The Business Year

Tomás Grávalos

MEXICO - Industry

Never Tire

CEO-Director General, Pirelli México

Bio

Tomás Grávalos, a native of Guadalajara, Mexico, received a Bachelor’s degree in Management from Malone University and a Master’s degree in Business Administration from Bowling Green State University. After a successful 33-year career with Goodyear, he joined Pirelli in 2007 as Vice-President of Marketing, Motorsports, and Original Equipment. Early in 2013, he was appointed CEO-Director General of Pirelli Mexico, and as such is responsible for all commercial and manufacturing operations. He serves as a trustee of The Motorsports Hall of Fame of America and is President of the Mexican Rubber Manufactures Chamber.

"F1 clearly creates the opportunity for Mexico to showcase itself to the rest of the world."

Pirelli’s worldwide revenue has risen by 6.8% compared to 2014. How has the market in Mexico contributed to that increase?

Pirelli México has contributed more than its fair share to that increase. We posted excellent results last year both in terms of the commercial and manufacturing operations, and 2014 exceeded our expectations. We continue to expand our in-country manufacturing capacity and by 2017 we expect to be producing at a rate of 5 to 6 million tires per year in Mexico.

What percentage of your production do you export to the US and Canada?

The volumes may differ because many cars exported already have our tires on them. About 80% of our production is exported. The math is still the same as last year, if you think of the NAFTA zone in terms of GDP with the US being 80% of the zone, Canada being 10%, and Mexico being 10%, and that is pretty much how our business operates.

How are you benefiting from Mexico’s rise in automotive manufacturing?

We enjoy the advantage of knowing that there are more of our global customers coming. We know that by 2020 Mexico will produce some 2 million more cars than it does today, which means we will need a significantly larger volumes of tires to meet those manufacturers’ demands. Mexico has numerous free trade agreements, which makes it convenient to sell cars to a wide range of international markets.

Have you signed any agreements with the new automotive manufacturers entering the market, on the strength of your strong relationship with other brands like Audi and Volkswagen?

We already supply the Volkswagen group, and we have a strong relationship with Audi worldwide, so it makes sense to continue that relationship here in Mexico. In addition, we already supply BMW, Chrysler, Ford, Lincoln, and Mercedes-Benz from this factory.

With the arrival of Goodyear, what are your views on competition and the replacement market?

The replacement market will continue modernizing. Today, much of the replacement market in Mexico is still in small rim diameter tires, but that will change as consumer buy new cars that are equipped with more premium tires, which is our strength. The arrival of new tire manufacturing plants in Mexico does not mean new competition because all of these companies were already importing tires for sale here. In fact, Mexico does not manufacture enough tires to meet local demand.

What are your expectations for the premium market segment?

Growth of the premium market worldwide, and in Mexico in particular, is outpacing the rest of the market, which is positive for us, being our main focus. For us it represents natural growth, and we also like to refer to it as a higher technology market because it is the market where our technological leadership clearly differentiates us from other tire manufacturers, which in turn creates customer loyalty.

What innovations have you have brought into the premium market in 2014?

Tire development is an evolutionary process, and there are often no visible changes. Tires remain round and black. That being said, the evolution we are seeing today is internal, and it comes in the form of materials and compound formulation. The most difficult part is the process technology. It is relatively easy to develop something in the laboratory, but much harder to take that laboratory experiment and repeat it on an industrial scale. In our case it would involve annual production in excess of 60 million tires. High technology with a quality-control system in place ensures that the tires we produce perform exactly as designed. Our factory in Mexico enjoys numerous benefits that are derived from being the newest facility in the group. We have received the funding to install cutting edge technology. In addition, we have advanced, state-of-the-art laboratories for extensive R&D work.

How do you think Mexican SMEs are benefiting from investment in Mexico?

Any time a major enterprise enters a market with world-class quality control, technology, and auditing systems, it obliges local companies to meet their standards, which has a positive effect. At Pirelli, we audit our suppliers to make sure they are performing at our high standards, and to make sure they remain socially responsible enterprises. We will not do business with suppliers who do not meet our standards. The added benefit of local suppliers is the shorter the supply line with less logistical risks for the involved materials. If you measure our presence in total, we are within the 30% range of local suppliers and actively seeking more. In fact, it is a main charge I have given to the purchasing team.

What opportunities has Formula One brought to Pirelli and the country itself?

For the country, it clearly creates the opportunity for Mexico to showcase itself to the rest of the world. For us it will be an opportunity to further differentiate ourselves from competitor tire brands in Mexico, since we will be the only tire brand at the track. And since this will be the first F1 race held here in 23 years, even those who are not major fans will likely watch the race and see our tires in action. We will be supplying all tires to all participating teams. We will have extensive track signage to maximize our visibility; this will all be topped off with a celebrity attendance. We will also be staging certain local promotions typical of a major race. And there will be at least one, if not two, Mexican drivers participating in the race.

What are your expectations for Pirelli for the year ahead?

We will increase production by more than 50% versus 2014 and will also realize double-digit growth in our commercial business, with market share gains in both the original equipment and replacement markets. In addition, Formula One will clearly have a positive impact on our business, which we will benefit from in the years to come.

© The Business Year – June 2015

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