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March 31, 2015 02:00 AM

TB EDITORIAL: Pirelli deal — a cultural test tube

Tire Business Staff
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    AKRON (March 31, 2015) — China National Chemical Corp.'s surprising agreement to purchase a 26.2-percent share of Pirelli & C. S.p.A. as a stepping stone to launch a bid to acquire control of the Italian tire maker is an exciting development that is sure to shake up the global tire market.

    In making this move, ChemChina, as the company is known, ultimately could become the fifth largest tire maker in the world and the largest Chinese tire manufacturer by far.

    It also would give ChemChina access to Pirelli's sophisticated technology and opens the tire company to expansion across the globe, particularly in Asia, where it still has a relatively small presence.

    It is a formidable pairing that will provide Pirelli with greater assets to compete against such larger firms as Group Michelin, Bridgestone Corp., Goodyear and Continental A.G. Coupling ChemChina's industrial tire holdings, including medium truck, agricultural and industrial tires, with those of Pirelli also would create a business with an annual capacity of about 12 million commercial/industrial tires.

    That said, let's face it — this would also be a merging of strange bedfellows.

    Throughout its 100-plus-year history, Pirelli has prided itself on its Italian heritage. It has spent billions on developing state-of-the-art technology and promoting itself as a maker of premium tires that are worthy of fitment on the world's finest automobiles.

    How that culture will mesh with a state-controlled Chinese owner is the question that will loom over this pairing.

    Historically, this has been an issue in any tire industry takeover or merger, including with Pirelli.

    In the U.S. Pirelli struggled and ultimately failed to leverage its 1988 acquisition of the former Armstrong Rubber Co. into something on a larger scale. Before it was over, Pirelli had divested itself of nearly all of the former Armstrong tire holdings and stopped manufacturing Armstrong tires.

    The companies were simply too different to make it work.

    Ten years later Pirelli tried again, this time joining forces with Cooper Tire & Rubber Co. in a move to boost sales and cut costs. That plan called for Cooper to take over sales and distribution of Pirelli passenger and light truck tires in the U.S., Canada and Mexico, and for the companies to cooperate on raw materials purchasing.

    That venture, too, was short-lived, the victim, in part, of trying to merge two vastly different product lines, approaches to market and customer bases.

    We wish ChemChina and Pirelli great success with their proposed combination. There's no doubt the two companies can do business together. The question is whether their diverse cultures can mesh — and thrive.

    This editorial appears in the March 30 print edition of Tire Business. Have an opinion on it? Send your comments or a letter to the editor via email to [email protected].

    Related Articles
    Creating solid truck tire unit key to ChemChina deal — Pirelli CEO
    Italian investor to sell minor Pirelli stake
    Letter
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    Do you have an opinion about this story? Do you have some thoughts you'd like to share with our readers? Tire Business would love to hear from you. Email your letter to Editor Don Detore at [email protected].

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