LAS VEGAS (Dec. 23, 2002)—In future corporate annals of Pirelli S.p.A., 2002 likely will be seen as a watershed year for its Pirelli Tire North America Inc. (PTNA) subsidiary.
If all goes according to the vision Pirelli executives have for the company, 2002 will be the year PTNA reversed a decade-long sales decline and laid the foundation for doubling sales in North America to $500 million by 2005.
Now, with all the pieces of its manufacturing, sales and marketing puzzle seemingly in place, the company needs to execute its plan, said Francesco Gori, managing director of Pirelli's tire sector worldwide.
Interviewed at the recent Specialty Equipment Market Association/International Tire Expo in Las Vegas, Mr. Gori and PTNA President Gaetano Mannino outlined the steps the company has taken to position its U.S. operation for a rebound.
“We have new products, we have the new factory and we have OE business,” Mr. Gori said. “We have, I believe, a few new customers. Now it's up to us really.”
The past year has seen enormous change at PTNA, Mr. Mannino said. He moved back to the U.S. in February from Venezuela (where he had been general manager of Pirelli's Venezuela tire operations) to take over the helm of PTNA. Then in April, the company moved its headquarters to Rome, Ga., the site of its new MIRS (Modular Integrated Roboticized System) tire factory, from New Haven, Conn.
Less than three months later, on July 1, the tire company officially ended its three-year sales arrangement with Cooper Tire & Rubber Co. that had the Findlay, Ohio-based company handling the sales and service of Pirelli brand tires in the U.S. Then on Aug. 17, the company started production at the MIRS plant with the second module going on stream Oct. 14.
In between, in mid-May, the company took more than 100 key U.S. dealers to Italy for the launch of the P Zero Nero high-performance tuner tire and the P6 Four Seasons high-performance tire and to court future business with them.
And finally, after years of trying, the tire maker announced in October that it had secured an original equipment contract in the U.S. to provide P6 Four Seasons tires to Ford Motor Co. for use on the Lincoln Town Car, Ford Crown Victoria and Mercury Grand Marquis. Saleen Inc. also has selected the Pirelli P Zero as original equipment on its production version of the Saleen Thunderbird Bonspeed Edition, set for introduction in spring 2003.
“It's been a very exciting year,” Mr. Mannino said. “We have so many things cooking.”
Mr. Mannino likened PTNA's situation to one of a newcomer because of its renewed focus on ultra-high performance tires, its regained independence from Cooper, its new products and the new MIRS factory.
“So I think we're in the driver's seat,” he said. “We have a very good opportunity to make a dent and continue with our strategy of doubling our market share in three years.”
To help supply tires to the North American market, Pirelli S.p.A. is adding radial passenger and light truck tire capacity to a factory in Bahia in the northern part of Brazil, Mr. Gori said.
This will be a traditional tire factory that will supply a new Ford Motor Co. Brasil Ltda. plant under construction in Brazil and also will export tires to North America. Having this production outside the U.S. will give the company flexibility, Mr. Gori said, noting that manufacturing and labor costs in South America are very competitive.
Pirelli has begun installing initial machinery in the new factory and expects to start delivering tires to Ford there in the last quarter of 2003.
“We always talk about MIRS, MIRS, MIRS. But on the other side you also need the good old traditional (tire making) process for the volume sizes,” Mr. Gori said.
Can PTNA double its sales in three years?
Mr. Gori thinks so. “I keep on saying it's not difficult to double at the level where we are,” he said. The additional contracts with auto companies, both in the U.S. and on imported vehicles, will give the company higher market share on the OE side of its business than on the replacement side, where Pirelli has a 1-percent share in the U.S.
The only worry, he said, is the overall growth of the tire market. This year, passenger and light truck tire shipments to the replacement market declined, he said.
“If the market would stabilize and eventually start going up maybe 1 or 2 percent, then what we target is feasible,” he said. “But if the market—for any reason I cannot understand today—would keep on reducing, then it would be tough on everybody.”
Overall, he said, the design of Pirelli in North America is for a company that will produce profits. “Of course we need a bit more business,” he said, “but the break-even point is low.”