PASADENA, Calif.-1994 was to have been the year Pirelli Armstrong Tire Corp. made good on long-standing promises to improve the level of service to its independent dealers-providing them the products they needed when they needed them. It didn't work out that way. But it could have, had it not been for the devastating impact of a strike that began in mid-July.
That was one of the messages PATC President Paul Calvi and his senior management team wanted to deliver at this year's Pirelli Armstrong dealer conference, Jan. 28-31 at the Ritz-Carlton Huntington Hotel in Pasadena.
Instead of celebrating a record year, Mr. Calvi et al. were obliged to again thank dealers for their continued patience and loyalty in the face of product shortages, and to try to persuade them that PATC is building the kinds of products, programs and support that will make 1995 the turnaround year 1994 wasn't.
The information they provided and the initiatives they announced certainly helped make their case:
Prior to the strike, 1994 sales of Pirelli and Armstrong tires were running ahead of the company's goals for the year;
Tire production at the company's plants in Hanford, Calif., and Nashville, Tenn., should reach pre-strike levels in February and continue to increase;
PATC will invest $100 million in 1995 to improve plant capacity and product quality;
The company plans to launch six Pirelli tires in 1995, including its high-mileage, wet-traction tire, the P400 Aquamile, and an all-season, Z-rated, ultra high performance tire, the P7000. It also will debut two new Armstrong tires: the high performance Formula V and the Formula APT light truck tire;
In March, PATC will kick off the largest advertising campaign in its history, featuring U.S. track star and Olympic gold medalist Carl Lewis in TV and print ads emphasizing the firm's new theme: ``Power is nothing without control'';
The company is negotiating with a major trucking company to provide dedicated transportation service from three PATC distribution centers, with a goal of filling 80 percent of a dealer's order within 48 hours;
The Pirelli brand will for the first time compete in a major North American race series, outfitting the Scandia Motorsports team of Ferrari 333 SPs in the IMSA World Sports Car Championship, a 15-event series that begins in early February with the 24 Hours of Daytona (Fla.);
PATC will launch two promotions to generate interest in and excitement about the Pirelli brand-the Pirelli Performance Challenge for dealership personnel, and the Pirelli Performance Sweepstakes for consumers-featuring grand prizes that include ``fantasy'' trips to top sporting events and a 1995 BMW 540i;
To improve communication with dealers, the company has resurrected the Pirelli Newsletter, a quarterly publication; and
Dealers will receive new point-of-sale materials focusing on new products, the new ad campaign and new original equipment fitments, as well as a new program of Pirelli sportswear and merchandise.
Pirelli's OE presence in the U.S. has to date been limited to its appearance on imported vehicles, but there were indications that might change. Though unwilling to provide any specifics, several top PATC executives made statements to the effect that the firm is very close to securing its first contract to supply OE tires in North America.
But what seemed uppermost in Pirelli executives' minds was the event that has consumed the bulk of their time and energy-the strike and its impact.
For six and one-half months, PATC was well on its way toward the kind of pivotal, turnaround year it had forecast for 1994.
Then on July 15, the unionized work force at the company's three U.S. tire plants walked off the job, bringing to a virtual standstill production of all Armstrong-brand tires and key Pirelli-brand lines developed exclusively for the North American market.
Subsequent negotiations with the United Rubber Workers union produced no results, and in September PATC began replacing the striking workers.
By year-end, production at the company's passenger and light truck tire plants in Hanford, Calif., and Nashville, Tenn., was approaching 90 percent of pre-strike levels, according to Joe Denton, PATC vice president of manufacturing, but the damage already had been done: The two plants achieved only 61 percent of their targeted production for the year. (PATC's third plant-its farm tire factory in Des Moines, Iowa-was sold just after the strike began.)
According to Alan Bennett, vice president of sales and marketing, product shortages resulting from the strike forced virtually all Pirelli Armstrong dealers to add other brands and/or emphasize other products.
Sales of Pirelli-brand tires, which before the strike were running 23-percent ahead of 1993 levels, finished the year up just 7 percent, he said. The company's goal had been a 20-percent improvement.
Only the ability to import certain lines from Europe and Brazil and the quicker return of the Han-ford plant (site of most U.S. Pirelli-brand production) made this more modest increase possible, he added.
Sales of Armstrong passenger tires plunged 24 percent for the year, Mr. Bennett said.
PATC had set a goal of boosting sales of the newer Armstrong lines (introduced in 1992 or later) by 91 percent. Pre-strike sales of these products soared 95 percent over 1993, but in the strike's wake managed just a 15-percent increase for the year.
``The strike virtually killed the Armstrong brand,'' Mr. Bennett said, necessitating what amounts to a relaunch in 1995. The goal is to boost sales of Armstrong passenger and light truck tires 43 percent.
``If all goes well, we'll achieve our '94 goals for the Armstrong brand in 1995,'' he said, adding that the Armstrong brand plays the role of value brand to Pirelli's premium brand position. ``Armstrong is a tool used to further support Pirelli dealers.''
The goal for the Pirelli brand is a 24-percent increase in unit sales in 1995, Mr. Bennett said.
Mr. Calvi was anxious that dealers understand that PATC had not wanted a strike-and certainly had not planned it. ``We practically begged the union not to walk out,'' he said.
PATC had been ``transparent'' and honest about its motives for seeking contract changes, he said, including the fact that PATC's production costs were 10 percent higher than the industry average.
PATC entered negotiations seeking lower labor costs and greater work-force flexibility, Mr. Calvi said, but found the union completely unwilling to compromise on its insistence on a 20-percent wage increase and an agreement in line with the ``pattern'' established between the URW and Goodyear.
In deciding to permanently replace the strikers and restaff its tire plants, PATC has met its goals for lower labor cost and greater flexibility. In the current non-union environment, job classifications have been reduced from 60 to 2 and the number of operating days per year increased from 250 to 350, Mr. Denton said.
Looking to the future, ``We've got good products and exciting new programs,'' Mr. Calvi said. ``We know we're close to our last chance (to make good on our promises to our dealers).''