Never Tire

What is the significance of the Mexican market for your company?

At a global level, Pirelli has always had a strategy of diversification regarding its manufacturing locations. The NAFTA market has been one of the great opportunities for the company. When we made the decision to build another plant to serve the NAFTA region, we selected Mexico for a number of reasons. Geographically, it is very well situated to serve markets to the north and south. Mexico enjoys 12 free trade agreements (FTAs) with 45 countries, and this means that production can be sold in both the NAFTA region and many other markets. Mexico’s population is young, and so the market has much room for growth. This is a demographic bonus, and we will have customers for a long time to come who are economically active, as well as staff for our plant. Mexico is also enjoying good growth within its education system, in particular the college and university systems. At our plant in Silao, we have a research and development group of 22 engineers, 20 of whom are Mexican, and we continue to provide our compatriots with employment in their home country. At this plant, we made an initial investment of $200 million, and we are now in the process of investing an identical sum. This is a large plant of 135,000 sqm under one roof. In 2017, when it becomes fully operation, it will employ 1,400 direct and 400 indirect employees with a total of 1,800 jobs created. In 2017, it will produce 17,000 tires daily, which amounts to 5.5 million a year. Last year, we celebrated the production of the 1 millionth tire. In 1Q2014, we celebrated the production of 2 million tires, and by November 2014 we expect to have produced 3 million tires. The numbers keep growing, and as a result we will have reached our targets by 2017.

What are the figures regarding the development of Guanajuato?

The factory not only contributes new jobs, but also provides for personal development. When we initiated the project, we sent about 120 people to Europe to work at our factory for 3-6 months, so they could learn the process and system, and bring that knowledge back to Mexico. We are hiring local providers to help us install equipment in the plant, the result being they have had to learn the skills to do so, boosting their professional knowledge in the process. We are constantly looking for local suppliers of required materials, so there is a considerable development of local providers. If a local provider wants to sell us something that does not meet our standards, we help them achieve those standards. We run a green plant: none of our production scrap ends up in a landfill. We recycle our water, use natural lighting to save on energy, and are constantly looking for ways to make our products more environmentally friendly. In the second investment project we are making, we have added space and equipment for the production of special green tires that assist cars in using less gasoline by reducing the rolling resistance a tire has. Gasoline consumption is an issue around the world, and anything we can do to reduce it is a benefit to society and the consumer.

What are your short-term expectations for the market?

In the NAFTA region, we are growing at a double-digit pace. We have excellent contracts with auto companies that are already public knowledge. One that we are particularly proud of is our contract with the new 50th Anniversary Ford Mustang. For North America, this is an important landmark, and the special high-performance tires for that car are made in Silao. The production of the plant is generally reserved for export markets. If you think about NAFTA in terms of market size, Canada accounts for about 10%, the US 80%, and Mexico 10% of regional GDP. It is logical, therefore, for 70-90% of what we produce to be exported. We have to consider local carmakers and where they are producing. Mexico today is the biggest provider of cars for the US market. We recognize that some of the technical skills we need at the high-end aspects of our plant are not readily available, so we are in the process of launching the Instituto Piero Pirelli, in association with local and state governmental and teaching institutions. The purpose is to develop talent to work in the automotive market on the machines, hydraulic systems, and electronics. Those trained at the Instituto Piero Pirelli will work in diverse companies, not just at Pirelli, so it will ultimately benefit everyone. In addition, as a company, we have a long-standing relationship with soccer legends Inter Milan. Around the world, Pirelli has set up Inter Milan campuses, where hundreds of children from lower-income families have the chance to be trained, play soccer, and to gain a more aspirational perspective on life. Our hope is for these children to one day come to work for Pirelli. Even if they don’t, one day they will be customers and their lives will been changed in some way. We have been around long enough to know exactly who we are, and moreover, we know where we want to be. We provide premium products, and use leading-edge technology to produce them. My desire is for Pirelli to be the brand of choice for consumers, the supplier of choice for distributors, and the employer of choice for our associates. If we accomplish these things, we will consider ourselves successful, and are making encouraging progress so far. Currently, we have a good managerial staff comprised of expatriates and Mexicans, although our goal is for Pirelli Mexico to be managed by Mexicans from top to bottom. We treat our employees as associates, because in the world we live in today, we choose where we want to be. If you think of your employees as associates, it opens up communication.

Apart from the Inter Milan campus and the Piero Pirelli institute, do you have any other initiatives?

Those are our primary corporate social responsibility (CSR) initiatives. I do a lot to build the brand, because I spent many years as a marketer. I know what makes a brand powerful and memorable. Pirelli’s strategy is very straightforward. In 2015 Formula 1 will return to Mexico City, we will of course be a major sponsor of the event, and plan to use our visibility to promote road safety. We can also demonstrate tire technology at its limit. The fastest speed achieved last year, during Formula 1, was by a Mexican. The speed was 342 kilometers per hour, using our tires. An incredible 1.5 billion people watch Formula 1, which makes the sport an ideal marketing tool. Another part of our strategy is our calendar. This year we celebrated the 50th anniversary of the calendar, which is particularly special in that it has featured many celebrities, such as Penelope Cruz, Amy Smart, Heidi Klum, and Naomi Campbell. Meanwhile, locally we are big supporters of the growth of society through education. For the future we want people to continue taking pride in working at an institution such as Pirelli.

© The Business Year – July 2014