Peled: M&As a big deal for tire industry

Hanover, Germany – Merger & acquisition (M&A) activity has had a significant impact on the development of the tire manufacturing industry, particularly as the deals involved have accelerated the flow of information and technology in the sector, according to Jacob Peled, executive chairman of Israel-based Pelmar Engineering.

“The influence of M&A activity is very strong on the industry, much stronger than people understand,” Peled set out in a presentation at the TTE conference in Hanover on 15 Feb.

The nature of M&A has changed from previous years, when acquisitions and sales were led by the tire companies themselves, according to Peled.

The Pelmar boss went on to note a surprising trend among the most significant M&A deals in the tire manufacturing industry.

“If you look carefully you see the role of agricultural and industrial tires is the biggest: much more than those involving passenger car tires or truck tires,” said Peled.

To explain this trend, Peled suggested that heavy-duty tires have gone from being “primitive products that everyone could make” to become technical products needing a lot of expertise to design and very expensive machinery to make.

“The requirements of the agricultural market have changed completely,” he stated. “In the US, 30km per hour or 25 miles per hour was once considered very fast for a tractor. The last specifications that I have seen from John Deere was 115 km/hr for a tractor. Normal [tractor] tires cannot withstand that.”

More on this report will appear in ERJ’s March/April issue