Pirelli’s announcement that it plans to invest EUR150 million to expand its unit in Slatina is in stark contrast, at least at first sight, with the evolution of car sales in Romania. The domestic car market has declined sharply over the past three years, while internationally, car sales have only started picking up in the past year.
But the Italian company’s new investment in Slatina, where it has already invested EUR300 million, is a bet for the future and part of the company’s strategy to be present on emerging markets, where the growth is.
“We are happy with our results in Romania so far,” says Marco Tronchetti Provera, president and CEO of Pirelli group, and one of the most influential businessmen in Italy.
In a few years, Pirelli’s facility in Slatina is slated to put out an annual 10 million tires, compared to 4 million last year and 7 million estimated for this year, which makes it the group’s biggest production line.
“Why did we invest in Romania? A few years ago, we looked at the market and decided we needed to focus on the premium tire segment. Old factories couldn’t house new technologies so, unfortunately, we’ve had to shut them down and build new ones. We chose their locations so as to be present in regions with sturdy growth. In Romania, we also found skilled labor and support from authorities,” says Tronchetti.
Romanian Prime Minister Emil Boc visited Slatina late August when Pirelli announced its investment plans, where he met with Tronchetti. The CEO says authorities in Bucharest took “very brave” measures that will bear fruit in the upcoming period. But apart from anti-crisis measures, the Italian group was likely more enticed by the support authorities offered – the Government is offering Pirelli EUR28 million in state aid for its new investment.
Expanding the production line will create 300 more jobs, besides the 2,400 employees Pirelli says it currently employs in Romania. The CEO says he is satisfied with the skills of Romanian employees.
“To show how satisfied we are with the skills of Romanian workers, we have brought 100 Mexican workers to Slatina for training. The new factory we’re building in Mexico will have the same technology as in Romania. Slatina currently hosts the largest Mexican community in Romania,” says Tronchetti.
He doesn’t seem very concerned with the crisis currently affecting European economies and says he is not afraid of a new decline of the auto market. “We are less affected by the downturn. We are not that tightly connected to the auto market,” he explains.
Statistics show that in the past ten years, 2000-2010, the global car market increased by an annual average of 2%, while the tire market grew by an annual average of 2.8%. The premium car segment grew an annual 2.8% in the same interval, while the premium tire segment grew an annual 4.7%.
In 2009, when the auto market declined 22%, the tire market only dropped 10%.
In Slatina, Pirelli mainly makes tires for new cars for makes such as BMW, and the bulk of the output is exported, company officials say.
Despite the crisis, sales of Pirelli Romania more than doubled over the past three years, from EUR115 million in 2007 to EUR242 million in 2010, while the number of employees increased from 800 to over 1,600, according to Finance Ministry data.
(English version by Oana Gavrila)