Pirelli Sees Price-Hikes In Its Future
Will other tiremakers follow in their tracks?
by David Surace
This Monday, while we Americans were remembering our fallen vets, and experimenting with various pairings of grilled meat and domestic beer, Pirelli CEO Francesco Gori told Reuters at a press conference inside their factory in Germany that the tire company foresees a raise in product prices to compensate for the rising cost of tire-making raw materials, and the cost of getting them there.
It’s of note that these are the same raw materials other tire manufacturers have to use to make tires as well: petroleum-based plastics are used alongside natural rubber in most tire compounds, and most radial tires use several layers of polyester weave to act as the “ply” which steel belts serve to reinforce. Could Pirelli be the bellwether for increased tire prices across the board?
Said Mr. Gori, “We cannot exclude further price increases in the third or fourth quarter, especially in the dollar region,” the latter part rather ominously referring to the market in the States.
Any price increase would be a proactive attempt on the part of Pirelli to keep its tire business in the black and meeting its goals: the place where Mr. Gori spoke from, Pirelli Tire Germany, has set its annual revenue bogey at 1 billion euros, or $1.58 billion USD, by 2010. They’re almost there, too–last year they raked in 850 million euros (about USD$1.4 billion.)
But the precise timing of that statement is impeccable; despite Memorial Day being one of the busiest driving holidays of the year thanks to its almost nationwide acceptance as a three-day weekend, many folks here in the US simply changed their plans and drove less to avoid that other stinging cost-of-ownership issue–fuel consumption.
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