Pirelli SpA’s formal opening ceremony for its new $300 million passenger and light truck/SUV tire plant in Silao, Mexico, can be described using the same words as the impact the tiremaker hopes the facility will have on its operations in the NAFTA region.
Big. Influential. Premium.
Just how massive? The new Silao plant, Pirelli’s first in Mexico and 22nd globally, is part of a planned $400 million investment in tire production in that country. The plant will produce higher-end performance and light truck/SUV tires for the U.S., Canada and Mexico at a rate of 400,000 annually by the end of this year. Targeted capacity expansions will see the facility produce 3.5 million tires per year in 2015, after the first phase of development, and 5.5 million units annually when fully operational in 2017.
Demonstrating the influence Pirelli has in the Silao region and Mexican economy in general, Mexico President Felipe Calderón Hinojosa was on-hand for the May 31 opening ceremony. Calderón arrived at the event via helicopter, touching down adjacent to the factory, where he met Pirelli executives and unveiled a ceremonial plaque alongside Pirelli Chairman and CEO Marco Tronchetti Provera.
The factory fits with Pirelli’s premium strategy, according to Tronchetti Provera, who said that while the tiremaker holds a premium reputation when it comes to R&D and product performance, Pirelli must improve its service in order to meet growth goals. By providing a shortened supply chain and increased capacity, the Silao plant will do just that for North American customers, he noted.
“Until now, we’ve served the NAFTA market mostly from Brazil, as well as partly from Europe and China,” Tronchetti Provera said. “This plant is a way to serve customers directly, allowing for better service because we can send tires anywhere in the U.S. within four days; from Brazil, it takes 45 days. This plant will allow us to service customers that today we cannot supply.”
The plant’s initial phase – the current 135,000-square-meter building – is part of a $300 million initial investment. Pirelli said another $100 million will be spent by 2017. The facility will employ some 1,000 through 2013, with additional hiring bringing employment to 1,800 in 2017.
Pirelli said the new plant “will augment the factory the group already has in Rome, Ga., specialized in production using MIRS technology.”
With the new plant, Pirelli’s North American production in 2015 will be 3.9 million tires, rising to 5.9 million pieces in 2017. The new plant also will increase Pirelli’s local NAFTA production, from 6% in 2011 to 11% this year, and finally to 53% in 2015, according to the tiremaker.
Also on hand for the ceremony was Paolo Ferrari, recently appointed chairman and CEO of Pirelli Tire North America (PTNA), who outlined the tiremaker’s near-term market share goals. “Our premium market share right now is around 6% in the U.S. (15% in Canada),” he said, adding that as part of Pirelli’s three-year plan, “we plan to grow in terms of premium volume at least twice as fast as the market. So that could lead to a gain of at least two to three points of market share.”
Ferrari said this will be attainable through the tiremaker’s improved service and supply plans, in addition to the upcoming launches of “significant new products” and an aggressive marketing plan. “It’s ambitious, but when you have a plant investment like this, you need to think big,” he added.
Tom Gravalos, PTNA vice president of marketing, motorsports and original equipment, added, “We would like to set a new standard in the way Pirelli launches products. We’ve invested hundreds of millions of dollars in the Silao plant; it would be foolish of us not to spend the last few million to close the loop and get the most out of this investment.”
While Pirelli officials were tight-lipped on the details of any new products, they did offer a time frame: an announcement will coincide with the return of Formula One to the U.S., at November’s F1 race in Austin, Texas.
