Pirelli focuses on win-win business model

Tire maker plans to establish new projects based on reciprocal growth

Editor's Note: ChemChina acquired a 65 percent stake in Italian tire maker Pirelli in 2015, with an investment of 7 billion euros ($7.87 billion). In light of the recent agreement signed in Rome at the end of March to formalize Italy's endorsement of the Belt and Road Initiative, China Daily interviewed Enrico Verdino, chief technology officer of Pirelli APAC, to elaborate on the win-win business model that characterizes projects advanced within the initiative, with mutual benefits on both sides.

What's your view of China's Belt and Road Initiative?

In recent weeks, Italy has attracted worldwide attention by becoming the first country of the G-7 to formally join the Belt and Road Initiative. The Belt and Road Initiative represents an extraordinary and comprehensive opportunity to develop deeper mutual knowledge of different cultures and to establish new and fruitful cooperation projects based on reciprocal growth and a win-win perspective.

How do you view China-Italy relations? What are the potential areas of cooperation between the two countries under the framework of the Belt and Road?

China and Italy have a long history and attach great importance to the inheritance of civilization, which is the foundation for mutual understanding and long-lasting friendship between the two countries. I firmly believe that in the future, Italy and China will work together to forge a closer comprehensive strategic partnership in economic, cultural and other aspects. President Xi Jinping said in his signed article that "Made in Italy" is synonymous with high-quality products, stressing that China will open wider to the outside world and share opportunities in the Chinese market with other countries, including Italy. This is a great historical opportunity for Italian companies such as Pirelli.

What has Pirelli done for China-Italy communication under the framework of the Belt and Road?

Pirelli is important member of the Business Forum Italy-China, or BFIC, a permanent committee of top managers established under the patronage of the Chinese and Italian governments in 2014.

Through the chairmanship that Pirelli shared with Bank of China until the end of 2018, the group plays an active part in advancing the dialogue between the countries' business communities and promoting the development of bilateral economic relations also at the regional level.

In particular, the BFIC seeks to promote dialogue and concrete projects related to the implementation of the Belt and Road Initiative, as expressed in the joint declaration signed by the co-chairmen of the forum in Beijing on Feb 22, 2017 in the presence of Chinese President Xi Jinping and Italian President Sergio Mattarella. In the context of China's opening-up, the BFIC aims to stimulate a multilevel dialogue and support the identification of concrete cooperation projects. To do so, it plans targeted and regional initiatives, designed to shed light on the strengths and excellences present in both economies and contribute to building synergies between these.

To fulfill its objectives, the BFIC also promotes the organization of numerous high-profile initiatives, alongside official state visits and meetings, on ad hoc topics of bilateral interest, such as the SME Forum in May 2017 on the occasion of the visit of Italian Prime Minister Paolo Gentiloni to China's BRI summit.

In June 2018, the SME Trade and Investment Forum, a forum designed to promote regional-level cooperation between SMEs, was held in Dalian in Liaoning province and Qingdao in Shandong province, and played an important role in helping Italian companies discover the economic opportunities present in the provinces. The forum saw 1,000 business-to-business entities and over 400 business proposals, as well as the signature of two memorandums of understanding for economic and trade cooperation - also with Shandong.

Also, a number of seminars and conferences have been organized in Italy during the past few years with the support of China's Ministry of Commerce and Italian institutions to promote the Belt and Road Initiative.

Can you give a basic outline of Pirelli Yanzhou, its recent business growth and your plans for the next stage of development?

Pirelli's Yanzhou Plant was put into service in 2005. The plant now has the annual capacity to produce 7 million high-end car tires and 1.3 million premium motorcycle tires. It employs more than 3,000 people, and is one of the best-managed, most cost-effective and high-quality production plants in the world.

In the past 13 years, Pirelli's Yanzhou Plant has produced more than 60 million tires. Currently around 80 percent of production is high-value tires, it supplies original equipment tires to the Chinese factories of many top automakers, including Mercedes-Benz, BMW, Audi and Volvo, as well as serving the increasing demand from the replacement market.

In 2018, Pirelli invested in a new consumer tire production plant in China through a joint venture with Hixih Group. The new plant, which was put into use at the beginning of 2019, will give Pirelli the necessary production flexibility in the high-value segment, addressing the evolution of the Chinese market, the expected developments in electric vehicles and the growing share of homologations obtained in the original equipment segment in China, Japan and South Korea.

