Pirelli

Customers

Types of Group Customers

The types of customers vary greatly from one business unit to the next.

The Tyre Sector serves the following categories of customer:

• “Original Equipment” which includes the leading international makers of cars, motorcycles, scooters, commercial vehicles (light, medium and heavy), buses and agricultural machinery;
• “Replacements” which includes a total of about 15 distribution channels (for car, truck and motorcycle tyres), and whose importance differs from country to country.

The Real Estate Sector is comprised by:

• “Investment & Fund Management”, whose customers are funds and property holding companies and non-performing loans, in which Pirelli & C Real Estate generally has qualified minority shareholdings;
• “Service companies”, whose customer include, in addition to third parties, funds and property holding companies and non-performing loans managed by the Asset Management departments of Pirelli & C. Real Estate, which are also served by the franchising network.

Customers of Pirelli Broadband Solutions can be divided into the following categories:

• added value retails;
• system integrators;
• telecommunication operators;
• distributors.

The companies owned by Pirelli & C. Ambiente have the following categories of customer:

• Customers in the Renewable Energy sector, i.e. companies that convert solid urban waste to energy;
• Customers in the Site Remediation sector, i.e. companies - mainly in the Group and other closely affiliated companies - that assess, plan and manage the demolition and decontamination of buildings and/or lands;
• Customers in the Solar Utility sector, i.e. national electricity grid operator to which Solar Utility sells the electric power produced by photovoltaic plants.

Customers of Pirelli Eco Technology, i.e. companies that operate in public transport, freight transport, waste collection, the mining sector and construction. Pirelli Eco Technology also operates through partners that are licensees of its Gecam™ technology and operate independently in Italy. In addition to receiving royalties on its licensee’s sales, the company also indirectly performs the technical and marketing activities connected with the product.

The following table shows the breakdown of Group sales by geographical area:

Group Policies

Customer orientation - a key aspect of the Values and Ethical Code of the Group - presumes that Pirelli has a constant and ongoing commitment in terms of:

• comprehension of the market context in which the Group operates;
• consideration of the impact of the Group’s actions and behaviour on the customer;
• exploiting every opportunity in doing business to satisfy the customer’s needs.

These principles are set out explicitly in Articles 2 and 4 of the Pirelli Ethical Code. The relevant excerpts are given as follows. “The Company:

• “pursues market excellence and competitiveness, offering customers a quality of service that effectively meets their requirements” (Article 2 of the Ethical Code - Aims and Values);
• “bases the excellence of the Group’s products and services on customer service and the readiness to meet customer needs. The aim is to offer immediate, thoroughgoing and competent responses, tailored to the needs of customers, and in keeping with the spirit of legality, courtesy and cooperation” (Article 4 of the Ethical Code - Customers).

The Company’s commitments to the customer described above are similarly made explicit in the General Conditions of Supply applied by Group companies.

Focus on Pirelli Tyre

The wide variety of Group customers entails many different methods for dialogue and interaction between the customers and the various businesses. As in 2007, we have decided to focus again in 2008 on relations between the Tyre Sector and its customers, partly so that a year-on-year comparison of performance can be made.

Dialogue and interaction

The relationship is managed principally through two channels:

• the local sales organisation, which has direct contact with customers and, by using the Sales Force Automation (SFA) information management system, can process and respond on-site to all customer information requirements;
• the Contact Centre, which handles provides both informational assistance or order management (inbound) and telemarketing (outbound).

The existing monitoring systems generate reports that can be used to evaluate efficiency, effectiveness and level of customer satisfaction:

1. KPI Contact Centre monthly reports: quantitative measurement of the principal customer service parameters to aid the analysis of offered service levels.
2. WMT (Workflow Management Tool), which is an application that permits mapping of all requests originating from the marketing to obtain both quantitative (number of requests by subject area and requestor, response times, etc.) and qualitative (response method) analysis designed to improve service and enhance customer care.
3. Dealer Satisfaction Surveys, which are periodic surveys of satisfaction ranked on a scale of from one to five, conducted in the form of interviews with native language operators, anonymous surveys, and web based questionnaires.

The following table shows the results of the surveys for the last three years:

Satisfaction level
	2008	2007	2006
Number of countries involved	11	11	13
Overall satisfaction level (1-5)	3.96	4	3.96

Numerous surveys have been conducted by important newspapers and specialised organisations to determine end customer preferences and satisfaction. Pirelli enjoyed particularly enviable results for 2008: in the Original Equipment Tire Customer Satisfaction Study 2008, an annual survey conducted by the California research institute J.D. Power and Associates that measures car driver satisfaction on original equipment tyres during the first two years after car purchase, Pirelli’s score was more than 22 points above the sector average.

For the readers of SportAuto, a leading German magazine in the sports car sector, Pirelli is the top brand for “sportsmanship and emotion”. This is what was reported in the survey that the specialised publication conducts every year amongst its readers to get their opinions and reward the brand that satisfied them the most.

