Pirelli Announces Further $100 Million Investment for Brazil, Latin America

Worldwide, Pirelli anticipates its specialised tyre segment to expand a total of 7.5 per cent over the next three years, and growth in Latin America and particularly Brazil is expected to be far stronger. The Italian manufacturer estimates sales of for construction, digging and mining vehicle tyres in these two markets to increase by 25 per cent and 37 per cent respectively, and to accommodate this development the Pirelli Group has announced plans to invest US$100 million in its Latin America specialised tyre operations. Strengthened by this injection of funds, Pirelli intends to recommence the global export of these products from the region as of 2011.

Plans to invest in the region’s specialised tyre segment were announced during November’s Brazil-Italy Economic Forum in Sao Paolo, and are additional to the $300 million investment plan for the 2008 to 2011 period announced in July. The latest $100 million, says Pirelli, will be invested in the development of advanced radial technologies for construction, digging and mining and agricultural vehicle tyres. Research and development will take place at the company’s recently expanded special vehicles technology hub in Santo André, Brazil, and the manufacturing facility at the same site has been earmarked as a centre for the production of earthmover tyres. Manufacturing capacity for agricultural tyres in Santo André will also be modernised and enlarged.

Pirelli states this focus upon the earthmover and agricultural tyre businesses in Brazil is intended to consolidate the company’s leadership in Latin American markets and satisfy increasing demand: In addition to the aforementioned growth in the OTR tyre segment (which is mainly linked to large projects such as the new Panama Canal, the 2014 World Cup in Brazil and the 2016 Olympics in Rio de Janeiro), the agricultural segment in Brazil and Latin America is tipped to grow by 20 per cent and 15 per cent respectively (compared with 2008) in the years between 2010 and 2013. The $100 million investment will accommodate such increases by funding an overall 40 per cent increase in OTR and agricultural tyre production in the three years between 2010 and 2012.

Brazil has already considerably benefited from Pirelli investment; between 2004 and 2007 some $300 million was invested there, and as a result manufacturing capacity for passenger car, motorcycle, agricultural and OTR tyres grew by more than a quarter. Between 2005 and 2008 Pirelli’s South American sales increased 21 per cent, exceeding two billion dollars for the first time in 2008. Sales from this region represented 33 per cent of Pirelli Tyre’s overall global sales; Brazil alone accounted for around 20 per cent of worldwide sales revenue.

Seven of Pirelli Tyre’s 23 global facilities are located in South America, five of which are in Brazil. These five plants account for approximately 90 per cent of Pirelli Tyre’s South American production, and more than 35 per cent of this output is exported, including to NAFTA area markets where they are fitted as OE to Ford, GM, Mercedes and Volkswagen products. Pirelli Tyre employs 11,400 workers in South America, of which more than 9,600 are based in Brazil.