MIAMI—When Pirelli Tire North America and Cooper Tire & Rubber Co. formed their alliance a year ago, the two firms laid down a blueprint of what they wanted to accomplish in terms of distribution and cost-cutting. Many details needed to be worked out, including how the companies would position their brands and the transition of Pirelli's distribution to Findlay, Ohio-based Cooper.
Now the alliance and its multibrand offerings are complete and "the machine is ready to run," Giovanni Ferrario, worldwide CEO of Pirelli Group's tire operations, declared to Pirelli and Cooper dealers at their first-ever joint conference, Jan. 26-28 at the Eden Roc Hotel and Resort in Miami. Representatives from 150 dealerships attended the meeting.
Mr. Ferrario and other Pirelli and Cooper executives outlined the progress of the alliance and unveiled a multimillion-dollar advertising campaign to boost the Pirelli brand's image.
Logistically, Pirelli and Cooper have achieved almost 100-percent integration in their partnership, Carlo Bianconi, Pirelli Tire North America CEO said. Orders for all brands are now centralized at Findlay.
The companies' systems have been integrated, and their engineering teams have begun sharing information and working on a few joint projects, John Fahl, president of the Cooper Tire division, told the crowd. Cooper's three key logistics centers—in Moraine, Ohio; Albany, Ga.; and New Brunswick, N.J.—now stock Pirelli brands.
Cooper's distribution facility in Texarkana, Ark., also will carry Pirelli brands beginning in the first quarter of 2000, as will Cooper's Cedar Rapids, Iowa, distribution center during the second quarter, Mr. Fahl said.
The firms are "optimistic" about these integration efforts so far—particularly with the logistics centers, which they expect will keep fill rates up.
"Not everything is perfect," Mr. Bianconi said. "We are going to improve each and every month. This is not the full picture."
Mr. Fahl emphasized that Cooper's recent purchases of Standard Products Co. and Siebe Automotive were "not a matter of choice for us" but necessary for the company to become a global supplier in the auto parts business. He said those acquisitions complement Cooper's tire operations.
"I firmly believe we are a stronger company overall," Mr. Fahl said. "It is critical to our plan to be successful in the tire business. Tires are part of our heritage, part of our souls and a huge reason we're the fastest-growing tire company today."
A key component of the alliance is a three-tier, multibrand approach devised to give dealers the choice of mixing and matching brands along those tiers and honoring their territorial integrity, Mr. Fahl said.
"Cooper has never believed that manufacturers should dictate to dealers what to buy," Mr. Fahl said. "We want to put the dealer in control."
Carl Casalbore, director of Pirelli brand sales for Cooper, explained the strategy by showing that dealers can position Pirelli in the premium Tier 1, Cooper or Avon in the mid-range or Tier 2, and Starfire, Dean or Dominator in Tier 3. Brands used in Tiers 2 and 3 will vary according to local market conditions.
Neither Pirelli nor Cooper will mandate any quotas, and profits "will be the result of our ability to compete," Mr. Casalbore noted.
The tire makers' strategy and progress report satisfied dealers John Zisser and John Farkas. Mr. Zisser, owner of Zisser Tire & Wheel in St. Louis, said he has bought 600 units of Pirelli product for 2000—in contrast to 1999, when he bought minimal Pirelli product—all because of the alliance.
Mr. Farkas, president of Interstate Tire Distributor Inc. in Commerce, Calif., a retail and wholesale operation, has carried Cooper products for more than 20 years. He has decided to offer Pirelli tires for his customers for the first time.
"Pirelli is a new experience for us," Mr. Farkas said.
Conscious of its consumer image, particularly in the high-performance sector, Pirelli this year will launch a worldwide ad campaign to promote its light truck tire offerings for the sport-utility-vehicle sector.
The firm wants to create more profit opportunities for dealers beyond the high-performance market and grow its meager North American market share of 1 to 2 percent through the Cooper partnership, Pirelli executives said.
>From April through July, Pirelli will run national 30-second spots on cable TV—including CNN, ESPN, CNBC and Discovery—featuring Scorpion light truck tires, Mr. Bianconi said. The Sci-Fi, Comedy and Speedvision networks may also be added, a spokesman said.
The firm has discontinued its ad campaign featuring Brazilian soccer legend Ronaldo in favor of a more rugged approach.
One new commercial shows a deer, drinking peacefully from a stream, forced to flee suddenly as a stampede of Scorpion tires rolls down rocky cliffs through dirt, water and rough terrain. The spot ends with a lone Scorpion sitting on a high rock, as if it had conquered the land below.
The print version of the ads feature the Scorpion on the rock, as well as Pirelli's familiar slogan, "Power is nothing without control."
The print ads will appear in select enthusiast magazines, such as Truck Trends, European Car, Sport Compact Car and Sport Truck, the spokesman said. He declined to disclose how much Pirelli is spending on the campaign.
Pirelli and Cooper have developed ad packages for both TV and newspapers that dealers can customize in their local markets, the spokesman said.
Dealer reaction to the ad campaign seemed overwhelmingly positive. Bob Green, purchasing and marketing director for Reliable Tire Co. in Camden, N.J., said he was encouraged by Pirelli's marketing plans.
Mr. Green said he felt most consumers perceive Pirelli as a luxury product that's beyond their reach. He thinks Cooper can help change that image, particularly if Pirelli is more aggressive in marketing.
"Pirelli's focus this year has to be on marketing and creating relevance with the consumer," Mr. Green said. "Relevance is key."