Pirelli Tires and Cooper Tire & Rubber Company (NYSE: CTB)
announced the formation of a strategic alliance. Set to begin
immediately, this new venture will effectively combine the best
resources from the worlds sixth and eighth largest tire
companies to improve their competitiveness through a multibrand
strategy in the North and South American replacement tire markets.
Capitalizing on Pirellis technological capability and
expertise in the performance tire arena along with Coopers
dealer relationship and manufacturing efficiency, the new venture
will enhance the global position of both companies. Particularly,
Pirelli will strengthen its Original Equipment business thanks to
the addition of new platforms on vehicles destined to the North
American market, and in the future expects to begin providing tires
directly to Original Equipment manufacturers in the USA; moreover,
Pirelli will continue to develop innovative products for the North
American market and strengthen its brand awareness by increasing
advertising and motorsport programs.
Cooper will manage the distribution and sales of all Pirelli
passenger and light truck tires in the U.S., Canada and Mexico
replacement markets. Future plans include an agreement for Pirelli
to distribute and market Cooper brand tires in South America.
In announcing the agreement, Giovanni Ferrario, CEO Pirelli Tires,
stated: “We are pleased to join forces with Cooper, one of the
leading independent tire companies in the world, in a plan to
improve market penetration for both companies in North and South
America. Our strengths combined will make a formidable force in the
tire industry in the above areas. This move confirms our mission to
create value to our shareholders through a strategy based on
geographic alliances and on technological partnerships which truly
strengthen the competitive capacity of our corporation”.
Patrick W. Rooney, Cooper’s chairman and CEO, was emphatic about
the strategic fit: “While the trend in business today is to focus
on assembling critical mass, we believe this arrangement will allow
us to maintain complete flexibility in meeting the demands of our
customers, will provide maximum returns for shareholders and yet,
combine resources for successful global market penetration. This is
a well-structured plan to help both companies achieve more success
in the 21st century.
As our industry continues to consolidate, strategic alliances are
the ultimate way to maintain independence and continue to be a
competitive factor in the market”.
Thanks to the extensive retail network provided by the joint
venture, Pirelli plans to nearly double its Pirelli branded tire
sales and production in the NAFTA market over the next three years.
Cooper will act as an agent of Pirelli Tire North America and will
aggressively market their complete tire line including ultra high
Cooper anticipates a sales increase for Cooper-produced tires as
new relationships are developed with Pirelli customers. The new
venture will also benefit from global purchasing synergies by
helping to optimize raw material costs for both companies.
The joint venture, based on contractual arrangements only and with
no joint share holding, will create synergy using the talents of
both companies. Pirelli will contribute its leading-edge
performance tire technology which will be supported by new
investments aimed at improving capacity output and cost
competitiveness at its Hanford manufacturing facility. In addition,
Pirelli will provide leadership in the high performance and ultra
high performance segment of the market which specifically fits the
need for domestic and imported luxury and sports cars and SUVs.
Pirellis unique brand awareness and upscale image will also
be positive factors in the new venture.
Cooper will bring its extensive distribution network system,
including its warehouses and logistic capabilities, its leading
relationships with independent tire dealers, wholesalers and
retailers, a highly respected sales force, and its expertise in
manufacturing efficiency to Pirellis Hanford, California
facility. In South America, Pirellis historical presence and
outstanding leadership will offer Cooper the opportunity to
penetrate one of the fastest-growing passenger tire markets
worldwide, through its extensive distribution system and overall
knowledge of the South American market.
Pirelli Tires is one of the world’s top six tire manufacturers,
with 1997 sales of roughly US$ 3.2 billion, 23 factories with over
21,000 employees in 9 countries, and has a marketing network
covering over 150 countries around the world. The Sector’s product
range is one of the most complete in the industry, comprising tires
for passenger cars, light and medium trucks, off-road vehicles and
The high-tech image enjoyed by the Group internationally stems from
extensive research activities carried out in its centers in Italy,
Germany, Brazil and the United States.
The market and the automotive industry have recognized this
leadership, awarding Pirelli the distinction of having all the
major world’s car manufacturers today fit Pirelli tires as original
Cooper Tire & Rubber Company, founded in 1914, is the eighth
largest tire manufacturer worldwide and fourth largest in the
United States with sales of almost $ 1.9 billion. With more than
10,000 employees, Cooper specializes in the manufacturing and
marketing of rubber products for consumers.
Products include automobile, truck and motorcycle tires; inner
tubes; vibration control systems; automotive sealing; hose and hose
assemblies. Cooper markets its products in more than 100 countries
to automotive manufacturing companies, independent tire dealers,
wholesale distributors, mass merchandisers and large retails
Facilities include 12 manufacturing locations and 14 distribution
centers worldwide. For more information on Cooper Tire, visit the
company’s web site at www.coopertire.com.