EXPECTED 2014 CONVENTIONAL MOTO TYRE PRODUCTION 2 MILLION PIECES, GROWING TO 7 MILLION IN 2016

AT FULL OPERATION THE FACTORY WILL ACCOUNT FOR AROUND 25% OF PIRELLI’S TOTAL WORLDWIDE MOTO PRODUCTION

Pirelli has signed an agreement with Astra Otoparts, the  leading Indonesian automotive components maker, for the construction of a new factory in Indonesia, Pirelli’s first in the country, for the production of conventional motorcycle tyres.

The agreement was signed – on the occasion of a mission to Asia by the Italian Foreign Affairs Minister Giulio Terzi di Sant’Agata – by the Senior Vice President of Pirelli’s Moto Business Unit Uberto Thun and the CEO of Astra Otoparts, Siswanto Prawiroatmodjo. The signing was presided over by Terzi di Sant’Agata, the Indonesian Industry Minister M. S. Hidayat, the Minister for Trade and Investment Gita Wirjawan and the Italian ambassador in Jakarta Federico Failla.

The accord entails the creation of a joint venture in which Pirelli will hold the majority position with 60% of the capital and Astra will hold the remaining 40%. The joint venture will invest a total of 120 million dollars between 2012 and 2014 for the construction of a new factory.

Construction of the new factory, located a short distance from Jakarta, is expected to begin in the fourth quarter of 2012. The site will cover 25 hectares and when fully operated, in 2016, will employ 750 people.

The new factory is expected to become operational from the second half of 2013, with an estimated production of around 2 million conventional moto tyres in 2014 which when fully operational, in 2016, could reach 7 million pieces total. Of these, 3 million will be sold as Astra brands, while the remaining 4 million – equal to about 25% of all Pirelli’s moto production in the world – will carry Pirelli brands (Pirelli or Metzeler). In the context of the group’s ‘local for local’ strategy, 20-25% of the Pirelli brand production made in the Indonesian plant will serve the original equipment and replacement markets of the Asia Pacific area, where the moto market is forecast to grow at an average annual rate of 3.5% from 2011 to 2014. The remaining output will serve all the markets in which Pirelli operates with the exception of South America.

The new facility will allow Pirelli to not only strengthen its moto production capacity – which according to the forecasts of the industrial plan will grow to 16 million pieces in 2015 from 13 million pieces in 2011 – but also to have a direct presence in the Asean area’s biggest economy, which with a circulating pool of 250 million motorcycles is the biggest motorcycle market in the world.  Of this total, 68 million are in Indonesia whose moto market is growing by more than 10% a year. The in-country production capacity will also be free of export duties to Asean markets and reduce the cost of raw material supply thanks to the strong local presence of natural rubber producers.

Pirelli

Founded in 1872, Pirelli is the fifth tyre maker in the world by sales. Present in over 160 countries, at the end of 2011 it counted 21 production facilities on four continents and employed around 34,000 people. Pirelli is a leading producer in the high and ultra-high segments, thanks to its commitment to research and development, an area in which it invests about 3% of total revenues (5.6 billion euro in 2011) or 7% of Premium segment revenues, one of the highest levels in the tyre segment, with the goal of a constant improvement of products in terms of performance, safety and containment of environmental impact. Active in automotive sports since 1907, Pirelli is the exclusive supplier of the Superbike world championship and prestigious mono-brand championships, but above all it is the sole supplier for the Formula 1 championship for the 3-year period 2011-2013.

PT Astra Otoparts Tbk

PT Astra Otoparts Tbk (Astra Otoparts) is Indonesia’s foremost automotive component Company producing components both for Original Equipment (OEM) and Replacement Market (REM). The company counts most major car and motorcycle makers of the world among its clients and has become synonymous with high-quality automotive spare parts. These both satisfy growing local demand and are exported to 49 countries in the Middle East, Asia Oceania, Africa, Europe, and the Americas. The company has established three representative offices in Singapore, Dubai, and Australia. It employs circa 33,000 people and has been listed on the Indonesia Stock Exchange since 1998. Its consolidated revenues in 2011 were 7.36 trillion rupiah (626 million euro).

