Pirelli Pounds the Pavement
Founded in 1872, Pirelli is the fifth largest manufacturer of tires in the world. The company operates 19 industrial factories in four continents with a distribution network spanning 160 countries. One of these factories is located in the Amreya district of Alexandria and is considered to be an anchor for Pirelli’s regional growth strategy. Business Today was invited to visit the factory and witness the highly advanced production process that supplies the region with premium grade truck and bus tires.
The factory was established in 1990 and produced its first tire in 1994. Built over an area of 300,000 square meters, the facility employs approximately 1,100 people. Production capacity has been steadily rising from 157,000 tires in 1999 to 750,000 tires in 2011. “We started with a 12/R20 tire that worked only for small loads,” says Khaled Abdel Hamid, commercial director of Pirelli Egypt. “We then introduced the 12/R24 and were the first country in the Middle East to produce this type of tire.”
The company prides itself on being a technology leader in terms of its production process and continued development to suit client needs. “We always keep our clients’ needs in mind. Whether it is safety, increased mileage or higher loads, we try to connect these demands with the quality of roads that exist in Egypt,” says Abdel Hamid.
“After we match our customers’ needs with the prevalent roads, we then go into the design and production phase. We have to always maintain a close relationship with our clients in order to continually develop our tires and match their expectations,” he adds.
The production process of truck and bus tires is comprised of a series of steps where each part is manufactured separately and then combined to form the tire. First, a mix of natural rubber and other chemicals is ground together to produce the rubber compound.
The compound is then made into sheets, which are cut into different shapes and thicknesses to produce the different parts of the tire. These parts include the side walls, inner liner, belt and tread. Each part is produced on a separate production line and then fused together to form the green tire.
Compressors with the tread’s mold are used to heat and compress the green tire to produce the final product. The factory produces over 90 different treads in varying sizes.
The Alexandria facility is one of the most advanced factories that Pirelli operates. In 1997, the factory acquired an ISO 9001 quality certification. Then in 2004 it received an OHSAS 14001 and OHSAS 18001 certifications for occupational health and safety. Finally, in 2012 it acquired the ISO/TS 16949 which not all Pirelli factories have.
“We produce the best tires not only in Egypt but all over the world. Our parent company sometimes calls for our assistance in issues pertaining to production processes. This is due to our high caliber of engineers and technicians,” says Abdel Hamid.
Global context
Pirelli’s CEO Karim Gaddas said Pirelli is well-positioned in the global market to capture future economic growth, compared to its competitors.
According to him, the demand for premium tires, where Pirelli is a leader, is set to grow at a much faster rate than that of normal or standard tires. “In the period from 2009 to 2015 the demand for premium tires will double whereas standard tires will only grow by 27%. Therefore, he who can produce premium tires will ride this growth,” says Gaddas.
Another important factor is the geographical distribution of this projected growth. With the global financial crisis of 2008 and now the European debt crisis, global economic growth will be driven by emerging economies such as China, South America, the Middle East and Russia.
“Pirelli has a very competitive industrial footprint. 75% of our production capacity is in emerging markets like China, Venezuela, Egypt and Turkey. So 75% of our products are already where the future consumer is,” Gaddas says.
Global truck tire capacities reached 135 million tires in 2011 and the market is projected to grow at 5% per year for the next five years. Currently, Pirelli produces around six million tires per year and is planning to expand to seven million tires by 2015.
The company is planning to focus its growth strategy on premium tires and direct much of its investment to emerging markets. In 2008 and 2010, the company invested €30 million (LE 238.29 million) in Egypt and is planning to invest an additional €30 million in 2012 and 2013.
“In the span of six years, we will have invested close to LE 500 million in Egypt. Not many companies are willing to invest right now, however we believe that we have a responsibility as an Egyptian factory. We need to set an example to others abroad who are waiting to invest,” says Gaddas.
The company’s continued investment in Egypt reflects its strong belief that Egypt is set to be the anchor for its growth strategy. The factory’s ability to produce high quality premium tires allows it to export its produce not only to the MENA region but to Europe as well.
“Over 50% of our production capacity is exported to regional markets, including Europe, which helps us offset any slowdown in the local market; this is due to our high quality products. However, in order to reach this standard, we had to invest in technology. Anyone who believes he can produce a quality product without investment in technology is mistaken,” Gaddas explains.
All of the tires that compete with Pirelli Egypt are in fact imported but, according to Gaddas, they still supply the highest quality of truck and bus tires in the market. “All of our competition is not made in Egypt but comes from countries like Japan or Italy. So to have the highest quality in the market made in Egypt is something that we are very proud of.”