Known for its style, speed and performance marketing values, Pirelli & C. S.p.A. is a multinational company based in Milan, Italy, listed on the Milan Stock Exchange since 1922, with a temporary privatization period by the consortium led by the Chinese state-owned enterprise ChemChina.
Auto Express has published the results of its latest tyre test, an evaluation of six big-selling small sports utility vehicle products, fitted in size 235/55R17 to a Toyota RAV4 at Continental’s proving ground in Uvalde, Texas. Goodyear’s Excellence (H), Conti’s CrossContact UHP (H) and Michelin’s Latitude Diamaris (H) took the top three spots respectively in a very closely fought contest.
Russian petrochemicals group OAO Tatneft (Kama and Niznekamshina’s parent company) said it is set to expand its tyre manufacturing capacity with the commissioning of a 1.2 million tyres a year all-steel truck and bus radial plant near its existing Niznekamshskina plant in Niznekamsk. The commissioning follows investment of around 17 billion rubles (£362 million; 388 million euros; US$578 million) in line with a plan first conceived in 2006. Increasing demand in this part of the Russian market is said to be behind the move, with Tatarstan truck manufacturer KamAZ Auto Manufacturer lined up as a customer.
According to Tatneft such large-scale construction of a factory from scratch is “really unique in today's Russia” and is part of a strategic investment programme scheduled to continue until 2013 – providing for the “further increase of the Kama-Euro type tyre production.” According to a company statement, Tatneft has implemented major investment projects in this field during the past few years, such as organizing the production of Kama-Euro passenger cars and light truck tyres using Pirelli technology and the construction of a new rubber-mixing complex.
The new plant, which Tatneft refers to as its “SSC Tire Factory” (SSS = Solid Steel Cord) reportedly allows the company to produce tyres which offer 8 per cent more weight capacity and “significantly reduce fuel consumption.” In addition, SSC tyres can reportedly be retreaded up to three times, thus extending potential life up to 500,000 kilometres, says Tatneft.
Pirelli is cooperating with a property developer on plans to build a housing estate on the site of its Burton factory’s former retail division. Developer St. Modwen Properties, who purchased a 21-acre plot from Pirelli in 2005 and a further nine acres in 2007, intends to construct around 200 houses on a 20-acre site.
Natural rubber cost increases of 60 per cent during the course of 2009 could force tyre manufacturers to increase selling 2 per cent. Current prices of US$ 2.4/kg (RSS3 grade, according to SICOM) compare with a recent low of US$ 1.5/kg last January, and US$ 3.2/kg in June 2008. Average prices reached US$ 2.3/kg in 2007, US$ 2.8/kg in 2008 and are expected to fall around the US$2.0/kg mark for 2009.
According to financial analysts at Deutsche Bank the recent surge is due to inventory build up from tyre companies; the weakness of the US dollar; and recent flooding in Indonesia, which is responsible for 15 per cent of the world’s natural rubber production. Writing in an investor’s note dated 13 October, the analysts reported that natural rubber costs represent approximately 8 per cent of sales of leading tyre makers. This equates to an estimated 550 million euros for 2009 in Continental’s case; 1.2 billion euros for Michelin; 60-65 million for Nokian Tyres and 400 million euros for Pirelli. Therefore if rubber stays at current levels the industry would have to increase selling prices by approximately 2 per cent to offset the added cost, say the analysts.
Shares in Pirelli Tyre parent company Pirelli & C SpA have risen four per cent to a one-year high on hopes that the company may focus more intensely upon its tyre business. The possibility exists that the Pirelli & C Real Estate SpA business unit could be detached from the company. "That would help it being seen as a pure tyre company, valued without the classic discount for holding companies," a trader told Reuters.
Reports from multiple news sources suggest that Pirelli is planning to shut its final-salary pension scheme in order to protect the company’s future. The closure would, according to the BBC, affect 743 staff members, all of whom would be eligible to join the defined contribution scheme open to new recruits to the manufacturer since 2001. Consultations with staff have begun, with a view to cancelling the scheme at the end of 2009.
In the five years Tyres & Accessories/Tyrepress.com has been publishing a dedicated e-Commerce feature, one of the most common themes has been the real need for an integrated approach to selling tyres online. Now this need is being answered with the introduction of the EDIWheel eBusiness standard into the UK, linking and automating the whole approach from stock availability through to invoicing.
The online tyre market is estimated to occupy a 4 per cent market share across Europe, however, the true potential for eBusiness in the UK tyre industry is yet to be fully realised for two main reasons. Firstly the amount of ordering websites that are not integrated with the dealer’s order processing systems or processes. And secondly, the absence of an agreed industry wide eBusiness standard for core business processes such as ordering and invoicing.
According to the group of collaborating tyre manufacturers involved, these issues are being addressed by key members of the tyre industry with EDIWheel (Electronic Data Interchange Wheel – wheel representing the distribution cycle and not a physical wheel) eBusiness standard which enables the automation of stock availability checking, ordering, order confirmation, dispatch advice and invoicing. Specifically, a forum hosted by TIF about EDIWheel for tyre manufacturers, software developers, dealers and wholesalers has been scheduled for mid-November.
