Pirelli opens Mexico plant to serve NAFTA region

Posted on June 1, 2012

Pirelli & C. S.p.A. held a grand opening ceremony yesterday for its new factory in Mexico, in Silao, in the state of Guanajuato.

The plant, Pirelli’s first in Mexico and its 22nd tire plant worldwide, is mainly focused on the premium segment, producing high performance and ultra-high performance tires for cars and SUVs for the local and all North American Free Trade Agreement (NAFTA)-area markets.

The factory covers an area of 135,000 square meters and its capacity will reach 400,000 tires by the end of this year, rising to 3.5 million tires in the first phase of development, which ends in 2015. When fully operational in 2017, production is expected to be 5.5 million tires.

Pirelli’s investment, already included in the industrial plan, will be around $300 million from 2011 to 2015. By 2017, a further $100 million will be invested for an estimated total of around $400 million. When fully operational, the plant will employ a total of 1,800 people.

Pirelli Chairman and CEO Marco Tronchetti Provera said, “The opening of the new factory in Mexico represents an important step in our international development plan. This is a country that offers excellent opportunities, both because of the positive dynamic of local demand and its strategic position, making it an ideal industrial base to serve the entire NAFTA area, which we think is one of the most promising for the success of our premium strategy.”

In line with Pirelli’s strategic focus on the premium segment, in which the group aims to achieve world leadership in 2015, the production from the Silao plant will be mainly high- and ultra-high passenger and SUV tires and will serve the entire NAFTA area: 30% of production, in line with Pirelli’s local for local strategy, will serve growing Mexican demand, while the remaining 70% will go to the U.S. market and to a lesser extent Canada.

The new factory will augment the factory the group already has in Rome, Ga., which has specialized production using the company’s MIRS technology. That plant has an annual output of 400,000 tires, so Pirelli’s total production in the region in 2015 will be 3.9 million tires, rising to 5.9 million tires in 2017.

Because of the new factory, Pirelli will be able to increase its capacity to satisfy NAFTA-area demand through local production, which in 2011 accounted for 6% and will rise to 11% in 2012 and finally reach 53% in 2015.

The new Mexico factory also will deliver a reduction in logistical costs, offer more efficient customer service, lead to lower imports from Brazil and free-up production capacity there which today serves the NAFTA area, allowing Brazilian production to focus on the Latin America area.

In the NAFTA area, the tire market in the passenger tire segment is seen growing by an average 2.1% per year to 361 million tires at the end of 2015 and represents an opportunity for Pirelli’s international development. The company expects the premium tire segment to grow at an average annual rate of 6%.

As indicated in its industrial plan, Pirelli’s revenues in the area will amount to around 710 million euro in 2014, with an average annual growth rate from 2011 of 7.1% and will equal over 9% of total revenues at the end of 2014.

In particular, in 2014, 66% of Pirelli’s revenues in the area will come from the premium tire segment (30% medium segment and 4% standard), a marked increase from 55% (36% medium and 9% standard) at the end of 2011.

“In line with the strategy of constant technological innovation at Pirelli’s sites – which in 2015 will mean that 60% of production will come from factories/facilities under 10 years old – and the group’s commitment to sustainability, the new factory in Mexico is, together with the hub at Settimo Torinese, one of the most technologically advanced and was built with great attention to the reduction of its environmental impact both in terms of processes and products,” the company notes. “In the new plant expected production will entail a great commitment to the production of tires in line with Pirelli’s ‘green performance’ strategy, which is to say tires that combine road performance with the containment of environmental impact in terms of lower rolling resistance – which means lower fuel consumption and noise reduction.”

Related Topics: Capacity, Mexico, Pirelli, tire production

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