Pirelli eyes €500m savings through cost-cutting measures

Milan, Italy – Pirelli & C. SpA is targeting savings of €510 million with a cost competitiveness initiative, launched as part of its 2020-2022 industrial plan, which was unveiled 19 Feb.

The three-year plan aims to strengthen Pirelli’s business model through three key programmes of cost competitiveness, commercial development and technology-based innovation, said executive vice chairman and CEO Marco Tronchetti Provera presenting the roadmap.

Launched in the final quarter of 2019, the cost competitiveness programme is set to deliver €180 million of saving in 2020, followed by another €330 million during the 2021-2022 period, the Pirelli official noted.

As part of the initiative, Pirelli is consolidating its production footprint by reorganising its Brazilian operations and converting production in Bollate, Italy, to high performance Velo bicycle tires.

In Brazil, the previously announced restructuring will continue with the closure of production plant in Gravataí, Rio Grande do Sul and the transfer of moto tire production to the company's factory in Campinas, Sao Paulo.

In Italy, Pirelli will discontinue the manufacturing of standard car tires at its Bollate plant and move the production to Russia, Tranchetti added.

The Italian tire maker expects savings of €160 million from the restructuring of its operations, of which around €40 million will be achieved in 2020.

In addition, Pirelli said in a 14 Feb statement, that it would introduce a range of measures to optimise its products.

“A large part of our cuts are coming from product costs and this is where we will leverage technology, modelling, simulators,” said Tronchetti. “We are going to cut the [costs of the] launch of new products by 30%.”

Here, the company will aim to optimise of the range and specifications of its tires while moving to ‘simplify and rationalise’ tire components structurally.

Through this, the company expects to save €160 million, of which €50 million are to be achieved this year, said the Pirelli statement. 

Using advanced marketing tools and strictly controlling overheads, Pirelli also expects to save €100 million, €40 million in 2020, in SG&A (selling, general and administrative expenses).

Another €90 million of savings, €50 million this year, will be achieved through the reengineering of processes and digital transformation, as well as by increasing the variable component on overall salaries.

By the end of the three-year period, Pirelli said it expects to have 18 plants, more than 80% of which located in low-cost countries. 

Of those plants, nine will be “fully high value” – producing high-rim size tires – with six of the plants equipped with new robotised machinery.