MILAN—Pirelli & C. S.p.A has introduced a series of cost-cutting measures to mitigate the economic effects of the COVID-19 crisis on the group's profitability and cash flow.
The Italian tire maker also has lowered its sales estimates by more than $1.1 billion for fiscal 2020, and is set to "reformulate" targets for the year as it braces for a global economic slowdown caused by the global pandemic.
The cutbacks will target discretionary costs, marketing and communication activities, renegotiation of supplier contracts as well as prioritizing investments in research and development and efficiencies, Pirelli said.
Moreover, the company said that, as of March 20, it temporarily had suspended production at all of its factories—except for China—in response to COVID-19 outbreak.
In China, following the suspension of activities for about a month in two factories, activity gradually is returning to normal, Pirelli added.
As a result of the economic slowdown and plant closures, the Italian tire maker now expects annual revenue to come in at $4.7 billion to $4.9 billion, down 16 percent to 18 percent from the prior forecast.
To limit the impact on profitability, Pirelli said it is reducing planned investments nearly 60 percent to $145 million in 2020.
The Milan-based group is also canceling the 2019 dividend, while reducing compensations for the board, the CEO and the top management of the company. Executive vice chairman and CEO Marco Tronchetti Provera will take a 50 percent cut in gross fixed annual compensation.
Remuneration of Pirelli board members will be cut by 50 percent, while the gross fixed annual salary of company managers will be reduced by 20 percent.
The pay and bonus cuts are expected to result in the saving of about $33.5 million, according to Pirelli's statement.
Pirelli went on to state that it would revise its recently launched Industrial Plan 2020-2022 in the fourth quarter of this year.