For the third year in a row, Pirelli won in the “Best Brand” tyre category, the most popular competition for readers of Auto Illustrierte, a prestigious independent car magazine published in Switzerland.

Dialogue with the Company is assured by a Contact available to customers on the Pirelli Tyre website for any questions or requests they might have.

Focus on quality: certifications

The focus placed on quality by Pirelli Tyre, both as manufacturer and supplier, is demonstrated by the certifications it has received, which comply with international standard and address aspects regarding processes, products and services. In particular:

ISO 9001

The Group Quality Management System, set up in 1970, has gradually been introduced to all the plants. The Pirelli quality system has been ISO 9001 certified since 1993. All of its factories are certified in accordance with the most recent version of this standard.

ISO/TS 16949

To meet the requirements of car makers, the Group obtained certification for its quality management system under the ISO/TS 16949 standard in 1999, and has since maintained its certification in compliance with the current version of that standard. All plants that supply car makers have obtained this certification.

ISO/IEC 17025

In 1993 the Pirelli Group Materials and Products and Outdoor Experimentation Lab implemented a quality management system that is accredited under the ISO/IEC 17025 standard. This quality management system is maintained in accordance with the current standard.

Pirelli’s car tyres are an excellent example of the Company’s focus on quality, which is confirmed by its pre-eminence in a large number of product tests, and also ensured by the Company’s close links with highly prestigious partners (famous car makers, specialist magazines, driving schools, etc.) for product development and experimentation.

European Regulation no. 1907/2006 (REACh)

In certification of the compliance of chemical products pursuant to European regulations to protect worker health and the environment, the Group has recently implemented all measures necessary to comply with REACh requirements. Pursuant to these requirements, Pirelli does not produce or does not directly import chemical substances from non-EU countries, constantly controls the chemical substance registration processes implemented by its suppliers, verifies their certification and requests continual updates in accordance as necessary to carry on its business.

Product eco-sustainability: Green Performance Strategy

Over the next few years, the efforts of the Pirelli Tyre R&D Department will be increasingly focused on the development of innovative performance products capable of anticipating market demand, particularly in all businesses connected with the definition or development of technologies and “green products” that are compatible with the new environmental standards.

This will particularly involve new ecological materials, first and foremost silica from rice chaff, which offer both environmental and cost benefits. The development of “green performance” products is planned for various segments, reinforcing its current leadership especially in the premium segment. In particular the new Cinturato P7 tyre, which will be presented next April, represents the green revolution that adopts the tradition of performance.

Pirelli is increasingly focused on ecology and road safety, i.e. sustainable mobility. This process began some time ago and, not by accident, it has had solid roots in the Group’s passion for innovation for more than 130 years (when it became a benchmark for the automotive industry) and in a Research & Development Department that boasts five centres of excellence located around the world (in Italy, Germany, Brazil, United States and United Kingdom), about one thousand professionals and the highest annual investment as a percentage of sales in the entire tyre industry.

All of the Group’s efforts are being focused on green performance. It will soon be ready to introduce many innovations that will change the history of the entire industry, just as it did with the radial ply tyre in the 1950’s or the low-profile tyre in the 1970’s. These innovations reflect a global, integrated ecological approach: from ever-more ecological tyres in all segments to the use of new materials that are not derived from petroleum; from integrated solutions for the automotive industry to production processes that are less and less harmful to the environment (or more and more friendly to it). In other words: ecology applied to the whole production chain, from tyre manufacturing solutions to the final product.

Green performance in a tyre means reducing fuel consumption and harmful emissions, higher mileage, the use of environmentally compatible materials and improved performance under dry and wet conditions.

Exploiting its acquired know-how, Pirelli will continue developing cutting-edge products to realise green performance. At the end of the three-year period, the impact of the “green” component in Europe will represent more than two-thirds of all sales in the replacement and original equipment channels.

This means that at the end of the three-year period, the impact of the “green” component on Group revenues is expected to increase to about 40% of the total, compared with about 20% now.

The family of Cinturato tyres, launched last year in the P4 and P6 versions dedicated to small and mid-size cars, points in that direction. The Cinturato P7 tyre, developed for top-end cars, consolidates Pirelli’s position on this path and puts it once again on the cutting edge with a tyre that exalts the characteristics of the P4 and P6 and launches a challenge that has never been attempted before in the automotive world: to simultaneously offer performance and environmental compatibility without sacrificing anything, from driving pleasure to safety, while reducing fuel consumption and harmful emissions.

Consumer safety: product innovation and institutional campaigns

The Group has always pursued product innovation to improve quality and safety for the end consumer. To achieve this, Pirelli Tyre relies in part on its close ties with the leading car makers in a segment that is particularly scrupulous and demanding in terms of safety: the ultra high performance market.

