LAS VEGAS—Pirelli Armstrong Tire Corp. is looking at 1997 as the year it begins growing again. ``We've done the actions. We've been through the restructuring period. Now it's time to take out all the excuses,'' President and CEO Giovanni Ferrario told 200 independent tire dealers attending the company's 1997 North American Business Convention and new product launch, Jan. 13-16 in Las Vegas.
In a ``state-of-the-company'' address, Mr. Ferrario said the major issues the tire maker has faced in recent years are now mostly resolved and that selling the Pirelli brand is again an ``opportunity'' for dealers.
``The availability (of tires) will be there; the capacity is there,'' he said. ``We just need orders.''
In his speech, Mr. Ferrario outlined some of the steps the company has made, and is making, to return the New Haven, Conn.-based firm, part of Italy's Pirelli Group, to profitability.
Focusing 100 percent of the company's efforts on the Pirelli brand and eliminating the 85-year-old Armstrong line, replacing it with a new brand—Formula—a low-priced, entry-level line to be sold as part of the Pirelli package.
Investing in and sourcing tires from a Pirelli plant in Venezuela, which will supplement production at the company's remaining North American tire plant in Hanford, Calif. This follows PATC's closing of its Nashville, Tenn., tire plant last November.
The Venezuela facility will become a strategic part of the North American system, Mr. Ferrario said, and will provide the company with a source of competitively priced tires.
In addition, the plant will help stabilize production at Hanford, allowing the U.S. facility to operate more efficiently.
Completing, by mid-1997, a $50 million capital investment, begun in 1996, at Hanford to increase capacity, upgrade machinery and improve the plant's layout. Also at the plant, Mr. Ferrario has created an international team of top Pirelli technicians to ensure the facility operates at a level equal to Pirelli's best plants worldwide.
Offering a complete line of passenger and light truck tires designed for the North American market, including two new tires unveiled at the meeting—the P6000 SportVeloce, an all-season high performance tire, and the Scorpion A/T light truck tire.
Continuing the company's focus on distributing tires through three retail channels: independent tire dealers, mass merchandisers and wholesale clubs.
``Our aim is to become stronger and stronger in the dealer channel,'' Mr. Ferrario said. As such, PATC has created several programs to help dealers increase their Pirelli-brand business, although not necessarily at the detriment of another supplier, Mr. Ferrario said.
The goal is to help dealers increase their dealership's sales by 10 percent.
``We are small in this market, so what we will do is to work with you,'' he told dealers. ``We will try to find new ways for both of us to (create) new business opportunities.''
Another key to the company's future will be supplying tires that the market needs, not just pushing the tires the company produces, he said.
Trying to get dealers to sell what the company produces is wrong, he explained. ``We are here to sell you what you need,'' he said.
This, Mr. Ferrario said, is more important than how many plants the company operates. ``The key question is: `Are we able to create a logistics structure that is able to support your needs in type and quality,' '' he said.
Mr. Ferrario admitted the PATC story, up to now, has not been one of success. But he is cautiously optimistic that is about to change.
Since arriving a year and a half ago from Italy, Mr. Ferrario said he has reduced PATC's fixed costs by 20 percent, moved the firm's research and development operations to Hanford to be closer to the plant, closed the money-losing Nashville factory and simplified the company's organizational structure to be closer to the market.
He's also ``renewed'' the firm's relationship with the United Steelworkers of America union following a devastating eight-month strike that ended in March 1995.
``I think we are all in the same boat,'' he said of the union and the company. ``We have to row in the same direction, so you can't compete with the union.''
Mr. Ferrario said the company now has a defined long-term strategy in North America, and the firm's employees are again having fun.
``When you have enthusiasm, when you have fun and when you have action, then the results start to come,'' he said.
All these moves are aimed at returning the tire maker to the black, something which didn't occur in 1996.
But PATC did move closer to that objective. The firm cut its loss from the year before by more than half, on sales of $300 million, Mr. Ferrario said, while reaching all of its targeted goals.
Projections call for more losses early in 1997 as well, but by the end of the year, the PATC leader expects the company to begin reporting positive monthly results.
Dealers attending the meeting seemed favorably impressed with the company's actions and direction.
Carl Thiele, tire manager for Vorderman Motor Works in Fort Wayne, Ind., said he felt upbeat about the meeting. ``They didn't spare anything,'' he said. ``The meeting was very informative and a nice atmosphere to get together.''
Barry Steinberg of Direct Tire Sales in Watertown, Mass., called it rare when a company will admit it has problems. ``Pirelli has taken a stand, said it's had problems and still has problems, but they have a plan and they're asking us to buy into the program.
``And I'm confident that they're focusing on the 21st century, whereas a lot of their competition is not focused on the future.''
Mr. Ferrario made it a point in his speech to thank the dealers for their support during what he called a difficult period for the firm.
``We have not always been in line with your expectations, so now it's our turn to give you the commitment,'' he said.