Pirelli 2000 Strategies
INVESTMENTS UP TO 2 THOUSAND BILLION LIRE TO CREATE e-PIRELLI
New Internet linked initiatives and on-line transfer of all company processes.
e-Pirelli will invoice one billion Euro on-line already in 2000
Milan, march 20, 2000 - The Board of Directors of Pirelli SpA examined today the main features of the new e-Pirelli Project, a radical transformation of the Group, to which an investment up to 2 thousand billion Lire has been assigned over the period 2000-2002. After having contributed to the fast diffusion of the World Wide Web with the development of extremely high transmission capacity optical components and systems, Pirelli is in turn becoming an e-company; a company that uses the speed and flexibility of the Network to both manage internal processes and develop innovative businesses. The company is facilitated in this by investments already made in recent years to create one of the most advanced internal networks in Europe, for which it received the Gartner Group's prestigious EIT award for Excellence in Information Technology.
" Internet is an opportunity to radically transform all company processes" , said Marco Tronchetti Provera, " and this strategic choice confirms the Group's firm intent to operate as a leader in the world of hi-tech and the new e-conomy, with the enhancement of competitiveness and the creation of value for the shareholders well within its sights" .
The e-Pirelli Project will grow in three main directions:
- development and enhancement of Pirelli optical components and systems activities linked to the e-technology, also through spin-offs and the creation of strategic alliances and technological partnerships with primary companies;
- full use of on-line technology in the Group's core activities (tyres, cables and systems), from purchasing through to finished product sales;
- start-up of a series of new entrepreneurial e-business activities, i.e. Network linked start-ups.
In detail:
1.Pirelli SpA: development and enhancement of hi-tech activities
-Hi-tech optical components company in the USA. A new high-tech company has just been incorporated in the USA, with US management, to exploit Pirelli's numerous patents in the field of optical components for communications.
-Another photonics company. A new company is also being incorporated to enhance Pirelli's numerous patents in the field of submarine optical systems.
-Innovative micro-components. Investments are envisaged with strategic partners in the field of innovative micro-components (sensors, interface modules, firmware, etc.), technologies which are being developed by the Group for the " intelligent" tyre, the realization of which is in under way.
All these highly innovative activities are of strategic value for the Group, and operate in high growth and profitability markets.
2.Pirelli SpA: transformation of the Groups core businesses
The company has kicked off 20 projects, all directed at radically changing company processes. The aim is to gain significant competitive advantages and overturn the historical profitability indices that characterize the Group's traditional activities. Speed and flexibility will be the principal levers of this programme, the main guiding lines of which are announced below.
-E-manufacturing. Pirelli SpA's industrial activities are in the process of being transformed into e-businesses strongly oriented to using on-line technologies and the Network, re-designing all the main internal processes, from purchasing to sales, from R& D to production and logistics. In the Cables and Systems Sector the e-business programme is being started up in the previously mentioned new photonics companies. In Tyres the first example of integrated e-business is already at an advanced stage in the Milano-Bicocca area, and will be presented to the press and to international investors in July together with MIRS (Modular Integrated Robotized System), the new revolutionary e-factory.
This is an extremely flexible plant fully managed on-line for the production of a family of ultra-low profile tyres with completely new features: the e-tyres. Robotized construction methodologies drastically reduce the number of processing steps, from the traditional 14 to just 3. The Tyre Sector's traditional profitability indices are overturned thanks to a 25% reduction in total product cost, a 100% improvement in quality, an 80% increase in labour productivity and a 50% reduction in tyre per day investment.
By the end of 2002, five MIRS e-factories will be operational in Europe, the United States, South America and Asia, with a capacity of 10 million tyres per year in a continuous cycle.
The Group plans to invest roughly 500 million Euro to realize the e-manufacturing projects in the Cables and Systems and Tyres Sectors.
-Cables E-commerce. An on-line order management system for general market cables (which represent roughly 25% of the Sector's total sales) has already been successfully started up in some of the major European countries; a first step which is destined to gradually expand to cover the entire sector. By the end of June Italy will be capable of reaching an e-commerce share of the general market equal to 65%, while the entire sector will reach 40% by the year-end, with sales in the region of over 400 million Euro. The on-line sales system therefore is destined to expand fast, embracing every segment of the Cables and Systems Sector.
-Tyres E-commerce. Recently, at the Geneva Motorshow, Pirelli gave a world preview of the " mini-portal" of the new P2500 Euro tyre, the first to be expressly conceived for sale via the Network. The portal allows the product to be selected on-line, chatting with the dealer to define the size, the price, booking and collection, filling in a purchase voucher on-line. The introduction of e-commerce in the sale of Pirelli tyres is a fast growing reality. In light of the current 25% share of European on-line car tyre sales (OE and replacement), the target is 50% by the year-end. Overall therefore by the end of the year the Sector will already be capable of making transactions worth 700 million Euro via the network .
- Pirelli & C: new investments for external start-ups
-Pirelli & C. has promoted the EuroCube Fund to finance Italian and foreign entrepreneurial start-ups which have as their object the creation and development of hi-tech Internet linked activities. Fund members besides Pirelli the groups Benetton, Caltagirone, Camfin, Gazzoni, Intesa, Mediobanca and Merrill Lynch. The Fund's resources amount to 100 million Euro.
The operative management of the projects approved by an Advisory Board chaired by Marco Tronchetti Provera - with the main shareholders and key representatives from the economic and scientific communities as members - will be entrusted to the incubator myQube S.A., a structure directed by Gian Luca Braggiotti, formerly Deputy General Manager of Pirelli S.p.A.
The first project, which will be completed by the end of June, is the Italian Real Estate Portal, directed at satisfying all housing needs (buying, selling, renting, mortgages, refurbishing, etc.) utilising the professional skills of the best Italian real estate operators.
-Pirelli & C. is participating in the Dix.it Consortium that is bidding for the the new generation UMTS mobile telephony licence, with joint shareholdings alongside Aem, Banca di Roma, e.Biscom, e.Planet, IFIL and Securfin. Pirelli's investment is estimated to amount to 300/350 million Euro, depending on the assignment price, inclusive of the investments required to set-up the network.
The Group is also studying the possibility of taking part in similar initiatives in the main markets where it has an institutional presence.
The e-Pirelli Project rests its foundations on a network that now links over 14,000 workstations in 35 countries. Within a time span of 24 months the new e-Pirelli network , which will offer surfing opportunities worldwide to a population of 90 million people (employees, suppliers, dealers, consumers) will be a reality.
Finally, it should be mentioned that Pirelli started using the Internet in the management of a number of internal processes as far back as 1995 with the launch of APIS (Advanced Pirelli Information System) and that during that same year it created its first Web site which, today, counts over 2 million contacts/month. In 1996 Pirelli gave birth to the first international on-line Competition for the diffusion of scientific culture via the Internet, with a jury formed by Nobel prize winners and scientists of international fame. The prizes of the fifth edition of the Internetional Award are currently being assigned.