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Henkel continues is path towards sustainable mobility and announces a new project in collaboration with Pirelli, a high profile sustainable partner committed to the dissemination of the cultre of road safety. Henkel employees, on the occasion of its first ‘Sustainability Day’ at its Milan headquarters, installed a tyre pumping station available to all employees. The Pirelli station represents a new piece of a wider sustainability strategy which Henkel has been pursuing successfully for many years, also directly involving employees in sensitizing initiatives. Even an apparently simply gesture like checking one’s tyre pressure can contribute to ensuring  vehicle and passenger safety on the one hand and increasing motor efficiency, therefore reducing consumption and emissions, on the other.

During the inauguration of the station, Henkel employees also had the possibility of speaking with Pirelli technicians to learn things about correct tyre maintenance like tread depth, damage that can compromise safety, the difference between winter and summer tyres, pressure and methods of inflation.

The initiative was part of Henkel’s first Sustainability Day, conceived to motivate employee engagement with themes of importance to the company such as the consumption of resources, waste management, safety, social progress and the growth in value of company activities.

“We recently announced a new sustainability strategy which will see us committed from now until 2030 to increasing our efficiency by 30%, with short terms targets set for 2015. To achieve these results it is indispensable that everyone be involved, along the entire value chain and in all areas of activity, with a continual monitoring of the milestones reached. With regard to safety, we are implementing a strict policy of eliminating all types of workplace accidents, through continuous training in responsible behaviour. The theme of safe driving is dear to our hearts; our goal is to shine a light on such arguments also as a way of caring for the health of our employees,” said Giacomo Archi, Chairman and CEO of Henkel Italia.

“In Pirelli we live sustainability as a natural way of managing our business and of creating value for all stakeholders”, said Filippo Bettini, the Pirelli Group’s Director for Sustainability and Risk Governance.  “For this reason we developed a plan that fully fits into the business’s growth strategy and which will lead us to become ever more committed to process innovation, with more challenging targets, such as a 70% reduction in the drawing of water by 2015 or the 15% reduction in specific CO2 emissions and energy consumption in the same time frame. And, obviously, a commitment to continuous product innovation, developing tyres that deliver safety, performance and driving comfort in all atmospheric conditions, as well as environmental efficiency. At the heart of Pirelli plan, underlined Bettini, “is the quality of the workplace environment and the quality of the work of our employees, as well as a commitment to transforming the education of road safety in a true culture of safety. Occasions like today constitute a further cultural enrichment and a stimulus for future commitments”.

Contacts:

In line with the 2012-2014 industrial plan presented in London last November, with this operation Pirelli intends to strengthen its leadership in the Brazilian market both in retail and wholesale distribution, focusing on the higher growth Premium segment and increasing the number of Pirelli owned (Pirelli Pneuac) points of sale from the present 48 to 102.

The 54 Campneus points of sale included in the agreement are already part of Pirelli’s distribution network in Brazil, which counts over 600 points of sale in total. The Campneus stores, which will continue under the same brand even after the closing of the operation, are located in the states of São Paulo, Minas Gerais, Paraná, Mato Grosso do Sul, Santa Catarina and Rio Grande do Sul. They sell the complete range of Pirelli tyres for cars, light-trucks, trucks, buses and agricultural machinery, as well as for earth moving and off road equipment.

The agreement is subject to approval by CADE, the Conselho Administrativo de Defesa Econômica brasiliano, and finalization is expected at the end of the first half of 2012.

CAMPNEUS

The first Campneus point of sale was opened in the Brazilian city of Campinas on September 19th, 1975 and the following year extended to three resellers in the sates of São Paulo and Minas Gerais. At present, the company employs around 600 people in seven Brazilian states.

PIRELLI IN BRAZIL

With over 80 years’ commercial presence in Brazil, Pirelli has five tyre production factories in the country: in Gravataí (RS), Campinas (SP), Santo André (SP), Sumaré (SP) and Feira de Santana (BA). The company employs around 9,000 people in its Brazilian plants and has its own testing grounds in Sumaré city for its R & D activities. As well as official Pirelli resellers, the commercial structure in Brazil includes the Pirelli owned Pneuac chain with 48 points of sale in 14 states.

