AKRON-Pirelli Armstrong Tire Corp. is looking for an equity partner to help reduce costs and improve efficiency at its Nashville, Tenn., tire plant. The move, which would permit PATC to concentrate on the Pirelli brand while continuing to support and develop the Armstrong brand, is part of the New Haven, Conn.-based tire maker's strategy to ``change the direction of the company'' and return PATC to profitability in 1996, said President Giovanni Ferrario.
Mr. Ferrario, who joined the U.S. subsidiary of Italy's Pirelli Group six months ago, detailed the company's 1996 plans in a press briefing in Akron Jan. 23.
In addition to seeking a partner for the Nashville facility, PATC will:
Move its research and development operations from New Haven, Conn., to its Hanford, Calif., tire plant by the middle of the year;
Invest $40 million in the Hanford factory to boost capacity for Pirelli-brand tires by 60 percent and improve the semi-finished product area;
Build on Pirelli's 10-percent share of the high-performance and ultra-high-performance tire markets and expand Pirelli sales in all car and light truck segments, in part through the introduction of five Pirelli-brand tires in 1996 (four to be made in the U.S.);
Enlarge the company's distribution network primarily with the addition of large- and medium-sized dealerships and wholesalers to accommodate the anticipated growth in sales;
Place more emphasis on meet-ing and exceeding customers' expectations; and
Continue its companywide efforts to reduce production costs and improve efficiency.
PATC also will retain its Little Rock, Ark., bladder and tube plant, which Mr. Ferrario said was an integral part of its operations.
In his briefing with reporters, Mr. Ferrario admitted PATC has not kept pace with other Pirelli subsidiaries throughout the world and has ``faced some severe losses'' in the past one and one-half years. This was due, in large part, to a nearly eight-month strike by the former United Rubber Workers union in 1994-95, which crippled production at the company's two U.S. tire plants, resulting in product shortages.
``Our target is to recover the losses and change the direction of the company in order to come back to a reasonable position in terms of profitability,'' he said.
In a written message to employees in January outlining the company's strategy in 1996, the CEO reaffirmed the firm's commitment to the U.S. market and noted the company ``is putting in place a strategy to fully realize the potential of both the Pirelli and Armstrong brands.''
He called on employees to pull together as a team and to look for better and more efficient ways of doing their jobs.
``The company may encounter difficulty along the way, but if each employee does his best, they can help assure a secure future for the company, themselves and their families,'' Mr. Ferrario said in his message.
He added that extensive research by the company on the U.S. market shows the Pirelli brand as ``quite desirable.''
``We think all the premises for us to grow in this market (are there), provided we make the right choice and we focus on what we have to do,'' he said.
A key element of the company's game plan involves the Nashville plant, which produces primarily Armstrong-brand passenger and light truck tires, as well as private brand lines.
The plant has excess capacity and needs to become more efficient, Mr. Ferrario said, and one way to accomplish that is through a partnership with a third party.
The objective is to ``bring us synergies in terms of volume and new market opportunities,'' he said.
With the company focusing most of its available resources on the Pirelli brand, ``Pirelli Armstrong believes the way to fulfill its commitment to the Armstrong brand and to enhance its growth is to establish some form of agreement with third-party partners to work with it,'' Mr. Ferrario said in his letter to employees.
The company is reviewing possibilities and currently is talking with at least one company about such a partnership.
The arrangement could involve a majority or minority share in the facility, Mr. Ferrario said.
And it could mean the partnering company would take a stake in the Armstrong brand, a PATC spokesman said. ``We're not ruling it out,'' he said.
Regardless of equity ownership, PATC will insist on maintaining a significant participation in the plant, Mr. Ferrario said.
He expects an announcement could come by the end of the year.
In moving the company's R*&*D operations to the Hanford plant, PATC aims to shorten the time it takes to bring new tires to market, Mr. Ferrario said, as well as make certain that new product development is in line with capability.
The operation has 55 employees, but Mr. Ferrario expects some layoffs as a result of the move.
With fewer employees in New Haven, Mr. Ferrario would not rule out moving the company from its headquarters building to another site in the city.
Any decision, he stressed, would be considered only after the R*&*D move has occurred and the company's new structure is in place.
About 200 people now work at the headquarters.