MILAN, Italy (April 7, 2000)—Pirelli S.p.A. will invest nearly $1 billion in the coming three years to transform itself into "e-Pirelli," a company equipped to take full advantage of the revolution in e-commerce.
About half the investment will be in tires, where Pirelli already has initiated more than 20 separate projects to develop e-commerce ventures that will transform the business and "revolutionize the unit´s profitability parameters," Chairman Marco Tronchetti Provera said.
The bulk of the capital spending on tires will be for the construction of five tire plants using the company´s new flexible manufacturing process: Modular Integrated Robotized System (MIRS).
The new plants—at least one each in Europe, North America, South America and Asia by year-end 2002—will have combined annual output of 10 million tires, primarily of the higher-value-added, high-performance type, Pirelli said.
A MIRS-based plant occupies only about one-fifth the space of a comparable conventional plant, Pirelli said, and uses one-third less energy. As a result, the initial investment is cut by half and operating costs by 25 percent. MIRS-based manufacturing also opens up opportunities for streamlining the development process and speeding up product development cycles, the company said.
Also under development are so-called "intelligent" tires, which will be capable of interacting electronically with a vehicle´s security systems, with the car owner, with dealers or with the car makers.
Pirelli´s short-term goal is to generate about $1 billion of its annual sales revenue via internet transactions, counting both business with suppliers and customers, a spokesman said. In Europe, Pirelli expects half its replacement tire orders from dealers to take place electronically by year-end, double what they are currently.
In fiscal 1999, the company´s tire unit sales fell 5 percent, to $2.73 billion, largely because of eroding prices, unfavorable currency swings and the loss of sales from the agricultural tire business, now operating as a joint venture under the control of Trelleborg A.B.
The sales decline, coupled with sales gains in cables, shifted the cables-to-tires business ratio from roughly 50:50 to 60:40.
Pirelli has made some major moves in cables lately—including five acquistions in the past year and the creation of a strategic business alliance with Cisco Systems—and continues to push investment in optical cables and underwater fibers technologies, markets with high double-digit growth rate projections. &Copy;