To cite a few examples, customer safety is part of the DNA of the following products:

• The New Pirelli Cinturato, whose innovation combines driver safety and reduced environmental impact. The New Cinturato is discussed in detail in the section “Environmental Dimension,” to which the reader is referred for further information.
• K-PRESSURE OPTIC™, an innovative, intuitive and immediate safety device based on sensors installed in place of the tyre valve cap, capable of clearly showing whether tyre pressure is correct or below the danger level, without the need for additional devices. All you have to do is walk around the car and look at the colour of the valve cap: if pressure has been lost, the device immediately shuts the tyre valve and turns red. The sensor turns white again only after the tyre has been brought back to the right pressure.
• Self-supporting or Run Flat tyres, which provide greater vehicle control in emergency conditions and allow continued safe driving even during a rapid loss of tyre pressure. Mobility is guaranteed by the self-supporting fabrication process, which involves inserting elastomeric reinforcements in the sidewalls, thus rendering the structure self-supporting. In other words, when pressure is lost, it supports vertical loads and the horizontal and transversal stresses from the vehicle, allowing the driver to reach the nearest service station safely.
• New generation winter tyres like the new Winter Sottozero Serie II introduced in June 2008. This is the ideal tyre for safe driving in the most critical winter conditions, suitable for all sedans and high-performance supercars to offer maximum mobility during autumn and winter months.
• New concept tyres like the Pzero that, thanks to its special tread compound, offers the extreme performance of a warm tyre from a “cold” start. This permits immediate driving pleasure and raises the safety standards for limit, straight-line and corner braking, in wet and dry conditions, at all speeds achievable on the road and track.

• WINTEC, the first winter tyre for motorcycles and scooters. Wintec is an innovative technology developed to help motorcyclists deal with the problem of seasonal weather conditions. It embodies a new concept of mobility, by extending traditional demands of safety and road hold in cold and/or wet conditions. Starting from the classic limits of motorcycle and scooter use and working on the constraints imposed by seasonal weather, this tyre guarantees a higher level of safety and makes it possible to use motorcycles and scooters even during the winter. Wintec was created on the basis of a detailed analysis of the technical, economic and environmental context, while also exploiting synergies with other Company business units that had already developed similar products. The identified technical solution was applied to scooters so that they could be used any day of the year, even in severe weather conditions, with a significant improvement in safety margins. With the first cold tyre for motorcycles and scooters, Pirelli makes it possible to extend the usage season and helps solve the problem of safe mobility in large cities.
• Cyber™Tyre Lean System, the first TPMS (Tyre Pressure Monitoring System) device capable of measuring pressure, temperature, the average load on each wheel and the number of rotations of the tyre, and of sending the vehicle’s data directly to the vehicle’s onboard computer via radio. Cyber Tyre Lean is an ecological device that, thanks to a technology patented by Pirelli, is self-powered through the energy released by the tyre’s mechanical vibrations as it rotates.
• Cyber™Tyre System, a truly “intelligent tyre” that can not only provide real time data about tyre pressure but also read the road and interface directly with the systems that control the wheel’s dynamics, providing the other electronic systems installed on the car with additional information for safe driving. The tyre itself will function as an electronic “sensor”, interacting with other devices like ABS and ESP, to provide real-time information such as the used and potential friction coefficient, the forces of contact between the tyre and the road, making it possible to maintain maximum, safe control of the car.

Finally, mention must be made of the Group’s commitment to increasing driver attention to comparisons of tyres - and thus his or her own safety - through dedicated institutional campaigns like “Tyre Life”.

Tyre Life is an international initiative that rewards consumers who decide to buy Pirelli tyres, by offering them a series of important benefits. In case of tyre puncture caused by nails or other objects, damage caused by impact against a sidewalk or by fire, Tyre Life replaces the tyre without limits within 24 months after the date of purchase. Tyre Life also pays for the cost of installation and balancing for replacement of the damaged tyre. A customer who installs Pirelli tyres can relax: he or she will be contacted before the scheduled deadlines for free inspection of tyre condition, so that he can always travel in absolute safety. This programme is valid in Italy, Spain, Switzerland, Austria, Greece, Germany, Poland, Czech Republic, Turkey and Belgium.

Of particular note is the role played by Pirelli Tyre in ETRMA. Its Chairman is the General Manager and CEO of Pirelli Tyre, who was responsible for the signing of the European Road Safety Charter.

Quality, Safety, Eco-sustainability: Awards:

Pirelli Tyre won the “Tire Technology International Award 2009” for the “creation of innovative materials” and “innovative environmental benefits,” and was elected “Tire Maker of the Year”.

The Company was also recognised as the best producer of tyres of the year in China, at the China Auto Service Golden Finger Awards.

Pirelli’s focus on quality is confirmed by its pre-eminence in a large number of product tests, and also ensured by the Company’s close links with highly prestigious partners (car makers, specialist magazines, driving schools, etc.) for product development and experimentation.

The following charts illustrate the excellent results achieved by Pirelli in 2008 in numerous product tests on summer tyres, winter tyres and motorcycle tyres, performed by leading specialist magazines.