Milan, Italy – Pirelli & C. SpA has introduced a series of cost-cutting measures to mitigate the economic effects of the Covid-19 crisis on the group’s profitability and cash-flow.
The Italian tire maker has also lowered its sales estimates by more than €1 billion for the year 2020 and is set to "reformulate" targets for the year, as it braces for a global economic slowdown caused by the global pandemic.
The cutbacks will target discretionary costs, marketing & communication activities, renegotiation of supplier contracts as well as prioritising investments in R&D and efficiencies, Pirelli announced 3 April.
Moreover, as of 20 March, the company said it had temporarily suspended all production facilities – with the exception of China – in response to Covid-19 outbreak.
In China, following the suspension of activities for about a month in two factories, activity is gradually returning to normal, Pirelli added.
As a result of the economic slowdown and plant closures, the Italian tire maker now expects annual revenue to come in at €4.3-4.4 billion, down from prior indication of around €5.4 billion.
To limit the impact on profitability, Pirelli said it was reducing planned investments to €130 million in 2020, from €300 million announced earlier in February.
The Milan-based group is further cancelling 2019 dividend, while reducing compensations for the board, the CEO and the top management of the company.
Therefore, executive vice chairman and CEO Marco Tronchetti Provera will take a 50% cut in gross fixed annual compensation.
Remuneration of Pirelli board members will be cut by 50%, while the gross fixed annual salary of company managers will be reduced by 20%.
The pay and bonus cuts are expected to result in the saving of €31 million, according to Pirelli’s statement.
Pirelli went on to state that it would revise its recently launched Industrial Plan 2020-2022 in the fourth quarter of this year.