Pirelli: expansion in China continues with new high performance car tyre factory

The new industrial facility, which rises in the same area as the factory for truck tyres which opened in 2005, was inaugurated in the presence of Riccardo Sessa, Italian Ambassador to the People's Republic of China, Marco Tronchetti Provera, Chairman of Pirelli, Francesco Gori, CEO and General Manager of Pirelli Tyre, Niu Yshun, Chairman of Yinhe Group, and Chinese authorities.

The factory occupies a covered surface area of 70 thousand square meters and has a manufacturing capacity of about 3 million pieces per year, with areas sufficient to contain manufacturing expansion up to 10 million pieces per year. Employees, nearly all of local origin, count about 1,000. The investment made by Pirelli to build the factory amounted to nearly 100 million dollars. Production will be destined for China and the main markets in the Asia-Pacific area.

Realization of the car tyre factory will start the second phase of the expansion plan of the Group in China, one of the world markets of reference for tyre manufacturers.

In the next four years, growth in the local tyre market will be driven by a significant increase in demand for new cars, resulting from the combination of several factors: from GDP growth (estimated at about 10% per year between 2008 and 2010) to the improved quality of life of large segments of the population; from better road infrastructure to the trend towards lower prices due to increased competition and technology innovation.

Following the investment in the truck tyre factory, which allowed Pirelli to establish its presence in the Industrial business - confirmed by the leadership gained from supplying original equipment to CNHTC (the No. 1 domestic manufacturer of industrial vehicles) - the objective now is to conquer the growing Chinese automobile market, in particular in the mid-high range segments, where double-digit CAGR (cumulative annual growth rate) is expected over the next four years. Pirelli, whose brand is highly regarded throughout China, intends to play a leading role in this growth process and aims to conquer a double digit market share in the high end of the Chinese market.

The growth strategy of Pirelli in the local market also includes strengthening the distribution network, which will grow to more than 1,000 points of sale (of which about 2/3 monobrand), by the end of 2008.

In order to accompany its expansion in China and throughout Asia, in addition, for the first time in history the Group has decided to set in Shanghai, and present in Shanghai, "Pearls of the Orient", the celebrated Pirelli Calendar. The 2008 edition of "The Cal", shot by photographer Patrick Demarchelier, will be presented there on 29 November.

The new Yanzhou plant, one of the most modern in the world for tyre manufacturing, uses the best non-robotized technologies and has been conceived for production of mid-high performance tyres.

The car tyre factory is adjacent to the factory for radial truck tyres opened in the second half of 2005, which has potential manufacturing capacity of more than 1 million pieces. The entire industrial complex, with two large, technologically advanced plants, will therefore become an important manufacturing, logistic and commercial hub for all of the Far East. For its realization, in the last three years, Pirelli invested a total of over 200 million dollars.

With the completion of the car tyre plant, the workforce at Yanzhou has doubled, growing from about one thousand to about two thousand employees. The themes of development and training of human resources will remain central in the future: in particular, studies of the English language will be intensified and Italian lessons for key resources will be promoted (currently, 50% of the first line of local management of Pirelli is of Chinese nationality); a project for internal communications is underway and international mobility of Chinese employees will be favoured.

Much attention has been dedicated to corporate social responsibility, with a campaign to sensitize employees on CSR themes, and to intercultural integration initiatives and work-life balance initiatives such as recreational events and trips. Pirelli has also launched a free vaccination campaign for all workers.
Pirelli operates in China through a subsidiary company, the result of the joint-venture agreement signed in 2005 with the Yinhe Group. The stake in the jv has recently been increased from 60% to 75%. This transaction had a value of about 11 million euros.

The strengthening of the new Yanzhou pole consolidates the international presence of Pirelli, which currently counts 25 factories in 12 countries around the world.