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.
Hankook Tire has concluded a 3-year agreement to supply Ford Motor with 140,000 VR-rated (up to 240km/hr) K105s tyres annually. The tyres will be mounted on the Ford Mondeo, a high-quality family car, and will bear the Hankook Tire logo. The export price, to include replacement tyres, will total 22 million euros over three years.
The global tyre market may be dominated by a handful of large players, with a number of “second row” players, followed by the rest of the world. The gap between the primary three and the fourth and fifth place manufacturers is considerable, and between the fourth and fifth and the rest of the market there is a considerable gap. However, the impact of the rest of the world on the market conditions enjoyed by the top five players is quite considerable. Tyre quality used to be such that there was a clear and distinct difference between the market leading brands of Michelin, Bridgestone, Goodyear, Pirelli and Continental, (and we must include Cooper here) and those of any of the other manufacturers. The reality though has been changing and increasingly brands from smaller manufacturers such as Toyo, Yokohama, Hankook, Kumho and latterly Federal have been increasing their market share by improving the quality of their products and building their brand image – often in the high performance sector.
Today, the market dominance of the key players is under pressure. Profitability is being eroded across tyre ranges by the increasing availability of low cost budget tyre brands. The commodity tyre requires no brand loyalty and sells on price alone. Thus, the high volume market necessarily targeted by the budget tyre manufacturers has largely become their domain. It has in essence been abandoned by the big brands. Yes, if you need a 155/13 from Michelin, or Goodyear you can still get it, but increasingly that tyre is being manufactured in a low labour cost centre in a joint venture with another tyre manufacturer who is also feeding his own budget tyres into the same market at a fraction of the price of the main brand names. If a big player is using a JV, or an offtake agreement in the Far East to fill commodity demands, he has surely all but abandoned that market. Indeed, if there is so little margin left in commodity tyres, if it were not for market shares, corporate egos, overall economies of scale and public relations where is the logic in continuing to offer branded commodity tyres?
The “great white hope” for the leading players, who have lost margins to the budget brands, is to develop a technologically advanced premium sector where quality and premium branding help create an exclusive market offering higher margins to the manufacturer, the wholesaler and the retailer. The high performance market offers just such an opportunity and the leading manufacturers are concentrating their efforts on the UHP sector in spades. Every new tyre launch is about UHP. Summer tyres, SUV tyres, winter tyres, all have an emphasis on the UHP market. Repeatedly the message is that the sector is growing in Western Europe and that it is destined to expand rapidly when Central and Eastern Europe follows the Western trend. However, it is not just a trend in Europe; it also follows in the USA – though perhaps surprisingly performance tyres account for only 13 per cent of the US market, whilst they amount to some 54 per cent of the European market according to Michelin; in Russia as an emerging market and in the Indian sub-continent – long ignored by the main brands as too poor an economy or too competitive a market. Here too the main brands are setting up camp and preparing to take market share from the domestic producers with high performance tyres. Pirelli being one of the first to see the potential and react with an improved sales operation.
Chinese President & Party General Secretary Hu Jin Tao visited the Hankook Tire plant in Huai-an, Jiangsu Province and talked to the workers. More than 40 other senior provincial officials were also on hand.
Pirelli and Alcatel have signed an agreement regarding the two companies’ submarine telecommunications business. Alcatel will pay Pirelli 52.5 million Euros for certain assets and intellectual property rights, while Pirelli will pay 45 million Euros for a five per cent shareholding in Alcatel’s submarine business.
Pirelli Tire North America is to increase prices of passenger car and light truck tyres from 1st June. All Pirelli branded tyres will be affected by the increase, which will vary by product offering but will average three per cent. PTNA President and CEO Guy Mannino blamed raw material costs for the increase, but added that they were lower than in other parts of the world because of manufacturing efficiencies made by PTNA.
Petter Solberg won the three-day New Zealand Rally in his Pirelli-shod Subaru Impreza, after taking the lead on the first day. He and teammate Mikko Hirvonen (who finishes 7th) both used the new KP tyre from the P Zero range, with KP4 tyres in the mornings, when conditions were variable, and changing to harder K2 tyres in the afternoon. Solberg’s winning margin after the 395-kilometre rally was six seconds and he now trails WRC leader Markko Martin by three points.
Pirelli has announced that it is to increase prices of tyres in all European markets, due to “considerable and unexpected increases in the cost of raw materials.” The increases will be between four and five per cent and will come into effect by June this year.
Pirelli’s P Zero Nero has emerged as the winner of a summer tyre test carried out by the German magazine auto motor und sport. Ten well-known brands in tyre size 225/45 R17 Y were tested. The Pirelli tyre was top points scorer in seven out of ten categories tested and performed particularly well in wet testing, scoring 99 out of a possible 100.
Back in 1990 or thereabouts Pirelli had just bought Armstrong and were busy launching their own 4×4 range and relaunching the Armstrong Tredloc Kevlar belted tyre for the 4×4 market.
The motoring press was busy telling the world that the 4×4 sector had peaked and would be on the decline by the following year. So much for the crystal ball gazing of the motoring press.
Today the 4×4 sector holds some 5 per cent of the UK market share – it may seem more as most 4×4 vehicles have a longer shelf life that their conventional counterparts, so probably hold a slightly larger share of the overall car parc. It would be interesting to know what the DVLA figures would be on that enquiry.
