Pirelli Group
Pirelli has organised a 100 million euro loan with the European Investment Bank (EIB) in order to support research and development projects in the years between 2009 and 2012. A financing agreement was signed on November 12 and Pirelli states this new loan consolidates the relationship it has with the EIB, which in the past contributed to the company’s “constant commitment to innovation and development of its competitiveness on a global scale.”
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.
According to the Pirelli Group, the first nine months of the 2009 fiscal year delivered “positive” operating indicators that are “overall in line with what was set out in the 2009-2011 industrial plan.” The company forecasts that, barring unforeseeable events, it will in the full year 2009 reach the targets identified in the plan presented last February, and due to Pirelli Tyre’s positive performance may even surpass these targets.
In mid-September Pirelli demonstrated its commitment to reducing vehicle emissions in China through the signing of two agreements. On September 15 the Italian firm, along with the Italian Ministry for the Environment, Land and Sea and China’s Ministry of Environmental Protection signed a protocol agreement on the distribution of diesel vehicle emission reduction technologies in China. Pirelli also signed a memorandum of understanding with the Hixih Group to set up a filter manufacturing plant in Shandong Province.
Mauro Pessi is taking over from Hugh Pace as CEO of Pirelli Tire North America. Pace is retiring after having been chairman and CEO of the company for nearly three years. Pessi will assume the position of CEO effective 1 October 2009. Pessi has had a long association with Pirelli, most recently having served as VP sales and marketing and then CEO, Latin American operations. He rejoins The Pirelli Group after his departure in 2008 to become CEO at Brembo.
Financial analysts are predicting that the Pirelli & C SpA will separate shares in its tyre business from the holding company. Writing in an investor’s note, Deutsche Bank analysts predicted “near-term action to reduce holding discount by giving shareholders two stocks: a pure tyre company and a pure holding company” and valued the tyre company at between 0.21 euros and 0.33 euros/share.
Good take up of Pirelli Real Estate SpA’s capital increase, which closed on Friday 3 July and was 99.4 per cent subscribed, has also resulted in a 14 per cent reduction in net debt, according to analysts. The company itself reported it raised 397 million euros throught the offer.
This year Pirelli celebrates 80 years of doing business in Brazil. In the eight decades that followed the company’s first presence there in 1929, Pirelli has established five factories and a research centre in the South American nation and manufactures 90 per cent of its South American production there. This strong presence reflects Brazil’s growing importance as a strategic centre for vehicle production, and Pirelli’s interest in the region remains strong. At a July press conference, held at the company’s Santo André manufacturing site in Sao Paulo, Pirelli outlined plans to invest a further US$200 million in Brazil over the next three years.
When it comes to high and ultra high performance tyres, few would argue that Italian manufacturer Pirelli holds a position of distinction. The brand boasts original equipment contracts with many of the leading names in top end models from such manufacturers as Ferrari, Lamborghini, Audi, Aston Martin, Maserati, Jaguar, Mercedes, Alfa Romeo, Porsche and BMW, with its latest contract coming on the new Bentley Continental GTC Speed, the car maker’s most powerful convertible ever. Its P Zero collection of tyres – and indeed the marketing campaigns behind the range – emphasise the glamorous, lifestyle-conscious leanings of the market, backing these up with a series of high-ranking results in the 2009 round of magazine summer tests (the P Zero pattern alone picked up wins in Gute Fahrt and Sport Auto, alongside a “very recommendable” rating in Auto Bild Sportscars).
Upon reporting its first quarter 2009 financials, Pirelli commented that its tyre division experienced “signs of recovery” in March; these indications of better times came in the form of a slowdown in sales decline in some countries and positive growth rates in others. Various government incentives to boost new car sales partly contributed to this reversal of fortune following OE business contraction in the first two months of the year, Pirelli comments.
Pirelli Eco Technology, the Pirelli Group company operating in the field of pollution control technologies, has signed a partnership with Swedish diesel particulate filter specialist GB Environment Consulting AB in order to distribute the new Pirelli Diesel Particulate Filter (DPF) systems and spare parts in the Scandinavian, Finland and the Baltic markets.
As part of its 2009-2011 Industrial Plan, Pirelli Tyre reports it is continuing with the cost cutting strategy it commenced last year. The goal of this plan is to save more than 300 million euros over a three-year period through the rationalisation of manufacturing structures and staff in Europe, the renegotiation of raw material purchasing agreements in order to take advantage of falling prices, and savings from lower energy and logistics costs.
Manufacturing capacity in emerging markets is to be expanded so as to take advantage of increasing demand in these regions, coupled with their lower manufacturing costs. In the commercial tyre sector 87 per cent of Pirelli’s total production is already located in low-cost countries, compared with an average of 50 per cent for the company’s four major competitors.
Pirelli’s released results for the first nine months of 2008 show a company affected by the international crisis. According to the company, during the course of the first nine months of the year the tyre market registered increasing weakness due to a combination of factors. In volume terms, the replacement channel, which determines most of Pirelli’s tyre sales, was affected by a reduction in consumer and industrial segment demand, especially in Western markets. The original equipment channel, says the company, was hurt by the strong contraction of new car sales, especially in Western Europe (10 per cent in the third quarter, 5 per cent in the first nine months compared with 2007) and in North America (15 per cent in the third quarter, 11 per cent in the first nine months compared with 2007).
Pirelli’s sees its new industrial centre in Romania’s automotive sector as strategic for the company’s future growth in the emerging East European markets. The company’s position in Romania is now set to grow further in coming years following the announcement of new investments to the value of 250 million euros. The chairman of Pirelli & C. SpA, Marco Tronchetti Provera, made the announcement to Romanian Prime Minister, Calin Popescu Tariceanu, during a meeting held in Bucharest on September 29, at which the Group’s activities in the country were discussed.
The Silvio Tronchetti Provera Foundation and the University of Shandong in Jinan (China) have signed a research agreement that will see the two parties cooperate on research into “the new generation of ecological tyres.” University researchers will work together with Pirelli Group’s R&D department in China with a view to producing advanced low rolling resistance tyres. Pirelli Group has been involved low rolling resistance research for some culminating in the production of “eco-compatible” products such as the new “Cinturato”, presented in Europe at the beginning of 2008.
The Italian-Chinese agreement also includes two joint research initiatives, which aim respectively at realizing more consistent compound mixtures and the study of low-temperature tyre vulcanization.
The Pirelli Group communicates has sealed a sponsorship deal with South African athlete Oscar Pistorius. Pirelli Chairman Marco Tronchetti Provera described Pistorius as: “An extraordinary person. We are happy to be able to give him our support. For Pirelli, he could represent our new Carl Lewis; his story witnesses to the fact that will, passion and technology can vanquish any obstacles, improving the lives of many.”
“Pirelli” – added Oscar Pistorius – “is a great company and an important brand. This agreement is another sign, after winning my case to have the chance to participate in the Olympics, that barriers are in the eyes of the beholder, of those who believe them to be barriers. It would be a dream come true for me to be a testimonial like Carl Lewis.”
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