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Social integration against youthful hardships, in areas at risk, support for the educational system, educational training by the instructors: all of this is Inter Campus and now it is also in Mexico. Pirelli supports the Inter Campus projects in various parts of the world by the process of growth and integration of the young generation through sport, creating a link with the social fabric in which the society is present.

The Inter Campus programme has been active since 2004 at Queretaro, a colonial town 200 kilometres north of Mexico City, where the Marcelline sisters continues to offer underprivileged children from the peripheral quarter of Bolanos and the Girasol school the chance to take part in sports activities on the attractive seven pitch of synthetic grass inside their college grounds. The activity is run by coordinator Ernesto Ortega, professor of physical education at the institute, who has organised a theoretical course with eight trainers and a group of about 15 students from the Autonoma University of Sports at Queretaro. The theoretical courses, held every morning, are followed by practical ones in the afternoons on the pitch in which over 100 children participate.

As further development of the activities that have been in operation for years, the visit of an Inter Campus delegation was an opportunity of activating two new centres. Starting from 17 March, the Mexican project was expanded to include new activities that will involve the children. Christian Valeiro of Inter Campus will work directly with the project as he already had experience with other groups in Mexico: after a carefully inspection in Mexico City, he has given his OK to begin.

Another centre has been activated on a small cement pitch within the structure near the Fundaciòn Renacimiento located at Tepito, one of the most underprivileged and dangerous quarters in the Federal District. In line with tradition, the distribution of shirts to 25 children participating in the first training session was carried out and the event was run successfully by Ricardo and Omar, social workers with the same past as the children hosted by the institute, who manage the activity during the course of the year.

Boys and girls from 6 to 14 years-old, who share a difficult existence, come together with football in a cheerful and surprisingly equal game for all the children throughout the world. The ‘callejeros’, children of the street, learn respect for the others by playing and are taught tolerance through the sport.

The event began with a speech by chairman Marco Tronchetti Provera in which he underlined how the premium strategy also consists of being able to rely on equally premium outside sources.

The awards were assigned on the basis of seven criteria: quality, innovation, speed, total cost, sustainability, global presence and service level.

As certified by the German Motorrad TestCenter, which carried out a test for which it bought the Metzeler products and those of its direct competitors.

To guarantee a high level of safety to motorcyclists, Metzeler decided to develop new tread compounds for its Roadtec Z8 Interact tyres with the clear objective of offering them not only the latest technological solutions in the area of wet handling, but also the chance of having a tyre that represents the new point of reference in all weather conditions, from wet and cold to dry.

The values taken into consideration by the Motorrad TestCenter test in the wet were: riding precision and characteristics, maintenance of trajectory under acceleration, ease of riding, grip when cornering, grip of the front and rear tyres in lean angle, grip in acceleration, handling on the limit, response when leaning and braking stability in the complete braking phase with ABS.

The motorcycles selected for the test were a Honda CBR600F ABS and a Suzuki Bandit 1250 ABS. The test took place at the Vizzola Ticino track network last January and February in the dry in slightly cloudy weather.

The Metzeler Roadtec Z8 Interact™ was not only the safest tyre in the wet, but also the fastest over the timed lap. Considering all the values taken into account, the Motorrad TestCenter crowned the Metzeler Roadtec Z8 Interact™ superior to its competitors in its segment.

A new model of institutional culture in which major contemporary art projects dialogue with people who wish to come closer to the language of today’s artists. Among the new and more relevant developments are 12 hours of opening daily from 11 am until 11 pm four days a week; an area for children with games, books and an art tutor; a great digital info wall with informative content and the opportunity of connecting to the international system of art; and a restaurant entrusted to a young and dynamic team, Dopolavoro Bicocca.

A significant international artistic programme will be guaranteed by a prominent name in the field of contemporary art Vincente Todolì, already director of the Tate Modern in London, who has been nominated artistic advisor to the Hangar as of 2013.

