AMSTERDAM, Netherlands-Pirelli S.p.A. is ``relaunching'' itself as a niche player, aiming for a fast time to market, more product introductions and a multi-brand strategy. Speaking at the launch of Pirelli's latest high performance tires, the ``P Zero System,'' CEO Marco Tronchetti Provera revealed the results of the company's top strategists' deliberations in the two years since Pirelli's bid for Continental A.G. collapsed.
Pirelli plans a three-year project, beginning this year and running through 1996, to relaunch the group, during which it plans to spend $840 million on capital projects and an additional $540 million on research and development.
In tires, Mr. Tronchetti said the company is raising more than $600 million in fresh capital, intends to address new markets in Asia and eastern Europe and aims to halve its product development cycle-to about 18 months-for tires destined solely for the replacement market.
Pirelli S.p.A. shareholders will be asked in May to approve new convertible debentures worth up to $610 million, as well as authorize an increase in the firm's share capital by $305 million.
Between one-fourth and one-half of the new funding will be used to take up Pirelli Group's portion of the new shares Pirelli Tyre Holding intends to issue, pending approval by its shareholders at its May 16 annual meeting.
Pirelli Tyre wants to raise close to $275 million by issuing 31 million new shares at a discounted price. This is PTH's second capitalization plan in less than two years. The firm doubled its equity base in mid-1993 by issuing 46.5 million new shares at a par value of $5.60 per share.
The V-/Z-rated ``P Zero System'' is described as a ``system'' because tires for the front positions are different from those in the rear. The front tires are directional for improved water evacuation, while the rear tires are asymmetric for better torque transfer.
The tire features a silica-based, low-rolling-resistance tread compound and aramid bead wires.
Already available to some automakers for original equipment, the P Zero System should become available to the aftermarket worldwide during May, according to Carlo Banchieri, deputy general manager, products, at Pirelli Tyre Holding.
Francesco Gori, marketing director at PTH, said customer loyalty to the OE tire brand is declining for mid-range automobiles, calling the value of that business increasingly into question. So while Pirelli intends to remain ``Original equipment on the world's finest,'' the company is less inclined to fight for OE contracts on more mundane models.
Instead, the company will continue to strengthen its multi-brand approach and work to shorten product development cycles for replacement tires, in order to respond more quickly to emerging market niches, such as light truck and off-road.
Europe correspondent Bruce Davis also contributed to this story.