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Facts section: sales and pricing Planning ahead on a global scale

Pirelli sets aggressive sales goals through 2013

Pirelli & Cie SpA developed the plan; Pirelli Tire North America will help implement it. In 2010, the parent company released its aggressive 2011-2013 Industrial Plan, which calls for average annual growth of 8% and an earnings target of 11.5% in 2013.

Pirelli plans to accomplish this by increasing its focus on premium tires, especially in the replacement segment.

“What we call the premium market is broadening,” says Mauro Pessi, Pirelli Tire’s chairman and CEO. “We try to set the standard, (and) 70% of our business is in the premium standard.”

He defi nes “premium” more in terms of pricing than tire category. “Th e upper half of the market is where premium and ultra-premium live,” he says. It represents about one-third of the total market and is “less impacted” by a recession or slowdown in the auto sector.

Pirelli posted global tire sales of $6.2 billion in 2010, a 12.7% increase over 2009 (see Chart 12). In the U.S. and Canada, its tire sales were up 25%, compared to 15.5% overall for the top 11.

Th ree rounds of price increases by many of the tire manufacturers greatly helped the dometic sales fi gures. Taking the high-end of the increases into account, they averaged between 11% and 22.5% for the year.

Not all the price increases stuck, however. MTD estimates that the average consumer price increase was closer to 10% to 12%. Based on advertised pricing, some tire sizes experienced lower increases (see Chart 13).

Th e most popular advertised size was P175/70R13, which was predominantly marketed in newspapers around the country as a low-cost radial (LCR). Its average price was $50.91, or 7.3% higher than in 2009.

In regard to the U.S./Canadian rankings, it should be noted that companies with company-owned stores like Bridgestone and, to a lesser extent, Goodyear, have the advantage of counting retail pricing on tires through their outlets. Also, retreading revenue is included in the sales fi gures of Bridgestone, Goodyear and Michelin. ■

Chart 13 AVERAGE RETAIL TIRE PRICES ADVERTISED PRICES

Siz e Major brand LCR Average P205/65R16 $103.10 $65.10 $86.81 P235/75R15 $114.33 $87.06 $106.72 MEDIAN SELLING PRICES P205/65R15 2010: $89.79 2009: $90.47 2008: $91.95 P195/75R14 2010: $67.95 2009: $66.00 2008: $68.97 Chart 12

WORLD LEADERS IN NEW TIRE SALES (fi scal year 2010; in billions of U.S. dollars)

Company

1 . Bridgestone Corp.

2010 2009

$26.4 $22.9

2. Groupe Michelin $21.7 $19.5

3. Goodyear Tire & Rubber Co. $18.3 $16.3

4. Continental AG $9.2 $8.0 5. Pirelli & C. SpA $6.2 $5.5 6. Sumitomo Rubber Industries Ltd. $5.4 $4.6

7. Hankook Tire Co. 8. Yokohama Rubber Co. 1

9. Cooper Tire & Rubber Co. 10. Cheng Shin Rubber Ind. Co. Ltd. 2

11. Kumho Tire Co. Inc. $4.7 $3.8

$4.2 $3.5

$3.2 $2.8

$3.1 $2.7

$3.0 $2.2

12. Toyo Tire & Rubber Co. Ltd. 3 $2.5 $2.3

U.S./CANADIAN LEADERS IN NEW TIRE SALES (fi scal year 2010; in billions of U.S. dollars)

Company 2010 2009

1 . Bridgestone $9.2 $8.1 Firestone 2. Goodyear $8.0 $7.0 3. Michelin North $6.6 $5.8 America 4. Cooper Tire $2.2 $1.8 5. Continental Tire $2.0 $1.7 the Americas 6. Yokohama Tire Corp. 7. Hankook Tire America Corp. 8. Toyo Tire Holdings of Americas Inc. 9. Sumitomo Rubber Industries 4

10. Kumho Tire U.S.A. Inc. 11. Pirelli Tire North America $1.1 $.92

$1.0 $.83

$.85 $.74

$.76 $.64

$.73 $.57

$.54 $.43

1 Fiscal year ending March 31, 2011. Yokohama will change to a January-December fi scal year in 2012. 2 Doing business as Maxxis International. 3 Fiscal year ending March 31, 2011. 4 Sumitomo Corp. of America is run independently of Sumitomo Rubber Industries.