HANOVER, Germany-Despite efforts to reduce costs and improve their operating efficiencies in North America, neither Continental General Tire nor Pirelli Armstrong Tire Corp. finished 1994 in the black, according to the year-end results of their Europe-based parent companies.
Increased sales and reduced overhead helped CGT improve its operating earnings last year 80 percent over 1993. But provisions for continuing restructuring left the company in the red on a net basis.
``For 1995, however, Continental General must produce a suitable positive balance,'' said Hubertus von Grunberg, chairman of CGT's Germany-based parent, Continental AG, commenting on the company's 1994 financial data.
The recently renamed Continental General Tire reached break-even last year on an operating basis, but recorded a net loss because of provisions for restructuring, Conti said.
Overall, North American sales rose 3 percent on 2-percent better passenger tire volume and 13-percent better truck tire sales.
The firm's sales in the first quarter of 1995 rose 5.7 percent to $1.85 billion. Further profit improvement will depend on Continental General's ability to raise prices in line with material cost increases, the company said.
In Europe, meanwhile, Conti management also warned that prices for both tires and industrial products would have to be raised again this summer. The company also said it would close as many as 30 of its unprofitable Vergolst retail stores in 1995.
Although the volume of tires delivered to both original equipment customers and aftermarket dealers in North America rose anywhere from 9 to 12 percent, CGT sales increased only 2.9 percent, to $1.36 billion.
Earnings before interest and taxes rose to $24.7 million, but the net still came up $6.1 million shy of break-even, the company said.
Globally, Continental's pretax earnings climbed 24 percent to $56.8 million in fiscal 1994, in spite of the effects of price competition and spiraling raw materials costs. Net earnings were slightly above 1993 at $23.4 million.
Sales grew 5.4 percent to $6.1 billion, although sales in the fourth quarter were up only slightly over the comparable 1993 period. Sales volume increased measurably more, reflecting the price situation.
Conti credits the results of extensive restructuring measures undertaken to cut costs for the earnings improvement.
Above average sales and earnings growth came from the Conti-Tech Holding non-tire group, where sales were 17 percent ahead of 1993, though much of the growth is attributable to acquisitions consolidated last year.
The commercial vehicle tires segment outperformed the passenger tire unit, both in Europe-where sales rose 6 percent and operating losses were reduced ``substantially''-and in North America.
Employment was down 3.4 percent at year's end to 48,583. Capital expenditures were off 17 percent to $317 million, for a spending ratio of 5.2 percent.
``Price increases of 3 to 4 percent for passenger car tires and 6 to 7 percent for commercial vehicle tires are in the pipeline for July/August, according to Wilhelm Schaefer, director of Conti's tire business. He said prices of original equipment tires also need to be raised, but did not divulge specifics.
Price hikes of 5 percent are needed in the non-tire products segment as well, said division director Peter Haverbeck.
A strike-induced 9-percent drop in production and the loss of sales from the divested farm tire unit in Des Moines, Iowa, combined to cut Pirelli Tyre Holding NV's sales in North America 25 percent last year, to $393 million, the firm's annual report reveals.
Despite the sale of the farm tire business and a reduction in employees and related overhead, the firm's U.S. unit, Pirelli Armstrong Tire Corp., was 11 percent deeper in the red on an operating basis last year, at $21.4 million.
The sales decline was particularly disheartening for Pirelli, the report said, because the North American market for passenger tires rose 4 percent last year to 236.4 million units.
``Our local operations. . . were not in a position to grasp these growth opportunities due to the ongoing industrial dispute and plant strikes, . . .'' the report said.
While sales were off overall, demand for Pirelli performance tires increased a ``flattering'' 12 percent, the company said, on par with previous years' performances.
The North American sales drop was more than offset by an improved performance in Latin America, where sales increased nearly 21 percent to $728.5 million, and operating earnings jumped 39.5 percent to $33 million.
Pirelli Tyre wrote down tangible fixed assets by $24.7 million to cover the sale of the Des Moines plant and Richmond Converters Inc.
At the same time, however, it increased its financial fixed assets by $17 million to reflect its ownership of 1 million shares of Titan Wheel convertible preferred stock, acquired in the terms of the sale of Des Moines to Titan Wheel Inc.
Overall, Pirelli Tyre reported a $2.2 million net group profit on sales of $3.02 billion.
The net result, though, was $19 million in the red as a consequence of earnings distribution to shareholders in Turkey and Brazil. Operating income rose 59 percent to $122 million.