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May 15, 2002 02:00 AM

Pirelli goal: double P-brand sales in 3 years

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    Milan, Italy (May 15, 2002) — Pirelli Tire North America Inc. (PTNA) plans to double sales of Pirelli brand tires in North America to about $500 million over the next three years.

    Company officials told about 50 dealers attending the Pirelli North American Partner's Meeting May 14-15 in Milan that the increased revenues will come from additional original equipment business as well as from expanded replacement sales.

    Pirelli, which is resuming management of its North American tire sales and customer service July 1 after ending an arrangement with Findlay, Ohio-based Cooper Tire & Rubber Co., expects to boost replacement sales by adding new distributors in the U.S. and through increased business from existing dealers, said Guy Mannino, PTNA president. Currently, the company has about 400 dealers in the U.S. and will focus all of its sales efforts through the dealer channel.

    Mr. Mannino also expects to gain sales through additional OE fitments on vehicles imported to North America as well as from new OE contracts with U.S. auto makers. He said Pirelli could announce an OE contract with one of the Big 3 U.S. auto makers by the end of this year.

    To support the company's replacement and OE efforts, Pirelli is launching a worldwide print advertising campaign called “Power in Safe Hands” that will break in the U.S. in June. While the ads will stress Pirelli's position as a manufacturer of top-line high performance tires, they also will discuss the safety of the company's tires.

    Pirelli officials also introduced two tires during the meeting. The P6 Four Seasons is an all-season high performance tire offered at both the OE and replacement levels. The PZero Nero is a high performance tire targeted at the fast-growing tuner market.

    During the meeting, dealers also toured Pirelli's MIRS (Modular Integrated Roboticized System) test facility in Milan. The tire maker is installing MIRS technology at a tire plant under construction in Rome, Ga.

    By the end of this year, Pirelli expects to have three MIRS production modules in operation at Rome, company officials said, with the entire production dedicated to the North American Market.

    PTNA's parent firm, Pirelli S.p.A., is targeting 4.5-percent annual growth by its tire sector the next several years, according to a three-year business plan presented to shareholders at the company's annual meeting May 9.

    The company will put even more emphasis on the high-performance end of the market, which also will include run-flat tires of Pirelli's own design as well as PAX-type tires done in partnership with Group Michelin, the company told shareholders.

    In particular, Pirelli executives expect the company to be able to leverage advances in technology—through its MIRS process—into higher sales. Pirelli said it intends to extend MIRS production to sport-utility vehicle and motorcycle tires.

    To achieve their goals, Pirelli executives are counting on “significant” increases in sales from the NAFTA region, which includes the U.S., Mexico and Canada; Pirelli's sales in North America have declined the past several years, sliding nearly 9 percent last year to $158.8 million.

    Along with expanding sales, Pirelli expects tire sector gross operating profits to grow 19 percent annually, and the net return on sales to rise steadily to 9.1 percent from 6.1 percent.

    For the first quarter of 2002, Pirelli's tire sector posted a 4-percent increase in sales to $665 million, based on a 2.6-percent rise in unit sales and a 5-percent gain in prices/product mix. These gains were offset by negative exchange rate effects, Pirelli said. Operating earnings were down slightly, to $47.4 million.

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