F1 Tyre Supply to Have “Zero” Impact on Pirelli’s Budget

The cat’s been out of the bag for a couple of weeks, but now it is official – as of next year, Pirelli will serve as official exclusive tyre supplier to the Formula One championship. The Italian manufacturer will supply all F1 teams from 2011 to 2013, and no additional funds are required in order to do so.

“We will supply starting next year, and we had this opportunity thanks to the fact that the world is changing,” commented Pirelli CEO and chairman Marco Tronchetti Provera during a conference call on June 24. According to Tronchetti Provera, Pirelli’s Formula One tyre supply will have “zero” impact on the company’s budget. “The investment has been already done,” he explained. “The motorsport site we have in Turkey has been already projected towards new technologies and we already produced slick tyres for IMSA and F3, racing tyres for rally and GT. For us it is not a question of new investment, it is focusing on Formula One rather than in other directions.”

These so-called ‘other directions’ include the Italian manufacturer’s existing motorsport commitments. No capacity expansion at its facility in Turkey will be necessary to accommodate the demands of F1, reports Tronchetti Provera; tyre production will simply be redirected from other types of motorsport tyres. Similarly, when outlining Pirelli’s strategy for funding its F1 involvement within its existing budget, the company chairman and CEO explained that resources used to cover its advertising for Formula One “will be switched from other campaigns where we will reduce our budgets. For example, in rally there will be a number of suppliers from the start of next year so we will reduce our budget. We will be fully dedicated to Formula One.”

Exactly how Pirelli will use the opportunity afforded by F1 tyre supply to promote its brand name has not yet been set out. However, when asked whether it would continue the safety and fuel efficiency themes currently pursued by Bridgestone, Mr. Tronchetti Provera quipped that it was Bridgestone that was following Pirelli’s policies, not the other way around. “We lead the so-called green performance segment,” he continued. “We launched the Cinturato 7, we launched the Scorpion Verde. Next year 40 per cent of our products will be in line with regulations being introduced in Europe in 2012…Green is a good new segment where not only do we want to compete, we want to be leaders.”

Pirelli will also exclusively supply the GP2 championship from 2011 to 2013, an agreement Tronchetti Provera states was made independently of the F1 tyre supply deal. These two supply agreements join a respectable list of motorsport participation that includes the World Rally Championship, the World Superbike Championship, Rolex Sports Car Series in North America, Motocross World Championship and several other national championships for both cars and bikes. At this stage Pirelli has not specified how much funding will be removed from these and other existing undertakings and how this will affect the tyre maker’s relationships with the various organisers.

According to Pirelli, the FIA, the racing teams (represented by FOTA) and Formula One’s organising body (represented by FOM) chose Pirelli as exclusive supplier based on the Italian firm’s specific proposals to guarantee technical and operational stability for the competitors. Following current F1 regulations laid down by the FIA, the new contract ensures that Pirelli will provide teams with four slicks with different compounds for various types of dry surfaces, one rain tyre for heavy rain, and one intermediate tyre for damp conditions or light rain. No major changes in tyre design or dimensions are anticipated next year or in 2012 as designs for the vehicles to be used in these seasons are already advanced, however Pirelli hints at changes during 2013. “We are committed to continuous technology and it is true that after the three years something could change,” said Tronchetti Provera. “It would be exciting to be part of a new era for Formula One.”

In announcing its confirmation as tyre supplier, Pirelli notes that the current economic climate has led to a “realistic and collaborative approach with all the teams, ensuring that manufacturing and logistical costs are shared fairly.” Marco Tronchetti Provera reported that F1 “understands” the problems facing suppliers, and the company also states its return to Formula One accompanies a “firm eye on the future” – by this it means that, in collaboration with the various racing teams, it will conduct research into new tyre development and innovations.

Pirelli shares that it plans to make  “important investments in corporate communications” in order to take advantage of the high profile and cutting-edge technology that go hand in hand with F1 tyre supply. To meet this end the company says it will use resources and budget already set aside for this purpose. Any such Formula One themed communication campaigns are primarily intended to help support Pirelli’s increasing profile in the emerging: Latin America, the Middle East and Asia Pacific markets, all of which are areas frequently visited by Formula One. In this way, Pirelli sees F1 taking on the role of a “vital calling card for the Pirelli brand,” helping its commercial and industrial expansion without disrupting the company’s long-term financial strategy.

“The global visibility guaranteed through extensive media interest in Formula One, together with dynamic plans to leverage Pirelli’s involvement in an activity central to the company’s core business, represents a unique opportunity for the brand to maximise its return on investment,” said Pirelli a press statement.  Marco Tronchetti Provera added: “We expect a great return in terms of brand image and technological recognition thanks to the fact that Formula One reaches two billion viewers, one billion in fast growing regions where our brand recognition is growing fast.”