Pirelli to review European supply/demand imbalance
In its most recent report on market trends, Pirelli’s figures showed car and light commercial vehicle volumes in Europe to be down 13 per cent year-to-date in the OE segment and 10 per cent in the replacement business. While separate information for premium tyres is not given, on 5 April Pirelli stated that in response to the economic crisis in Europe and its impact on demand for premium tyres, it is “carrying out a significant review of its commercial structures” in the European market. The Italian tyre maker says this review entails, among other things, more closely integrating its high-end tyre production capacity in Europe with those markets where demand for premium products in highest. These markets are presumably the US and rapidly developing markets – areas where Pirelli says demand is growing approximately three times faster than overall global demand for passenger car tyres.
Pirelli doesn’t precisely set out what it has in mind regarding integrating capacity with demand, and although an industry source told Reuters (Pirelli studying plan to offset weakening European demand, published 7 April) that the company intends to ship European-produced premium tyres to markets where demand is growing and absorb the extra transport costs through lower margins, the same Reuters article shared comments made by a second person familiar with the matter, who is reported as saying “Pirelli had no plans to cut production or close factories outside of Europe.” This comment, by means of deduction, leaves the option of cutting production or closing plants within Europe completely open.
The Italian firm is not the only tyre maker to re-evaluate its European business. As Tyrepress.com reported on 26 March, French newspaper Les Echos quoted Michelin’s passenger car and light truck products division director Florent Menegaux as saying the tyre maker “does not exclude anything” in its response to recent market evolution. He added that Michelin is experiencing overcapacity in Europe, and it appears the French manufacturer met with union representatives in early March to discuss the future of factories in its homeland. Earlier in the year, analysts at Deutsche Bank also named Goodyear as a company considered likely to restructure its EMEA region business during 2013. Indeed, upon releasing its fourth quarter 2012 results (which contained poor EMEA sales), Goodyear said it was taking further steps to “return its business to historical margin levels” within EMEA. In January, the tyre maker committed itself to exiting the agricultural business within the region.
Pirelli’s comments on reviewing its European commercial structures were made in the context of the announced postponement of its 2013-2017 Industrial Plan presentation. This was originally scheduled for 8 May but will now take place in November. “The decision was taken to provide better visibility on the context of reference and enable the preparation of coherent medium-to-long term forecasts, taking into account that the macro-economic and business context in which Pirelli operates is in significant and continuous evolution, more markedly so in recent times,” stated the Italian manufacturer. It added that its 2013 targets, announced on 11 March, remain unchanged.