MILAN, Italy—Pirelli & C. S.p.A. has unveiled a two-phased industrial plan that calls for investments of nearly $2.4 billion in capacity and digitalization through 2025 and should generate sales growth of nearly 9 percent a year.
The Pirelli 2021-22/2025 industrial plan includes two distinct phases, which address a rebound from the COVID-19 pandemic crisis and then further stabilization of growth in high-end markets.
During the first phase (2021-2022), Pirelli said it expects "a substantial rebound" in global gross domestic product, driven by China and the U.S.
At this phase, the tire maker said it expects its production capacity utilization rate to return to 90 percent, helped by "a capacity rationalization that is already under way, with growing importance in countries with lower production costs."
This will be followed in 2023-2025 by a phase of expansion of capacity to support the growth in volumes.
This phase will also see a strong focus on connectivity, automation and the Internet of Things at an industrial level, with benefits in terms of efficiency and elimination of production defects, said Pirelli.
During Phase 1, Pirelli intends to invest up to $870 million, equal to roughly 7.5 percent of total revenues, focusing on technological upgrade, mix improvement, productivity and optimization of industrial efficiencies.
In the second phase, the company aims to invest between $1.4 and $1.5 billion, for both "constant technological upgrade" as well as capacity upgrade for "high value" tires, in particular in countries with lower production costs.
The tire maker expects its digitalization efforts to transform its key processes, connecting them in real time.
By 2023, the company said it "will adopt a simultaneous business model, wherein workflows are supported by five digital platforms capable of integrating internal functions with external partners/customers in real time and full time."
All the data will be stored in a "data lake" for better interpretation through artificial-intelligence AI models, Pirelli added.
In terms of production presence and capacity, Pirelli expects it will manufacture 73 million units of tires in 2022, of which roughly 53 million are "high value."
By 2025, the tire maker targets a capacity expansion to 75 million units per year, of which 56 million will be high value.
In terms of its manufacturing footprint, Pirelli said it expects to operate 18 production plants by 2025. Of these, 15 will make passenger car tires (12 high-value and three standard), while its plants in Bollate, Italy, and Java, Indonesia, will focus on bicycle tires and motorcycle tires, respectively, and the Burton, England, factory will make semi-finished products.
Pirelli said it expects 77 percent of its capacity for high-value tires will be located in plants in countries with lower production costs, up from 74 percent in 2020.
According to its website, Pirelli operates 19 factories in 12 countries and a commercial footprint of around 15,900 points of sale in 160 countries.
In financial terms, Pirelli anticipates that sales will grow to between $6.8 billion and $7.4 billion by 2025, compared with $5.1 billion in 2020.
As for efficiencies, the Italian manufacturer said "program was already set in motion in 2019," with Phase 1 delivering $130 million in savings in 2020.
Phase 2, covering 2021-2022, will deliver net savings of around $200 million, equal to 4.5 percent of total base costs in 2020.
In addition to these savings, during 2023 and 2025, Pirelli aims to achieve net efficiencies between $85 million and $120 million, about half of which come from digital transformation efforts.