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Pirelli 2000 Strategies

INVESTMENTS UP TO 2 THOUSAND BILLION LIRE TO CREATE
e-PIRELLI
New Internet linked initiatives and on-line transfer of all
company processes.
e-Pirelli will invoice one billion Euro on-line already in
2000

Milan, march 20, 2000 – The Board of
Directors of Pirelli SpA examined today the main features of the
new
e-Pirelli Project,
a radical transformation of
the Group, to which an investment up to 2 thousand billion Lire has
been assigned over the period 2000-2002. After having contributed
to the fast diffusion of the World Wide Web with the development of
extremely high transmission capacity optical components and
systems, Pirelli is in turn becoming an e-company; a company that
uses the speed and flexibility of the Network to both manage
internal processes and develop innovative businesses. The company
is facilitated in this by investments already made in recent years
to create one of the most advanced internal networks in Europe, for
which it received the Gartner Group’s prestigious EIT award for
Excellence in Information Technology.

” Internet is an opportunity to radically
transform all company processes” , said Marco Tronchetti Provera, ”
and this strategic choice confirms the Group’s firm intent to
operate as a leader in the world of hi-tech and the new e-conomy,
with the enhancement of competitiveness and the creation of value
for the shareholders well within its sights” .

The
e-Pirelli Project
will grow in
three main directions:

  1. development and enhancement of Pirelli optical components and
    systems activities linked to the e-technology, also through
    spin-offs and the creation of strategic alliances and technological
    partnerships with primary companies;
  2. full use of on-line technology in the Group’s core activities
    (tyres, cables and systems), from purchasing through to finished
    product sales;
  3. start-up of a series of new entrepreneurial e-business
    activities, i.e. Network linked start-ups.
  4. In detail:

    1. Pirelli SpA: development and enhancement of
    hi-tech activities

    - Hi-tech optical components company in the
    USA.
    A new high-tech company has just been incorporated in the
    USA, with US management, to exploit Pirelli’s numerous patents in
    the field of optical components for communications.

    - Another photonics company. A new
    company is also being incorporated to enhance Pirelli’s numerous
    patents in the field of submarine optical systems.

    - Innovative micro-components.
    Investments are envisaged with strategic partners in the field of
    innovative micro-components (sensors, interface modules, firmware,
    etc.), technologies which are being developed by the Group for the
    ” intelligent” tyre, the realization of which is in under way.

    All these highly innovative activities are of
    strategic value for the Group, and operate in high growth and
    profitability markets.

    2. Pirelli SpA: transformation of the Groups
    core businesses

    The company has kicked off 20 projects, all directed at
    radically changing company processes. The aim is to gain
    significant competitive advantages and overturn the historical
    profitability indices that characterize the Group’s traditional
    activities. Speed and flexibility will be the principal levers of
    this programme, the main guiding lines of which are announced
    below.

    - E-manufacturing. Pirelli SpA’s
    industrial activities are in the process of being transformed into
    e-businesses strongly oriented to using on-line technologies and
    the Network, re-designing all the main internal processes, from
    purchasing to sales, from R& D to production and logistics. In
    the Cables and Systems Sector the e-business programme is being
    started up in the previously mentioned new photonics companies. In
    Tyres the first example of integrated e-business is already at an
    advanced stage in the Milano-Bicocca area, and will be presented to
    the press and to international investors in July together with MIRS
    (Modular Integrated Robotized System), the new revolutionary
    e-factory.

    This is an extremely flexible plant fully
    managed on-line for the production of a family of ultra-low profile
    tyres with completely new features: the e-tyres. Robotized
    construction methodologies drastically reduce the number of
    processing steps, from the traditional 14 to just 3. The Tyre
    Sector’s traditional profitability indices are overturned thanks to
    a 25% reduction in total product cost, a 100% improvement in
    quality, an 80% increase in labour productivity and a 50% reduction
    in tyre per day investment.

    By the end of 2002, five MIRS e-factories will
    be operational in Europe, the United States, South America and
    Asia, with a capacity of 10 million tyres per year in a continuous
    cycle.

    The Group plans to invest roughly 500 million
    Euro to realize the e-manufacturing projects in the Cables and
    Systems and Tyres Sectors.

    - Cables E-commerce. An on-line order
    management system for general market cables (which represent
    roughly 25% of the Sector’s total sales) has already been
    successfully started up in some of the major European countries; a
    first step which is destined to gradually expand to cover the
    entire sector. By the end of June Italy will be capable of reaching
    an e-commerce share of the general market equal to 65%, while the
    entire sector will reach 40% by the year-end, with sales in the
    region of over 400 million Euro. The on-line sales system therefore
    is destined to expand fast, embracing every segment of the Cables
    and Systems Sector.

    - Tyres E-commerce. Recently, at the
    Geneva Motorshow, Pirelli gave a world preview of the ”
    mini-portal” of the new P2500 Euro tyre, the first to be expressly
    conceived for sale via the Network. The portal allows the product
    to be selected on-line, chatting with the dealer to define the
    size, the price, booking and collection, filling in a purchase
    voucher on-line. The introduction of e-commerce in the sale of
    Pirelli tyres is a fast growing reality. In light of the current
    25% share of European on-line car tyre sales (OE and replacement),
    the target is 50% by the year-end. Overall therefore by the end of
    the year the Sector will already be capable of making transactions
    worth 700 million Euro via the network .

  5. Pirelli & C: new investments for external
    start-ups

- Pirelli & C. has promoted the EuroCube
Fund to finance Italian and foreign entrepreneurial start-ups which
have as their object the creation and development of hi-tech
Internet linked activities. Fund members besides Pirelli the groups
Benetton, Caltagirone, Camfin, Gazzoni, Intesa, Mediobanca and
Merrill Lynch. The Fund’s resources amount to 100 million Euro.

The operative management of the projects
approved by an Advisory Board chaired by Marco Tronchetti Provera -
with the main shareholders and key representatives from the
economic and scientific communities as members – will be entrusted
to the incubator myQube S.A., a structure directed by Gian Luca
Braggiotti, formerly Deputy General Manager of Pirelli S.p.A.

The first project, which will be completed by
the end of June, is the Italian Real Estate Portal, directed at
satisfying all housing needs (buying, selling, renting, mortgages,
refurbishing, etc.) utilising the professional skills of the best
Italian real estate operators.

- Pirelli & C. is participating in the
Dix.it Consortium that is bidding for the the new generation UMTS
mobile telephony licence, with joint shareholdings alongside Aem,
Banca di Roma, e.Biscom, e.Planet, IFIL and Securfin. Pirelli’s
investment is estimated to amount to 300/350 million Euro,
depending on the assignment price, inclusive of the investments
required to set-up the network.

The Group is also studying the possibility of
taking part in similar initiatives in the main markets where it has
an institutional presence.

The
e-Pirelli Project
rests its
foundations on a network that now links over 14,000 workstations in
35 countries. Within a time span of 24 months the new

e-Pirelli
network
,
which will offer
surfing opportunities worldwide to a population of 90 million
people (employees, suppliers, dealers, consumers) will be a
reality.

Finally, it should be mentioned that Pirelli
started using the Internet in the management of a number of
internal processes as far back as 1995 with the launch of APIS
(Advanced Pirelli Information System) and that during that same
year it created its first Web site which, today, counts over 2
million contacts/month. In 1996 Pirelli gave birth to the first
international on-line Competition for the diffusion of scientific
culture via the Internet, with a jury formed by Nobel prize winners
and scientists of international fame. The prizes of the fifth
edition of the Internetional Award are currently being
assigned.

Categories: Institutional