Increasingly, observes Birmingham-based wholesaler, Bike Tyrestore, customers are registering for access to their online enquiry and order service, at ‘YOUR Online Warehouse’, where pricing and stock can be viewed, and orders placed at any time. “With 75 per cent of BTS customers now using this facility, they reckon it is certainly the way forward!” says BTS joint-MD Peter Smith. The company also offers a freephone number, over which the customer service team is on hand to provide support, and take orders, for next day delivery, up to 17:45 on Monday to Friday.
The latest Tyres & Accessories online brand equity survey analysis shows that, for the fifth straight year, Michelin is the most prominent online tyre brand by a significant margin. Michelin also came top in the sentiment index, which deducts negative mentions from the overall total. Despite it being the third year running that Michelin has attained the position of being both the most positively-referenced brand and the most prominent brand overall, it is worth noting that the margin of its lead has somewhat decreased compared with 2008. The top six most prominent brands remain the same as observed in the past four years, though with Dunlop dropping from third place in 2008 to fifth place in 2009. There remains a significant drop in relative prominence between the top six brands and the remainder, with the rankings of the bottom three brands remaining unchanged.
Workers at Pirelli’s plant in Carlisle have been given increased hours, according to local newspaper, News & Star, continuing that the Italian manufacturer has lifted its suspension of the ‘guaranteed week’ thanks to a “stabilisation” of orders in the European market. The company also sounded a note of caution, saying that the situation could fluctuate in the coming months with the market.
A Deutsche Bank analysis of the global tyre market in 2008 has revealed that the global top 11 tyre manufacturer’s share of said market has fallen considerably in this decade, while the market capacity has swelled to twice its value (not allowing for inflation) at the turn of the millennium – US$140 billion compared to 69.78 billion in 2000. In addition, the Global Big Three (Bridgestone, Michelin and Goodyear) have seen their market share dwindle to 46.2 per cent. In the four previous recordings, taken by Deutsche Bank at five-year intervals, their share had not dipped below 52.1 per cent. Analysts attributed the downward trend to the fact that they have a below average share of the markets that are growing most rapidly, such as China. The news is affecting Goodyear most of all, since they have reportedly lost three times more market share than either Bridgestone or Michelin.
Financial analysts are predicting that Michelin will benefit most from a margin recovery effect set to hit premium tyre manufacturers in 2010. According to Deutsche Bank, despite a significant negative volume effect, the leading tyre companies have been “very resilient” in 2009. This means they have benefitted form pricing discipline, raw material tailwinds (in the second half) and a positive OE/replacement mix. The analysts believe that next year’s volumes should rebound strongly from their low current level and, coupled with a leftover raw material tailwind and with restructuring paybacks, margins should rebound strongly. “Michelin should benefit the most followed by Pirelli. While Continental should benefit the least [proportionately] since tyres represent only 30 per cent of the group's revenues,” the investor’s note explained.
Although recent years have been challenging for the UK automotive industry, Birmingham remains a city steeped in automotive heritage. And, in the midst of some high profile casualties in recent years, BMTR says it is going from strength to strength and this year celebrates its 90th anniversary. The company clearly has some history, but is it the oldest in Britain? In order to find out, and in celebration of BMTR’s 90th anniversary, Pirelli Tyres UK exclusively through Tyres & Accessories is offering a case (that’s 12 bottles) of fine wine to any tyre dealer or wholesaler that can prove they are the oldest in the business.
Pirelli has been confirmed in the twice-yearly review of Financial Times sustainability indices FTSE4Good World and STOXX, for the seventh consecutive year. The indices measure corporate performance in terms of respect for international standards of economic, social and environmental sustainability. British independent research provider Eiris, working for the Financial Times, evaluated corporate characteristics including: sustainable supply chain management, ethical behavior rules, means of prevention and management of risk, environmental impact management and relations with stakeholders. The review did not admit new companies to the Automobiles & Parts segment of the indices, continuing to include Pirelli as the only Italian company included in that segment.
Continental AG’s tyre operations are “doing extremely well,” according to financial analysts. Writing in an investor’s note, Deutsche Bank analysts reported that the tyre business' 11 per cent (combined truck and passenger) operating margin in the first half of 2009 outperformed its rivals.
“Even if the group enjoyed a small 45 million euro positive impact from raw material (compared with a small negative of 19 million euros at Pirelli and a bigger negative of 117 million euros at Michelin), they enjoyed a double digit operating profit margin despite a high 20 per cent volume decline,” the analysts wrote.
Looking forward, Deutsche Bank predicted that the tyre operations will benefit from a positive raw material effect of (200 million euros) and from a volume recovery.
The analysts pointed out that tyre operations produce 48 per cent of Continental AG’s group revenues.
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