Pirelli announces EUR250 million investment for its 2017-2020 industrial plan in Latin America

March 28, 2018

PirelliPirelli’s Executive Vice Chairman and CEO Marco Tronchetti Provera recently announced that the tyre manufacturer has invested EUR250 million into its Latin American market. He said this is part of an industrial plan from 2017 to 2020.

The investments will go towards modernising local production facilities, as well as the development of what it calls High Value tyres (Prestige, New Premium, Specialty and Super Specialty tyres) and also through the partial reconversion of Standard into High Value. This reconversion, to be implemented in the 3-year period 2018-2020, will represent about 20% of the region’s High Value capacity by the end of 2020.

The investments will enable the company to satisfy the demand for high end tyres both in local markets and, in particular, in the Nafta area for which Brazil is one of the integrated sources of supply.

Revenues in the Latam area last year grew by 11.1% to EUR915.7 million. South America – where Pirelli has been present for over a century and counts five factories – represents about 17% of the group’s total revenues (EUR5.35 billion in 2017) and is one of the most strategically important macro-areas for the group.

The Feira de Santana factory, in the state of Bahia, is the most recent production facility. Constructed in 1976 and expanded in 2003 (following its entry into Pirelli’s perimeter in 1986), the factory has always used the most modern machinery and advanced processes and in recent years, particularly in 2017, saw its transformation into Pirelli’s first 4.0 technology hub in Latin America with new digitalized processes and the use of advanced technologies. In the same way, also the other factories in the area are being progressively involved in the digitalization process and plant modernization, in line with the group’s strategy.

“Latam has always been a key area for Pirelli. In particular, we have been in Brazil for almost a century, achieving an extraordinary level of brand awareness and knowledge of the market which enables us to capture consumer trends and offer products most suited to their needs in all market segments. The investments announced today will enable a further improvement in the production standards of local factories, in line with Pirelli’s High Value global strategy and with its digital transformation, which is an integral of it and which today is essential to competitiveness, “ said Provera.

“Pirelli is inaugurating a new phase in Latam with the introduction of new technologies, processes and advanced machinery which will allow us to meet the growing demand for products with high technological content which we can already see in the market, in particular from car makers with a local presence. Thanks  to the digital transformation of the plants and the high end focus, Pirelli can further strengthen its leadership in the Latam market and in Brazil, where for years we have won the Top of Mind prize as the most recognized brand in all sectors”, said Paul Hembery, Senior Vice President Pirelli Latam.

In Brazil, as in Europe and China, Pirelli is the leader in the Replacement market for New Premium tyres for cars (with rim of ?18´´) and in Premium for motorcycles.  Pirelli’s presence in the country is supported by a commercial network of over 2,000 points of sale (over 2,300 in all of Latin America and destined to grow to around 3,300 in 2020) of a total of around 14,600 worldwide. The success of the brand has also been underlined for years in the Datafolha Institute survey, where Pirelli, as well as being the most famous tyre brand in the country, is also the Top of Mind brand, that is the most well known throughout the male population of companies in all segments.

In Brazil, the High Value project began in 2016. The first part of the project was mainly developed in Feira de Santana, while the subsequent stage referred predominantly to the factory in Campinas. In the Latam region, High Value is represented in the production of all tyre types in the segment, with the exception of Prestigeand Velo tyres.

The 4.0 factory of Feira de Santana between Digital Transformation and Smart Manufacturing

To meet the needs of the market in advance, manage the complexity of the business, constantly improve the level of service and effectively reach the end consumer, Pirelli is globally committed to a plan of transformation and renewal which aims at the digitalization of planning, production, distribution and consumer profiling processes. This plan includes four inter-functional programs: the integrated forecasting Program, which applies Data Science to offer greater demand predictability; the Smart Manufacturing Program and Flexible Factory, to respond in an ever quicker and more flexible manner to the requests of consumers, car makers and distribution networks; the Supply Chain Program, which aims to bring consumers closer to personalized services and the Prestige Program, focused on the Prestige end consumer.

The involvement of the Feira de Santana factory in the Smart Manufacturing and Flexible Factory program has already led to its transformation into a true 4.0 factory, a technological hub for the production of High Value tyres in South America, as is already happening at the Campinas plant in the state of Sao Paolo.

