. During the prevailing financial and economic crisis plenty of steps need to be taken if a company wants to successfully weather the hardships involved. In an exclusive interview with Tyres & Accessories, Massimo De Alessandri, CEO of the Marangoni Group, explains how his company is facing the current situation, why its prospects are quite good, and why there won’t be any long-term damage to the group.

TYRES & ACCESSORIES:
The economic environment in Europe has been difficult in recent months, to say the least. How has the Marangoni Group been affected by this?

Massimo De Alessandri:
Clearly 2008 was a difficult year for the tyre industry since the start, especially the commercial and industrial sector, and consequently for both direct and indirect retreading, above all in the final quarter.
In regards to the Group’s other operations: new tyres (cars and LT), despite a decline in demand, volumes have remained steady; tyre distribution ended 2008 satisfactorily, thanks to a good winter season (bad weather); and technology, thanks to a substantial portfolio of orders, has not yet felt the slowdown.
As regards our retreading sector business outside of Europe, I can say that our business in North America, despite the crisis in the truck sector, has confirmed its trend towards growth and in South America we started feeling the crisis only in the last part of the year.

TYRES & ACCESSORIES:
How have your “retreading systems“ and “tyre retreading“ business areas been affected in particular?

Massimo De Alessandri:
Clearly the Group has had to adapt to the new levels of demand in both the retreading systems and tyre retreading areas, by trying to manage the dynamics of inventory and the impact of the crisis in different countries and market segments.

TYRES & ACCESSORIES:
In this respect, can the Group benefit from its differentiated structure?

Massimo De Alessandri:
In general, as already said, I can confirm that the Group has benefited from its differentiated product and market structure. Nonetheless I should stress that we are dealing with a global structural crisis that is affecting the demand of many goods across the board; it’s not just tyres. Essentially this is a crisis of liquidity and of market confidence, to the extent that for the first time we are seeing a simultaneous drop in demand for original equipment and the aftermarket in all the world markets.

TYRES & ACCESSORIES:
Can you yet specify Marangoni’s corporate figures for 2008?

Massimo De Alessandri:
The data has not yet been presented or approved by the Board, so I can’t comment specifically. Clearly all our economic and financial indicators will be affected by the negative development of the business, especially in the last quarter.

TYRES & ACCESSORIES:
How has the Group reacted to the market challenges?

Massimo De Alessandri:
In response to the low demand for tyres expected across the industry in 2009 and during part of 2010, we decided to adapt our production levels and to accelerate the reorganisation process that commenced at the beginning of last year. In order to align our manufacturing capacity with the current and prospective economic situation, and also considering the increased price competition in the low end of the market, we were forced to close the car tyre retreading plant in Feltre. With reference to the truck tyre sector, even if we expect a gradual recovery of the demand in the next months, it has been necessary to reduce production programmes (both direct and indirect retreading), inventories and investment plans. The transfer of the production of solid tyres in Sri Lanka, which started last summer, will be accelerated and we are ready to undertake further initiatives in the short term and medium term, depending on the future development of market demand.

TYRES & ACCESSORIES:
According to your market data, have other companies from the retreading business also suffered the same?

Massimo De Alessandri:
Most participants in the truck tyre and retread business have been suffering for the last few months. Considering recent market trends, I can’t imagine that many companies have not been affected by the crisis.

TYRES & ACCESSORIES:
Do you think that there will be a consolidation in both the compound and the retreading markets?

Massimo De Alessandri:
It is clear that this crisis will change the market and that most of the companies will have to alter their outlooks accordly. The weaker and more vulnerable players will either have to exit or will join together in new organisations. This is the outcome of a process of natural selection.

TYRES & ACCESSORIES:
What will be your next steps in order to address the current crisis?

Massimo De Alessandri:
In order to compensate for the situation which we are facing in the mature markets, the Marangoni Group needs once again to look outside from its established markets to those regions (the so called BRIC markets and the Far East in general), which today are only marginally served and where there is a big potential to develop our presence in the retreading sector. Taking into consideration our know how and our capabilities in the various products and process technologies (tyre retreading, tread rubber production and machinery), the Group will further develop its presence in the Americas and will accelerate the penetration of those new markets where we have identified opportunities for a rapid and profitable growth.

TYRES & ACCESSORIES:
Will the Marangoni Group continue to in the near future to produce tread rubber in Ferentino AND in Hamburg?

Massimo De Alessandri:
Absolutely. We will continue manufacturing strips and precured rings in both Hamburg and Ferentino. The potential disadvantage in the scale of the two operations is largely offset by the proximity of the two plants to the northern European and southern European, Mediterranean and North African markets respectively.

TYRES & ACCESSORIES:
What will the market be like in 12 months time?

Massimo De Alessandri:
It’s hard to make forecasts, as so far nobody is able to fully appraise the extent and the consequences of the crisis in the different sectors and especially in the aftermarket.
As I said before, some product and market segments will be deeply affected by the crisis and others less. Much will in any case depend by the capability of our political and financial institutions to undertake the required countermeasures and to re-establish trust and financial soundness at every level.