Pirelli to lose 1500 jobs in western Europe

ERJ staff report (DS)

Milan -- Francesco Gori, head of Pirelli's tyre activity has said 2009 will be a tough year. In response, the company plans to cut production and headcount in western Europe. The company said it expects to to reduce its headcount by 15 percent (or 1500 people) by 2011. This will mean a reduction in capacity equivalent to one plant in the region. The aim is to move production to low-cost plants and to focus the higher-cost plants on the high-profit products.

He added that the impact of the slowdown would be reduced in developing markets of China and South America, where Pirelli is strong, so Pirelli will be less affected than some competitors. Gori said it currently has 61 percent of passenger car capacity in low-cost areas, and aims to move to 71 percent by 2011. In the truck sector the company currently has 87 percent of capacity in low cost areas, which will move to 89 percent by 2011.

The company said revenues fell by 1.5 percent in the 12 months to December 2008, to Euro 4100 million. Operating profits (EBITDA) suffered, but not as badly as some competitors. The company reported operating profit down by 19 percent at Euro 443 million. Pre-tax profits after restructuring costs fell by half, to euro 150 million from euro 358 million a year ago.

However, in common with other tyre makers, the business performance deteriorated during the year, with the company barely making a profit (EBIT) in the fourth quarter.

Gori said Pirelli will have to de-stock, so production output would be even lower than the overall 12 percent decline in sales volume. In passenger car. Gori said demand for OE tyres will be down by 25 percent in 2009, while replacement demand would be down by 8 percent, resulting in a total decline of 12 percent in the business.

Gori said tyre dealers had rapidly and substantially de-stocked at the end of 2008, which had taken the industry by surprise, but now their stocks are low, so they will need more tyres.

Meanwhile, Pirelli aims to keep its own stocks low during 2009.

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