Pirelli plans to divest energy, telecoms cables businesses, build car tyre plant in Romania

By Liz White, ERJ staff

Milan, Italy- Pirelli & C SpA has revealed a strategy that will see it put its major energy cables and telecoms cables businesses up for sale. The announcement, in Pirelli's third quarter results statement, comes as Pirelli also announced the signing of a letter of intent to make truck tyres in a joint venture in China (see story below).

And in another major development, Pirelli said it plans to build a major base for making high-performance car tyres in Romania. This follows the earlier announcement of a joint venture in Slatina, Romania, with Continental AG to make steel tyre cord.

The Romanian tyre plant will meet, “growing demand from East European markets,” with an investment of Euros 110 million in the next three years.

In South America, Pirelli plans to expand its recently opened plant in Bahia, Brazil, and build a new all-steel radial truck tyre facility on its Gravatai, Brazil, site, with a total investment of over Euros 80 million.

Also, the tyre maker said, three new plants utilising its MIRS automated tyre manufacturing technology “are currently being installed in Germany, the US and the UK, which will become operational during the first half of 2005.”

In total, Pirelli said it is investing over Euros 400 million in the next three years in the tyre manufacturing operations.

Pirelli's cables businesses have a total turnover of nearly half its industrial operations. Although these units are “high cash-flow generators with significant market positionings, we plan to gradually divest and sell them,” Pirelli said.

It intends to retain a minority share in the cables activities, where Pirelli has “international leadership in terms of market shares, technologies, profitability improvements and management quality,” a group statement said.

Since these strengths have again made the businesses of interest to institutional investors, Pirelli said, it has decided to start the ball rolling in terms of a sale.

Pirelli's current far-reaching plans for its truck tyre business are a complete turnaround from only three years ago, when the group put this business, together with its energy cables unit, up for sale, as commented on by Francesco Gori, general manager of the Pirelli tyre business, in an interview in ERJ's October edition.