My reaction when I learned a Chinese tire company plans to buy Pirelli & C. S.p.A.: What took them so long?
Not that I thought Pirelli was being shopped. Maybe it was, maybe notmost companies, especially big, publicly held ones, can be had if an enticing enough offer emerges.
No, I thought that by now, some Chinese company already would have bought up one of the big boys of the tire industry. China National Tire & Rubber Co.'s (ChemChina) plan to purchase the world's fifth largest tire maker comes as no surprise.
The Chinese tire industry is enormous. Its domestic appetite for tires, of course, is huge, and from the opening decades ago of China to capitalistic business, all the major tire makers have jockeyed for a piece of that action.
An even bigger impact China has had on the U.S. market has been the import of Chinese-made tires for the aftermarket. The massive influx of lower-priced Chinese tires eventually evoked a response by the United Steelworkers (USW), which saw it as a threat to its members' livelihood at American-based tire plants. Twice now during the Obama administration, government tariff action has curtailed such importsopening the door for the import of low-priced tires from other countries not named China.
Additionally, the lobbying by strange bedfellows Titan Tire and the USW has prevented certain Chinese-made OTR tires from seizing the market, via punitive duties.
Want to avoid antidumping duties, especially in the U.S., as well as elsewhere in the world? Become a domestic tire maker, such as Michelin North America Inc., Bridgestone Americas, Continental Tire the Americas L.L.C. and othersincluding Pirellihave done.
Among the 19 tire plants in 13 countries operated by Pirelli is a facility in Georgialocated in a city ironically called Rome, of coursewhich opened 13 years ago, and a three-year-old factory in Silao, Mexico. Now won't that help a new NAFTA-friendly Chinese owner?
Pirelli always has been an interesting and, well, unusual tire maker. Its high-performance tires as far back as I can remember have been considered top shelf. Its corporate structure and a number of its business deals seemed to reflect traditional Italian politicschaotic.
Remember the long-ago Pirelli-Dunlop combination? A flop. Pirelli's attempt to buy Firestone during the Buy American (tire companies) era failed. The Italian company got Armstrong Rubber Co. as a consolation prize, then ran that business into the ground. Pirelli hit its low point in this country when it tried to sneak out of its pension obligations. The courts said, Uh, uh.
Ah, but Pirelli got its act together, revived its fortunes in NAFTA with factories in the U.S. and Mexico, and it always made those well-thought-of HP and ultra-HP tires.
Assuming the ChemChina deal goes through, China will have a production foothold in the U.S., because Giti Tire Group is already building a plant in South Carolina.
Edward Noga is a contributing editor to and former editor of Rubber & Plastics News, an Akron-based sister publication of Tire Business.