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30/04/2013
LA LOMBARDA AND RINOVIS: SHARED VISION AND A STRATEGY FOR GROWTH

FROM THE RETREADING WORLD
Facing the retread market by joining forces: the main players in the merger between the two companies describe the conditions, the critical aspects tackled and the advantages achieved in a success story that could set an example

Mino De Rigo

“TWO YEARS AGO we decided to join forces and the time has come to talk about it now that the situation has been consolidated and the objectives we set have been achieved”. A decision taken by the shareholders of tyre retreading companies La Lombarda and Rinovis long before the crisis became contagious and a shakeout of the segment could lead to reconsideration of the basic prerequisites for staying on the market.  In 2011, La Lombarda incorporated Rinovis’ entire production department to create a bigger company that was better equipped to tackle the shifting business scenario.
Maurizio Gessati, joint owner of La Lombarda, and Dario Gonella, joint owner of Rinovis, guided the operation that united the two production units: “We studied each other at length and helped by the fact that we are both on the board of AIRP,  the Italian tyre retreaders’ association, we were able to discuss market perceptions and vision and discovered that we more or less held the same views”. “After years of being firm competitors” – Gonella added – “the spark came when I suggested that we jointly tendered a bid for a public contract and then shared the work. Which is what we did and it led to the idea of locating the two production plants in a larger site to take advantage of all the synergies and savings associated with setting up a single company, but without relinquishing the identity of the respective brands”.

A seventy-year-old history
The Rinovis retreading business was merged with La Lombarda, whose board of directors is now composed of Maurizio Gessati, cousins Dario and Mauro Gonella, and production manager Alfredo Zanella. The shareholders include Gommauto Ambrosiana, one of the most important retailers in Lombardy. Rinovis remains on the market as a commercial business that owns four outlets at Massazza (Biella), next to the 5,000-square-metre factory, Ivrea, Aosta and Novi Ligure (Alessandria). “We kept the most modern machinery from both factories” – Gessati continued – “and shared the new purchases to complete the plant.  As we are both dealers for the Recamic brand by Michelin, we were helped by the fact that our products are substantially similar, albeit characterized by different styles.”
Companies with a seventy-year-old history. Originally, both Rinovis and La Lombarda made retreads only for cars; in 1970 they added retreads for trucks, agricultural and earthmoving vehicles, but at the turn of the new century they stopped making car tyres. Over the last five years the pace of the market has quickened, with most manufacturers of new tyres intent on renewing the entire catalogue of truck tyres, so for retreaders it became more demanding to keep up, especially with regard to the investment needed to update production and meet the requests of an increasingly exacting clientele.

More quality and production - together
“Continual updating and the adaptation of plant, materials and technologies are needed” –Gessati confirmed – “and gradually become more of a burden for small firms in the sector. Joining forces also meant that these problems could be overcome and would guarantee technological and quality levels that would be higher than those achieved individually and would also increase production capacity. In Italy, the smallness of firms is frequently criticized, with incitement to aggregate but, in practice, individualism prevails”.
In effect, the road to a company merger was not without obstacles. Gonella: “Primarily, Mauro and I had to convince our parents, brothers Aldo and Oreste Gonella who founded Rinovis, entrepreneurs of a previous generation who saw it as suddenly giving up a large slice of what had been built up over the years; and then we had to cope with numerous bureaucratic complications. Paradoxically, it was simpler to create the organizational prerequisites for the new company, including running the business by interacting with a partner who did not exist before and now had to be taken into account”. The cost of transferring and merging the companies, plant and factory equipment was over €300,000.  Gessati explained  – “In practice, bringing the two manufacturing companies together was more complicated than anything else: it was like starting from scratch, but with the disadvantage of not really being able to start afresh, because the factory already existed. A new site would not have involved so many bureaucratic restrictions that we had to overcome by adaptation”.

Production objectives
The new company at Massazza has 23 employees and can boast a theoretical annual production capacity of 26,000 retreaded tyres.
“Now we can state that the merger was a success. Unfortunately, last year there was in any case a downturn because of the economic situation, but it was less than the falloff in the segment as a whole. And it was nothing compared to the plunge in new tyres for trucks, a segment that lost over 20% at national level”. Gessati added: “We think that being able to reconfirm last year’s numbers is a satisfactory result, also because the most important sector for us is construction, which now appears to be having serious problems. But we still have a good hand of cards”. Products for quarry and construction applications represent, respectively, about half of the two brands’ total production. The rest is divided among long haul, regional and urban transport and specialization in repairing agricultural and earthmoving tyres. Currently, customers are located throughout the northwest and part of Emilia Romagna and the mid-term aim is to grow even more.

Cold and hot, retreading travels on rails
Three autoclaves for cold retreading, one of which is for the bigger tyres used by agricultural and earthmoving vehicles, and ten presses for hot retreading.  This is the manufacturing array at the Massazza (Biella) factory, where over 90% is made to order and the rest is sold to warehouses. Just over 60% of last year’s retreads were made with the cold process. Maurizio Gessati stated: “we tend to use the cold process for the first retreading of casings that began as new tyres, and the hot process for subsequent retreading”. Gonella added: “To cover hot retreading requests we have about a dozen moulds in the most common truck sizes, whereas we use Recamic for treads applied with the cold process and this enables us to cover the entire range”.
A special characteristic of the firm is its overhead handling system, which means that the tyres travel on rails from one workstation to another without ever touching the ground. Production is totally controlled by the system which begins with shearography and constant quality control to the last stage. Tyre tracking ensures the mathematical certainty that the customer gets the same casing back and not a different one. This is essential because a tyre that has been used in a certain way offers greater guarantees compared to a similar tyre with a different history.  Tyre condition is monitored by means of a barcode and if there are any defects its entire history can be traced (origin, past repairs, when and who handled it, individual work carried out).
“The various competitors who know about the operation” –  Gonella and Gessati concluded – “have recognized that the idea is a good one and that we are capable of making it a success. Nowadays, the crisis is a strong acceleration factor and it is easy to predict that market selection will continue and will leave not more than about forty of the present manufacturing firms still in the market”.

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