Local for Local Strategy
Pirelli implements a “local for local” strategy by setting up production sites in rapidly developing countries to serve local demand at competitive industrial and logistic costs. In the context of an economic slowdown, this strategy improves Group competitiveness in the face of resurgent trading blocs and growing protectionist measures (customs barriers or other measures such as technical prerequisites, product certification, and administrative costs connected with import procedures, etc.). The Pirelli Group adopts this strategy for its operations in countries, where the general political and economic context and tax systems might prove unstable in future.
Below is an indication of the countries where Pirelli operates.
The different colors represents the so called "country risk" (source: IHS Global Insight, August 2012), which is a measures of risk that takes into consideration the economic, political and security sphere.
The industrial business was negatively impacted during H1 2012 by non-recurrent events related to specific country risk scenarios. Indeed, the challenging local political, economic and social context in Egypt led to a production slowdown at Alexandria production site during Q2, whilst delays linked to import licenses in Argentina negatively impacted the results of the industrial segment. The situation in Egypt has gradually returned to normality with the full resumption of production activity at Alexandria at the end of July. Regarding Argentina, the recent trade agreements with Brazil, should free exports from the Brazilian truck tire factories towards the Argentine market.
The Group constantly monitors the evolution of political, earnings, financial and safety risks associated with the countries where it operates. Moreover, in situations where the production capacity of certain factories is underutilised, production can be reassigned to other Group plants.