CEO Talks - Tronchetti Provera (Pirelli): "Vi spiego il nuovo piano industriale"

Let's say that Pirelli came out of this year with positive cash flow, which was the important thing. We had a drop of over 200 million, so the company consolidated its programs. We used this year to accelerate reorganization processes, involving digital, and we finalized closures that were underway in 2019. So we restart in 2021 with a reorganization and implementation of programs that also bring an acceleration in innovation: we will have 44 product lines between now and 2025, at a rate 25% higher than previous years. Digitalization plus innovation is a generation of cash that was preserved in 2020 and will continue to be strong in the coming years.

The main trends are linked to the evolution of electric vehicles in the high-end segment, where innovation is accelerating and we have advanced technologies to allow these cars, which have tremendous acceleration, to perform safely. Here, Pirelli is ahead; we are obtaining a lot of first equipment placements, focusing on products that give more safety, like Run Flat and Seal Inside, which allow driving longer with a flat tire, and tires that reduce noise for electric cars with a foam inside so the only noise is the tires. We are also developing tires dedicated to high-end electric technologies. Even in 2020, the segment where we are most resilient: while the market overall fell 16-18 points, the high-end segment fell only by double digits and is recovering at a different speed. We are well positioned, with positive signals in China, some in America, and Europe where dealers are restocking. We expect a strong recovery of consumption in the second half of the year.

We are betting on 2021, but we look at the evidence of what is happening in Europe over two or three months. Vaccines are arriving. We have seen the effects in Israel, England, and some areas of America. Consumer desire to go back to the market is very strong. China is very strong, America is strong. We will need to support the weakest groups; the government is moving in the right direction to ensure support for those who lost income. But there is a part of activity that has already resumed.

We see our segment growing double-digit: high-end, 19-inch and above, the electric part. With our technologies, including sensors that are now becoming a fundamental element in giving safety to cars, we are market leaders. We have already equipped the first production car in the world, a McLaren, with sensors that provide information on temperature, pressure, tire load density. We are also developing applications that monitor tire wear, wet grip, and can even signal a puncture in advance. I don't see a need for integration like other sectors; we have a specific segment that is growing and demands a lot of technology.

I think it is profit-taking because since the beginning of the year we have had a 15% performance, which is extraordinary. The market waits to see results. I think results will calm the market. Our future is based on real facts that are already giving results in the first part of this year, and we had them in the last quarter of last year, so I am confident the market will see Pirelli's future positively.

His mandate is to lead the company operationally and to grow the management team internally. He is a young person of excellent quality. When Angelos left, he did so with a reflection that I shared: the company has excellent management, young people, a clear strategy. He had other priorities, so he left not in conflict, seeing Pirelli as a great company. This convinced me that the natural path was to follow with a person who had been in Pirelli, had been in Minetti, then followed Pirelli from outside, and became CEO of the industrial tire business, achieving excellent results. He had industrial experience. It was the natural choice; he comes in with immediate plug-in, known by all management and appreciated by shareholders.

We made available our factories, ports, and Pirelli spaces, including Hangar Bicocca. The region visited the spaces and saw they are ideal for a campaign starting in early April. The spaces are ready. We are ready as soon as the region has vaccines available. Who knows, it might be the factories and businesses that help Lombardy out of the delays on the vaccination front.