Pirelli Negotiated the Crisis Year Well – Holds Potential for Further Growth

During the global recession and financial crisis of 2009, tyre manufacturer Pirelli negotiated the challenges thrown at it better than expected and in doing so proved it is what many companies only claim to be: a storm-proof edifice. A crucial factor in this was its very solid manufacturing network. In Europe the output from factories in Italy and other West European sites are supplemented by deliveries from Romania and Turkey. North and Latin America are largely supplied with products from Brazil, and in China Pirelli erected a truck tyre plant and subsequently established site a passenger car tyre facility at the same site.

The secret of its success most likely also lies in the company’s high level of name recognition plus the Pirelli brand’s excellent image. It is a brand not only counted as a “major brand” –  those with consumer insight identify it with absolute certainty as a premium brand that consumers worldwide are prepared to pay a truly fair price for.

Yet Pirelli’s truck tyre business could also withdraw itself from the melee. Admittedly, setbacks could not be avoided, however these were markedly more moderate than those experienced by several respected competitors. An often overlooked fact is that Pirelli globally, although not in Europe, achieves a higher turnover through truck tyres than, for example, Continental, and the products it markets are qualitatively on par with the best available.

The recent assertion made during a presentation held by Korean manufacturer Hankook that its truck tyre business in Europe was on an equal footing with that of Pirelli was noted and refuted. The point is, tyres cannot simply be counted and a sweeping statement made regarding market strength if you are, so to speak, comparing apples and pears. In terms of turnover and value of goods Pirelli is three times stronger in Europe than Hankook, who is still clearly positioned below Nokian.

Quantities to, turnover figures fro. What has been earned? In late January, Pirelli Tyres CEO Dr. Francesco Gori explained in a meeting with Tyres & Accessories that during the ‘crisis year’ 2009 to the start of the year the target EBIT margin of 6.5 per cent could be exceeded and most likely go beyond the seven per cent mark. In 2008 the company recorded restructuring costs of some 100 million euros, with such costs continuing the following year to the tune of 30 million. The Pirelli Group’s total debt decreased during 2009 from one billion euros to 700 million euros.

Where do Pirelli’s priorities for the coming years lie? Which markets will it place an emphasis upon? Will it make a return to the agricultural tyre market when the licensing agreement with Trelleborg expires at the end of 2010? These and further questions will be answered in an upcoming edition of Tyres & Accessories.