My reaction when I learned a Chinese tire company plans to buy Pirelli: “What took them so long.” Not that I thought Pirelli was being shopped. Maybe it was, maybe not—most 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 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 of China to capitalistic business decades ago, 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 less-costly Chinese tires eventually evoked a response by the United Steelworkers, which saw it as a threat to its members' livelihood at American-based tire plants. Twice during the Obama administration, government tariff action curtailed such imports—opening the door for the import of cheaply made tires from other countries not named China.
Additionally, the lobbying by strange bedfellows Titan Tire and the United Steelworkers has prevented 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, Bridgestone, Continental and others—including Pirelli—have done.
Among the 19 tire plants in 13 countries operated by Pirelli is a facility in Georgia—located in a city called Rome, of course—which 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 politics—chaotic.
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 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 deal goes through, China will have its first production foothold in the U.S. It will be no shock if it isn't the last.
Noga is a contributing editor of RPN and its former editor. He can be reached at [email protected].