The opening of Hangar Bicocca coincides with the inauguration of two exhibitions: one is NON NON NON, the retrospective devoted to visual artists Yervant Gianikian and Angela Ricci Lucchi, unquestioned interpreters of 20^th and 21^st century artistic culture; the other is a new version of the celebrated installation Shadow Play by Hans-Peter Feldman, a German artist and among the most accredited in the world, who will continue to dialogue with permanent installations.

On World Water Day (22 March) Pirelli added yet another important piece to its sustainability mosaic, considered to be of increasing fundamental value.

That very Thursday, our Brazilian factory at Campinas won a prestigious award from the Sao Paolo Industrial Federation FIESP, recognising the commitment of our Brazilian colleagues to the treatment of water after its use in production.

It is the first time Pirelli Brazil has beaten off the stiff competition from various other major companies.

The project honoured with the award is the result of a gradual investment carried out over the last year and which has enabled the plant to re-use 100% of the water it treats internally. It has also ensured a 35% reduction in the volume of water taken from the River Capivari.

This important award is the result of a series of analyses and evaluations made by the public companies responsible for the management of water resources.

British motorists have crowned Pirelli. A survey by Encircle Marketing, specialised in after sales car market research, sell-out prices and selling way, has identified Pirelli as the most recommended tyre brand in the UK last year for the second successive year, totalling 6.7% of all recommendations in the sector.

Managing director of Pirelli UK, Dominic Sandivasci, said of this distinction, “Results such as these are extremely important for us. Our reputation is built on a high level of customer satisfaction and the fact that our brand is spreading, thanks to word of mouth recommendation. This is extremely positive for our growth. We must thank all those who work for Pirelli and who play their part in the development and sale of excellent products, as well as offering such a high level of service to the client”.

THE PROJECT FOR THE NEW FACTORY WILL DELIVER PRODUCTION CAPACITY OF 700,000 RADIAL TRUCK TYRES TO SATISFY GROWING INTERNAL DEMAND AND FOR EXPORT TO MERCOSUR MARKETS

REVENUES IN ARGENTINA SEEN AT 500 MILLION DOLLARS IN 2011 (+40% COMPARED WITH 2010)

Pirelli is ready to strengthen its position in Argentina with a project to build a new radial truck tyre factory which aims to rebalance the company’s position in South America. The project, which will take the macro-economic context and demand dynamics into account, calls for investment from 2012 of approximately 300 million dollars for the first phase of development which ends in 2014. This investment is part of the total foreseen for the industrial segment as announced to the market last year with the presentation of the industrial plan. A second phase would require additional investment of about 200 million dollars. The Argentinian government, accompanying Pirelli’s commitment, will facilitate the project by funding part of the investment at a facilitated interest rate and by guaranteeing the delivery of services (gas, energy, electricity, etc.)

The first investment phase aims to deliver an annual production capacity of 700,000 pieces and employ about 700 people. The second phase would enable the plant to reach a potential production capacity of 1.4 million pieces, at full operation, and employ about 1,200 people. When the project is completed, it would bring Pirelli’s total number of employees in Argentina to approximately 2,300 people, including the 1,100 already employed at the Merlo plant.

Pirelli’s growth plan under consideration was presented today at a meeting in Buenos Aires, at the Residencia Presidencial de Olivos. The participants were the President of Argentina, Cristina Fernández de Kirchner, the Minister for Industry, Débora Giorgi, the chairman of Pirelli, Marco Tronchetti Provera, and the chairman of Pirelli Neumáticos Argentina, Franco Livini.

The project, which aims to further strengthen Pirelli’s leadership in South America, is part of the company’s international expansion strategy which, in recent years, has seen an increasing direct industrial presence in countries like Argentina which have fast rates of growth and competitive industrial costs, in the context of a region-based logic which permits, among other things, the containment of effects connected with exchange rate fluctuations. The new plant, in particular, would satisfy increased demand for radial tyres in a country whose economic growth is attracting new investment from the automotive industry. The dynamism of the auto market in South America is also linked to the launch of new industrial projects by some of the major car makers, including Fiat, Ford, Renault, Volkswagen, Toyota, Peugeot, Mercedes, Mitsubishi, General Motors, Hyundai and Honda, whose recent total investment plans for the area amounted to over 20 billion dollars. The Truck Business Unit in South America counts among its clients such major truck makers as Ford, Scania, Volvo, Man, IVECO, Mercedes and Agrale. Today, Pirelli satisfies the demand in Argentina with imports from other production sites.