Also a new R&D center, deploying the latest innovations and technologies, is under construction in Yanzhou in Hixih Industrial Park, near Pirelli's existing Chinese production hub. This will further reinforce Pirelli's operations in Yanzhou, which is today among the most advanced tire manufacturing facilities in the world, focusing on the production of high-performance tires.

What common values do the Chinese and Italian cultures share? Yanzhou is close to Qufu, the hometown of Confucius. What are the unique cultural elements of Pirelli Yanzhou and how do they affect the company's development?

As the two ends of ancient Silk Road, the common values are family and love. Respect and appreciation have always existed between China and Italy, supported by friendship and common interests.

The Yanzhou Plant is close to Qufu, and the team is composed of people from all parts of the world: Chinese, Italians, Brazilians, Romanians, Germans and Venezuelans. The meeting of different cultures, in a hospitable country such as China, creates important values based on HSE, quality, passion, innovation and organization that improve day after day.

Pirelli has plants all over the world. What's your view of the plants in China and the Chinese members of staff?

Pirelli develops and guarantees equal policies, systems and highquality processes, in all its plants all over the world. Pirelli's Yanzhou Plant is one of the best-managed, most cost-effective and high-quality production plants in the world. It has become an integrated reference point with our headquarters, and proposes innovative solutions that create values in the Pirelli group.

As for the Chinese colleagues, I should say they are extremely motivated, committed hardworking and with high leadership skills.

What's your impression of China as a country?

China is a huge country with a massive population, a country with a great past and a bright future. The development speed of China is always stunning. We feel the evolution of digitalization and the mobility in daily life. Therefore, it offers great opportunities for both people and enterprises to grow together in China.

I enjoy working with great Chinese and international colleagues here, and I feel lucky to see the fast improvements in daily life, my Chinese colleagues and friends make me feel at home.

What's the most important value Pirelli Yanzhou creates? Do you think Pirelli's DNA of technology and innovation will be well developed in China?

Pirelli now is the only pure consumer tire company with a distinctive positioning in high-value tires. As for China, Pirelli not only produces and provides best-in-class products, but also inculcates the highvalue brand DNA in our consumers. Apart from the product itself, Pirelli is highly active in sports, motor sports, fashion, and art and culture, which we also bring into local practices in China.

What's the position of Pirelli Yanzhou and the Chinese market in Pirelli's global strategy?

Yanzhou Plant is the manufacturing hub in APAC. Pirelli's Yanzhou Plant has produced a total of more than 60 million tires. Currently, about 80 percent of production is high-value tires, it supplies original equipment tires to the Chinese factories of many top automakers.

China has always been an important market for Pirelli for both production capacity (with two plants in Yanzhou and one in Jiaozuo) and the potential of the market, the fast market demand is a key motivation for us to further develop our business, especially high-value products in China.

We can take a look at our performance in APAC, where China is the leader. And In 2018, Pirelli APAC had total tire revenues of 890.2 million euros (17.1 percent of Pirelli's revenues), with an organic increase of 13.3 percent - in the top two regions with the highest profitability globally.

How do you envision the future of Pirelli's tire products in the Chinese market, in which foreign and local tire-makers are competing?

Pirelli has full confidence in the Chinese market. From the strategic point of view of high-value, our next steps in APAC, especially in China, will leverage the advantage of a new joint venture factory in Shenzhou, continuously keeping high-value top line growth, maximizing pull-through rate, and signing more cooperation agreements with premium international and local carmakers.

Challenges and competition allow us to improve and reach higher results. Pirelli has the people, passion and highly innovative technologies to be competitive in all markets. Pirelli is the market leader in the high-value tires segment and one of the most important automotive suppliers.

A good example is earlier this month when Shanghai hosted the 1,000th F1 Grand Prix, where Pirelli has been the global-tire partner since 2011. The F1 race is the most important and challenging motor sport race in the world and Pirelli tires play an important role in the race.

Do employees of Pirelli Yanzhou receive training at Pirelli HQ? What impressions do your Chinese colleagues have of Italy and Italian culture?

Pirelli offers a complete training matrix to our colleagues around the world. The Chinese colleagues from different functions have opportunities to visit the Milan Pirelli HQ and work with Italian and global colleagues in various training programs.

These experiences enhance the emotional links between the colleagues and the company, as well as between Chinese and Italian members of staff. All my Chinese colleagues have always demonstrated deep curiosity and interest in Italy.

(China Daily Global 04/25/2019 page9)