At the cutting edge in terms of processes and product development, the Bahia hub thus contributes to the constant increase product efficiency in Pirelli’s world. Its digitalization process has brought the factory smart manufacturing, thus allowing it to improve results through the use of big data and the ability to intervene rapidly to resolve problems. In particular, thanks to the work of over 20 professionals who developed many apps to support the work in the factory, Feira de Santana has become a solidly agile and flexible workplace, in which work is done with tablets which overcomes the need for fixed positions, making processes faster. The digitalization of information and intersection of gathered data, further, allows the machines to give not only feedback on the performance of the process under way, but also to predict the results (feedforward) or on a problematic context on the basis of historical data (machine learning). The use of cloud computing, of open source instruments and online programs which analyze data to carry out future predictions, in fact, are the other elements which are essential in dealing with the complexity and speed of the world linked to manufacturing and which make the Bahia plant one of Pirelli’s most technologically advanced.

After the process of transformation which led to the separation of the Industrial business, Pirelli is today not only the sole tyre maker specialized exclusively in the Consumer business (tyres for car and motorcycles), but also a maker with a distinctive positioning in High Value tyres made to reach the highest levels in terms of performance, safety, silence and road grip.

In 2017 High Value represented for Pirelli 57.5% of revenues at the global level. The goal is to reach 63% in 2020. In the context of the High Value segment Pirelli is today the leader in the Prestige sector, with a market share above one third of the global market in terms of volumes, and in the radial sector in the Replacement market for motorcycle tyres.

The High Value segment includes the following categories:

•   Prestige: tyres planned and developed in partnership with car makers in the Prestige Auto segment (traditionally marques such as Ferrari, Lamborghini, Maserati, Bentley, Bugatti, Rolls Royce, Porsche, Aston Martin, McLaren and Pagani) and the object of specific homologations;

•   New Premium: tyres with rims equal to or above 18 inches, primarily but not exclusively destined to cars belonging to the Prestige Auto and Premium Auto segments (traditionally such marques as BMW, Mercedes, Audi, Alfa Romeo, Jaguar, Land Rover, Infiniti, Lexus, Lincoln, Acura, Cadillac and Volvo). Until the end of 2016 Pirelli identified tyres with rims equal to or superior to 17 inches as Premium. From the first half of 2017, Pirelli redefined the Premium tyre perimeter as tyres with rim diameters equal to or above18 inches, changing the name therefore into New Premium;

•   Specialties e Super Specialties: tyres with a very high level of technological content for cars of every class, for specific applications (for example Run Flat) or personalization (for example “Color Edition” tyres), regardless of rim size;

•   Premium Moto: tyres for high end motorcycles which ensure high levels of performance.

At the global level, these categories are flanked by products and services for the Velo world (bicycles), to which Pirelli returned last year, and connected vehicles.  Pirelli Connesso is an example, the car tyre fitted with a sensor that, through a cellphone app, is able to update the user on the wear, pressure and temperature of the tyre and also to offer personalized services, such as car valet and remote assistance. The bicycle tyres and Pirelli Connesso are not available in Latam for the moment.

More recently, for the Original Equipment channel, Pirelli presented its “Cyber Car” at the 2018 Geneva Car Show, technology that tracks the functional parameters of the tyre and transmits them to a vehicle’s on board intelligence which can then adapt the ABS and check stability for a safer and better performing drive. Already in experimental tests with car makers, the technology is ready for use and by the end of the year will be available for the first time on both electric and traditional models.

And thanks to consolidated partnerships with the most prestigious car makers, Pirelli today has the biggest range of High Value tyres, with over 2,160 homologations (of the total of over 2,740 on December 31, 2017).  Pirelli’s High Value products will receive the greater part of R & D investment: in 2017, in fact, over 90% of total R & D spending went towards High Value products, equal to 6.5% of the relative revenues, one of the highest levels among the world’s principle tyre makers. With 19 factories in 13 countries and a total capacity at the end of 2017 equal to about 76 million car tyres, already today over half (55%) of Pirelli’s production capacity is suitable for the production of High Value tyres.

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