According to data released by the National Association of Automobile Manufactures (Adefa), production in Argentina in the first nine months of 2011 grew by over 23%, compared with the same period in 2010, and the full year is expected to see record production of more 800,000 vehicles. According to data from the Association of Dealerships in Argentina (Acara), sales of new vehicles in August 2011 were 32% higher in total than a year earlier, with auto sales 31.5% higher and heavy vehicles 33% higher, which demonstrates the favourable demand trend in the truck segment and which, in the coming years, will result in a larger replacement market.

The planned strengthening of Pirelli’s position in the country could bring Argentina to represent 13% of the Pirelli group’s total truck tyre production. The investment will not only allow us to satisfy growing internal market demand, which will absorb 50% of production, but also that of the important export markets like other markets of the Mercosur area.

In 2011, Pirelli estimates that its revenues in Argentina will reach 500 million dollars, an increase of 40% from 2010.

The project for the new factory, the construction of which is expected to start at the beginning in 2012, foresees the production of technologically innovative tyres, which offer efficient solutions in terms of performance, safety, eco-sustainability and economy of usage. The product lines foreseen will use SATT technology of the latest generation, which lengthens product life, optimizes wear and improves driving precision. Compounds and tread patterns are planned and optimized as a function of the performances required in their different uses.

Output from the new site, would be in addition to the 5 million pieces already produced annually for the entire car, Suv and light truck range at the Merlo factory, in the province of Buenos Aires, where Pirelli has operated since 1951 and where production capacity is already being increased. Last year, Pirelli announced a 100 million dollar investment to increase capacity in the SUV and Light Truck segments in Merlo. Merlo’s output today represents, as said earlier, 10% of total production in South America and 20% of car tyre production in the area.

Pirelli’s Truck Business Unit

Pirelli’s Truck Business Unit has six plants, located in Turkey, Italy, Egypt, China and Brazil, where there are two. All the division’s factories utilize the group’s most modern production technology and draw on Research and Development carried out in Izmit, Santo Andrè (Brazil), Yanzhou (China) and Milan, which ensure that the tyre design is in line with the specific needs of different markets.

The global growth strategy adopted in recent years has allowed Pirelli’s Truck Business Unit to confirm its weight in traditional markets and to expand into rapidly growing economies. In particular, thanks to the recent investments in Brazil and China, the Unit can count on significant, competitive production capacity to satisfy the growing demand for tyres for industrial vehicles, which is particularly strong in fast growing economies. This strategy has ensured Pirelli a leadership position in some of these markets, beginning with those of the Mediterranean area, particularly Turkey and Egypt and in South America.

Pirelli in Argentina

Of the 19 production sites which today compose Pirelli’s industrial universe, 7 facilities – 1 in Argentina, 5 in Brazil, 1 in Venezuela – are located in the South American continent with production that covers the entire range of segments: auto, industrial vehicles, motorcycles, agricultural machinery and worksite machinery.

Pirelli has been in Argentina for more than a century. In fact, it participated in the Buenos Aires Expo of 1910, formally marking the birth of Pirelli Argentina. The step up in size happened in 1929, at the edges of the capital where the company built a new factory for electrical conductors: the “La Rosa” factory. In 1948, it became Industrias Pirelli Saic and in 1956 Pirelli Argentina acquired a factory in Bella Vista, outside Buenos Aires, where it concentrated all its rubber processing, both for the cables sector and diversified products. In 1968, with the acquisition of 100% of Coplan, in which it had held 50% from 1951, Pirelli began the direct production of tyres in the town of Merlo, where the group’s plant has grown over the years and where the company is still located.

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