Chem China to Buy Pirelli

Photo of author

By Jacob Maslow

Pirelli Tire
Farnborough, UK – July 15, 2012: Closeup of a Pirelli slick racing tire attached to a Caterham Formula 1 car on display at an exhibition in Farnborough, UK

Pirelli Tires is known the world over for quality tires. Pirelli is one of the largest industrial brands to come out of Italy. In what can only be described as yet another sign of China’s growing financial and industrial might, Chinese chemical giant Chem China has agreed to acquire this Italian industrial titan. This is a big deal. After all, Pirelli is the world’s fifth largest maker of tires. This is going to have a tremendous impact on the tire industry and the automotive industry as well. China, as you probably know, has a growing automotive industry, and Chem China’s purchase of Pirelli puts some world-class brand cachet to the tires put on these Chinese manufactured cars.

The chairman of China National Chemical Corporation, also called Chem China, gave out a warning last Sunday. He was saying that a counter-bid for its efforts in acquiring Pirelli might hurt its investors. He also said that this might derail the long-term strategy of the company. Regardless, it looks like the deal is safe. If this deal goes through, Chem China is going to signal to the world that China is a world-class industrial player. I highly suspect that, as the Chinese economy continues to mature, there will be similar deals like this involving long-standing global brands being acquired by Chinese companies.

The big challenge for the Chinese economy is the development of a two-track economic system: one inside China and one outside China. It is not hard to envision a future situation where a multinational Chinese corporate economy does well on the back of stunted domestic development.

Images Courtesy of DepositPhotos