SILAO, Mexico — Pirelli Tire North America Inc. is packing its factory in Silao, central Mexico, with an additional $200 million worth of the most modern equipment available as the second phase of its $400 million-plus investment in the facility — its first in the country — advances apace.
A unit of Pirelli & C. S.p.A., the company inaugurated the plant in May 2012, and since then the factory has built in excess of 5 million tires, a milestone it announced in July.
“I've been in this industry for 40 years, and I've never seen a factory ramp up this fast,” Tom Grávalos, CEO and managing director of Pirelli Neumaticos S.A., told Tire Business in a telephone interview Aug. 3. (See sidebar at the bottom of this story)
The second phase is due for completion by year-end 2017, he said, by which time the factory's annual production capacity is projected to be between 5 million and 6 million premium, high-performance and ultra-high-performance tires for cars and SUVs and employment will approach 1,600.
“Have you heard of the Dodge Challenger SRT Hellcat, which develops 707 horsepower and requires tires capable of reaching 320 kilometers (200 miles) an hour?” he asked this reporter. “We make that tire in Silao.”
The plant produces tires in wheel diameters ranging from16 to 22 inches, which are sold primarily in the NAFTA region to both replacement and OE customers, including Ford Motor Co., Fiat Chrysler Automobile's Chrysler Group, Daimler Group's Mercedes-Benz, BMW A.G. and Volkswagen Group, Mr. Grávalos said.
The facility also is certified to export to Europe, China, India and elsewhere, he noted.
Mr. Grávalos explained that in late 2009, the tire maker was “going about the business of figuring where we needed to add capacity to our company, and made the decision that Mexico was the place to invest, and by 2010 we had decided where.
“In very late 2010 we broke ground on the factory. On Nov. 11, 2011, we built the first tire and now we have built 5 million tires (there).”
Pirelli has seven other factories in Latin America — two in Argentina, four in Brazil and one in Venezuela. Latin America represents 33 percent of Pirelli's global sales, or $2.64 billion last year.
The Silao factory “is state of the art,” said Mr. Grávalos, who was born in Mexico to an American mother from Michigan and a Spanish father. He was nine when he left the country to live in Spain and the U.S. He speaks, reads and writes Spanish fluently.
The Silao factory's interior covers 1.4 million square feet, he noted, emphasizing that “the size of the factory will not change” in the second phase of development. “Now it's a question of installing the latest technology.”
Asked to explain, he said: “Mainly it's ‘green performance,'” a reference to a Pirelli project.
“So it's technology on green tires, lower rolling resistance, the point being that, with all the car makers' coming to Mexico, they demand tires that improve the fuel economy of the cars.”
According to Mr. Grávalos, the factory is staffed mainly by local Silao residents. “We have 1,340 people right now. We will get to 1,600 direct (full-time) employees and another 400 indirect employees by the end of 2017.”
On the subject of sales in Mexico, he said that “in the past several years we (Pirelli) have outpaced the market and have seen double-digit growth. So we are very pleased with our performance in Mexico.” According to Mr. Grávalos, Pirelli “sells directly to slightly more than 500 dealer locations in Mexico.”
Asked whether Pirelli's sponsorship of Formula 1 racing helps Pirelli's sales in Mexico, Mr. Grávalos responded: “It helps us enormously. We have a couple of Mexican (F1) race car drivers.
“We are doing promotions involving Formula 1, (targeting) the consumer as well as the trade (press). Because of F1 coming (back) to Mexico, we have increased our marketing spend by 20 to 25 percent.”
He did not reveal the company's marketing capital allocation in Mexico.
The company plans to have “hundreds of guests at the race (in Mexico City Oct. 30-Nov. 1) and to take advantage with things that none of our competitors can do,” Mr. Grávalos said. “They could do it, of course, but it would seem odd for them to invite their dealers to watch our tires on the track.”
Commenting on the large and growing presence of multinational companies in Mexico, he said: “We bring a global view and standards that cannot be compromised. That allows us to enforce levels of quality…. We are taking all the good things about Mexican culture and adding some of the things not present in the culture.”
Where does Mr. Grávalos envisage Pirelli in Mexico within 10 years?
“I see Pirelli very firmly seated as a well-recognized premium brand,” he answered. “We will never be the biggest, but we know exactly what we want and where we want to be.
“We see ourselves as one of the leaders in the premium market.”
Stephen Downer is a Mexico-based freelance writer who covers that country and Latin America for Tire Business and its Latin America e-newsletter.