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December 02, 2010 01:00 AM

Pirelli breaks ground on tire plant in Mexico

Bruce Davis
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    NEW YORK—Pirelli & C. S.p.A.'s decision to build a car and light truck tire plant in Mexico is tied to the firm's growth projections for high-performance tires in North America, according to company executives.

    The $210 million plant in Silao, Mexico, is scheduled to start production by the first half of 2012 with a daily output of 10,500 tires. That amount will increase gradually to more than 14,000 tires, or 6 million a year, by 2015, said Tom Gravalos, vice president, marketing, motorsports and original equipment for Pirelli Tire North America Inc.

    Pirelli is projecting annual growth in North America of nearly 10 percent through 2013 to about $725 million from roughly $525 million this year, according to Mauro Pessi, Pirelli Tire North America chairman and CEO. He said 70 to 80 percent of the plant's output would be exported to the U.S. and Canada.

    Pirelli broke ground on the 1.29 million-sq.-ft. factory Nov. 5 with company officials and local dignitaries present. The site, in Silao's Puerto Interior industrial park, will be prepared to allow Pirelli to double the factory's size when demand warrants it, Gravalos said.

    The plant will be based on conventional tire building technology and not the company's automated Modular Integrated Robotic System, Pessi and Gravalos confirmed during a press briefing recently at the company's new sales office in New York. The facility will have the capacity to build tires with rim diameters up to 26 inches, they said, and will focus more on longer production runs.

    Pirelli's plant in Rome, Ga., will continue to focus on shorter runs of higher-performance tires, the executives said.

    Pirelli selected Silao as the site for the plant because of the region's good infrastructure, stable local and regional government, qualified labor, access to efficient transportation corridors, and Mexico's tariff-free status as part of the North American Free Trade Agreement, Pessi said.

    “We are a brand on the move, and this is the type of support we need to continue reaching our goals,” Pessi said.

    The plant is about 350 miles from the Texas border, which should allow Pirelli to improve its distribution efficiency to dealers measurably once the facility is on stream, Pessi and Gravalos said. Silao is in the central Mexican state of Guanajuato, about 175 miles northwest of Mexico City and 125 miles east of Guadalajara.

    The site is within 75 miles of Continental A.G.'s plant in San Luis Potosi and Michelin's in Queretaro. There are many other vehicle component factories and car assembly sites in the area.

    The investment in Mexico is part of Pirelli's five-year industrial plan, for which the Italian tire maker is budgeting $2.65 billion toward modernizing its manufacturing capacities globally, with a goal of ensuring 60 percent of equipment is less than 10 years old.

    The plant will be Pirelli's second in North America, ninth in the Americas and 20th worldwide. Adding this plant will free up some production capacity in Brazil now dedicated to supplying North America to local markets, Pirelli said, which ties into the firm's strategy to keep production facilities closer to the markets they serve.

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