Worldwide, Pirelli anticipates its specialized tire segment to expand a total of 7.5% over the next three years, and growth in Latin America and particularly Brazil is expected to be far stronger. The Italian manufacturer estimates sales of construction, digging and mining vehicle tires in these two markets to increase by 25% and 37%, respectively, and to accommodate this development the Pirelli Group has announced plans to invest US$100 million in its Latin America specialized tire operations. Strengthened by this injection of funds, Pirelli intends to recommence the global export of these products from the region as of 2011.
Plans to invest in the region’s specialized tire segment were announced during November’s Brazil-Italy Economic Forum in Sao Paolo, and are in addition to the $300 million investment plan for the 2008 to 2011 period announced in July. The latest $100 million, says Pirelli, will be invested in the development of advanced radial technologies for construction, digging and mining and agricultural vehicle tires. Research and development will take place at the company’s recently expanded special vehicles technology hub in Santo André, Brazil, and the manufacturing facility at the same site has been earmarked as a centre for the production of earthmover tires. Manufacturing capacity for agricultural tires in Santo André will also be modernized and enlarged.
Pirelli states this focus upon the earthmover and agricultural tire businesses in Brazil is intended to consolidate the company’s leadership in Latin American markets and satisfy increasing demand: In addition to the aforementioned growth in the OTR tire segment (which is mainly linked to large projects such as the new Panama Canal, the 2014 World Cup in Brazil and the 2016 Olympics in Rio de Janeiro), the agricultural segment in Brazil and Latin America is tipped to grow by 20% and 15%, respectively (compared with 2008) in the years between 2010 and 2013. The $100 million investment will accommodate such increases by funding an overall 40% increase in OTR and agricultural tire production in the three years between 2010 and 2012.
Brazil has already considerably benefited from Pirelli investment; between 2004 and 2007, some $300 million was invested there, and as a result manufacturing capacity for passenger car, motorcycle, agricultural and OTR tires grew by more than a quarter. Between 2005 and 2008, Pirelli’s South American sales increased 21%, exceeding $2 billion for the first time in 2008. Sales from this region represented 33% of Pirelli Tire’s overall global sales; Brazil alone accounted for around 20% of worldwide sales revenue.
Seven of Pirelli Tyre’s 23 global facilities are located in South America, five of which are in Brazil. These five plants account for approximately 90% of Pirelli Tire’s South American production, and more than 35% of this output is exported, including to NAFTA area markets where they are fitted as OE to Ford, GM, Mercedes and Volkswagen products. Pirelli Tire employs 11,400 workers in South America, of which more than 9,600 are based in Brazil.
