Pirelli Plans to Buy as Well as Build in Russia

During Pirelli’s third quarter conference call on November 5, company chairman Marco Tronchetti Provera confirmed plans to establish two factories in Russia. The first of these is to be acquired, the second a previously announced joint venture greenfield facility.

“We are in touch to buy an existing plant that is quite new,” the chairman stated. “We don’t know the timing, it’s quite a complex transaction. But we believe that within the first six months of next year we should be able to finalise the deal.” Speculation exists that the plant to be purchased by Pirelli may be one of the two mothballed factories belonging to the insolvent Amtel-Group, formerly known as Amtel-Vredestein. Russian media has already printed news of the Italian company’s interest in acquiring either the Kirov or the Voronezh sites.

The second investment Pirelli will make in Russia is in a greenfield plant for truck tyres, Tronchetti Provera continued. “We are finalising all the bureaucratic assessments, and we believe we will not start building the plant before second half of next year. So that’s the planning in Russia. And we expect the market in Russia recovering end of 2010, beginning of 2011. And so we’re trying to be ready to produce in Russia by the end of 2010 and first half 2011.”

In August, Pirelli signed an agreement with Russian Technologies State Corporation to establish a joint venture facility with an initial annual capacity of 4.2 million tyres. The announced investment in this Samara region based plant is 250 million euros. During the conference call, the chairman stated Pirelli believes its investment in 2010 “will not exceed fifty million.”

 According to Russian media, on November 6 Tronchetti Provera and the director general of the Russian Technologies State Corporation, Sergey V. Chemezov, signed an agreement that will see tyre production begin in late 2010.