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% 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.
This new investment will take place alongside Pirelli’s 2009-11 industrial plan and is additional to the $100 million invested last year. The funds will go towards consolidating the Pirelli Group’s leadership in South American markets and one-third will be specifically directed towards research and development, with the remainder earmarked for increasing manufacturing capacity. The company anticipated the new investments will provide for a 20% increase in passenger car and motorcycle tyre production capacity. On the back of these capacity increases, Pirelli is looking to increase Brazil market sales revenue 10% (compared with last year’s sales) by 2011.
“This is a country with a huge potential for growth, especially when you look at the ratio of inhabitants to cars," said Pirelli chairman Marco Tronchetti Provera. “We want to drive investments, especially in countries where there is desire for growth and development.”
Sales of Pirelli tyres in South America increased 21% between 2005 and 2008 and last year broke the two billion dollar mark for the first time. Brazil market sales, at more than $1.2 billion, accounted for more than 60% of this figure. These 2008 South American sales represented a third of Pirelli Tyre’s overall sales revenue, equal to more than 4.1 billion euros (more than $6 billion).
At present Pirelli employs at least 9,600 workers in Brazil, and the company’s operations there have already benefited from investment in the vicinity of $300 million between 2004 and 2007. During this time manufacturing capacity grew 25% and sales revenue 21%. Currently more than 35% of Pirelli’s Brazil tyre production is destined for export, including to NAFTA markets. Original equipment tyres are also supplied to all manufacturers present near its Brazil sites, including Fiat, Chrysler, New Holland, Iveco, Volkswagen, Audi, General Motors, Ford, Peugeot, Daimler, Honda, Suzuki, Yamaha, Mitsubishi, Toyota, Mazda, Scania and Volvo.
Pirelli has already stated its expectation that 2009 results will reflect decreased global demand. However, it comments that its strong presence in the Brazilian market “appears particularly strategic” in the current phase of the world economic crisis as the area, driven in particular by the emerging economy of Brazil, has been less affected by the fall in demand, and because it offers a more efficient cost structure and a competitive base for exports.
Of the seven Pirelli Tyre Group factories situated in South America, five are in Brazil: Feira de Santana in the north of the country, Santo AndrÉ, SumarÉ and Campinas in the state of Sao Paulo, GravataÌ in the south. The company’s South American headquarters are in South Sao Paulo, and Pirelli boasts that its Santo AndrÉ technological and industrial hub, and in particular the research centre located there, is a world class centre of excellence. At the 200,000-square-metre Pirelli proving ground in SumarÉ, also part of the Santo AndrÉ hub, testing is carried out on tyres for all vehicle segments.
Research in Brazil focuses on sustainable development in line with the Green Performance targets announced in the company’s 2009-11 industrial plan. In particular, the Pirelli group says it has a commitment with local authorities to acquire all the natural rubber produced with eco-sustainable methods in the Xapuri region, thus contributing not only to preservation of the region’s environment, but also to economic development of the native populations according to local traditional culture. Pirelli also supports the national Brazilian program for recycling used tyres. (Tyres & Accessories/Staffordshire, U.K.)