Throughout Europe there is no let up in the demand for 4×4 vehicles – even in markets where an off-road excursion could find the driver in serious trouble with the law. The 4×4 has developed from a serious tool for the military and agricultural sectors to a plaything and fashion symbol for the wealthy and the aspirational. Figures from Goodyear show that the utility sector of the market, the pick up and hard core 4×4 enthusiast has hardly shown any movement over the past four years, nor is it expected to in the coming years. The value market has dropped to a steady level at 90,000 units per year across Europe, the middle market too is stable. However, the luxury and crossover sectors of the SUV market are starting to show tremendous growth with the luxury sector doubling its volume from the 2000 figure of 101,000 units by 2007 whilst crossover vehicles will quadruple their volume in the same period it is these two sectors almost alone that will take the 4×4/SUV market from its current 706,000 units per annum to 840,000 units per annum by 2007.
In tyre terms this reads as growth in every sector – winter, S and T, and H and V rated, the market volume jumping from a total of 2,089,000 units in 1997 to 7,885,000 in 2007.
The two largest markets in Europe for 4×4 tyres are the UK and Germany, followed by Spain, Italy and France each having in excess of 10 per cent of the market. Scandinavia, Benelux, Switzerland, Greece, Portugal and Austria each have shares between 2 and 7 per cent of the market. With the whole of Eastern Europe taking only 4 per cent of the sector.
That 4 per cent for Eastern Europe suggests that, as with other sectors of the tyre market, the developing markets in Eastern Europe offer a phenomenal capacity for growth in this sector. In fact, if the move to car ownership in the East matches that ion the west, then the ultimate volume of the market could make Goodyear’s figures appear conservative.
Pirelli has been named “Supplier of the Year” by General Motors. This title is awarded annually for outstanding performances as a supplier to the car industry. “Pirelli is an example for a type of company with which we want to find our way to a world-wide leading position,” GM’s Bo Andersson said during the award ceremony last week-end in Prague. “With this award General Motors underlines the effectiveness of our market strategy in the United States and Northern America,” said Francesco Gori, general manager of Pirelli’s tyre sector.
Pirelli has exercised its option to acquire 0.46 per cent of the capital of Telecom Italia, the telecomunications group. The transaction involves the purchase of over 47 million ordinary shares at a price each of 2.12 Euro.
Pirelli has published its financial results for 2003, which show positive results from the company’s recent cost-cutting strategy. Group turnover was down slightly to 6.67 billion euro (2002: 6.72 bn), but turnover in the tyre sector rose from 2.86 billion euro in 2002 to 2.97 billion euro last year. EBITDA rose from 523 million Euro in 2002 to 628 million for the last year. The operation income is 268 million Euro (2002: 118 million Euro). Net profit increased form -405 million Euro in 2002 to +4 million Euro last year. Looking at the tyre sector, the turnover rose 11.6 per cent. 7.5 per cent of this was attributable to increased volumes and the remainder to improved prices and product mix, notably in the high performance sector. Operating income was 220 million euro (2002: 191 m); an increase of 15 per cent, while net profit was 129 million euro (78 m). Overall, prospects for 2004 are bright, says Pirelli as the company expects to continue reaping the benefits of its cost-cutting and simplification measures. In tyres, Pirelli is looking forward to yet further improvements, based on its continued focus on the high performance sector, predicted growth in the North American and Chinese markets and relocation of production to reduce costs.
A Dodge Ram SRT-10 has taken its place in the Guinness Book of World Records as the “World’s Fastest Production Pickup Truck”. Unmodified for additional power or enhanced aerodynamics, and using its original equipment Pirelli Scorpion Zero tyres, the Dodge Ram SRT-10 posted a two-lap, both-directions average speed of 154.587 mph over a “flying kilometer” on the 4.71-mile oval at the DaimlerChrysler Proving Grounds in Chelsea, Michigan. The record run by the Dodge Ram SRT-10 was certified by Guinness World Records and the Sports Car Club of America (SCCA). Filling the Ram SRT-10’s wheel wells for the record runs were production 305/40ZR22 XL 114W Pirelli Scorpion Zeros mounted on standard 10 x 22 inch alloy rims. These tyres have a maximum speed rating of 186 mph and are manufactured in Pirelli’s new factory near Atlanta, Georgia.
Anthony Ensor is returning to Pirelli Tire Inc. of Canada, where he began his career in 1985, as Vice President and General Manager. He has spent the past decade with Pirelli’s European operations in Italy, Germany and the UK. Ensor replaces Nicola Ruccolo, who has spent 28 years with Pirelli in Canada and North America, and who is leaving the company to pursue other interests.
Pirelli is to be the new official tyre supplier to the Volkswagen Racing Cup in the UK. All competitors in the 2004 championship, which gets underway in April, will run on Pirelli P Zero tyres. The Volkswagen Racing Cup joins the UK’s Seat Cupra Championship and the Pirelli Maranello Ferrari Challenge in using Pirelli tyres. The company also supplies its product to the American Le Mans Series and to GT teams internationally. Since its inception in 2000, the Volkswagen Racing Cup has grown to become one of the best-supported and most successful club championships in Britain. Last season more than 30 drivers took part, handling cars ranging in size from a 1.8-litre turbocharged Lupo to a four-wheel-drive Golf R32.
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