Pirelli board rejects ‘segregation plan’ for “cyber tire”

Milan, Italy — Pirelli's board of directors has rejected a proposal to segregate its “cyber tire” activities, agreeing with chief executive Andrea Casaluci that such activities must continue to be carried out and developed in a “fully integrated manner” within the group.

The vote came following an official proposal by Pirelli’s Chinese majority shareholder China National Chemical Corp. (CNRC) to separate the ‘cyber tire’ activities of the group citing compliance with the US connected vehicle requirements.

The board voted nine in favour and five against the assessment, said Pirelli in a 5 Feb announcement.

The board decided that cyber tire activities should remain integrated “including at the functional and organisational level with all the other activities of the Pirelli group,” it said.

The decision rejected “any project or initiative that might lead to any form of compartmentalisation, separation and/or segregation, even only partially, and of any nature,” Pirelli noted.

Directors Chen Aihua, Zhang Haitao, Chen Qian, Fan Xiaohua and Tang Grace voted against management’s position.

The vote comes after a recent decision by Italian major shareholders Camfin and MTP & C. SpA not to renew their shareholder agreement governing Pirelli with CNRC parent group Sinochem, which expires 18 May, citing US regulatory requirements.

In response, CNRC submitted a proposal to the Italian government 3 Feb announcing both the “failed renewal of the shareholder agreement” and a proposal for the “potential corporate segregation of the cyber tire business.”

In its latest statement, Pirelli said its management outlined the competitive context of the automotive sector, which it said is increasingly characterised by “software defined vehicles (SDA) and autonomous driving systems.”

In this environment, it added, any “fragmentation of Pirelli and segregation of the cyber tire business would have no possibility of actualisation.”

The segregation, the Pirelli management added, would “irreversibly undermine the integrated business model,” in which the group’s technology and innovation, product development, production and marketing work through “a constant exchange of information and data.”

According to Pirelli, segregation could also result in the allocation of cyber tire patents within a separate entity, “therefore inhibiting their free use by Pirelli,” and “denying it of strategic knowhow.”

This, said the Pirelli management, "would set back and weaken technological development, compromising Pirelli’s competitive and commercial advantage and its leadership in terms of innovation."

The Milan-based tire maker added that segregation would lead to “fewer synergies and greater costs due to the necessary duplication of operational structures.”

Furthermore, it would cause “significant destruction of value, and consequently reduce financial solidity,” of the group, it said.

Pirelli also stressed that the proposal “would not overcome the limitations imposed by US law.”

Pirelli’s cyber tire features a hardware and software technology that “dialogues in real time” with vehicle systems as well as with road and local infrastructure.

The technology has been adopted by ‘prestige car makers’ as well as local transport authorities including the Apulia Region, Movyon (Autostrade per l’Italia group) and Anas.