PIRELLI TYRESPIRELLI TYRESGiovanni Giovanni FerrarioFerrario

Euro mlnEuro mln

Net SalesNet Sales

EBITEBIT% on Net Sales% on Net Sales

Net DebtNet Debt

Net ResultNet Result

EBITDAEBITDA% on Net Sales% on Net Sales

PIRELLI TYRESPROFIT & LOSS

PIRELLI TYRESPROFIT & LOSS

FULL YEAR RESULTSFULL YEAR RESULTS

2,8802,880

1801806.3%6.3%

748748

(172)(172)

37037012.8%12.8%

20002000

7.2%7.2%

2,5592,559

185185

535535

112112

13.6%13.6%349349

19991999

+12.5%+12.5%

-2.7%-2.7%

n.m.n.m.

+6.2%+6.2%

+39.8%+39.8%

Var.00/99Var.

00/99

Volume and mix

Currency

Prices

Other

Volume and mix

Currency

Prices

Other

TOTALTOTAL

Var. %Var. %Var. %

10.5%

5.7%

-2.6%

-1.1%

10.5%

5.7%

-2.6%

-1.1%

12.5%12.5%

PIRELLI TYRESSALES VARIATIONS – 2000/1999

PIRELLI TYRESSALES VARIATIONS – 2000/1999

PIRELLI TYRESEBIT VARIATIONS – 2000/1999

PIRELLI TYRESEBIT VARIATIONS – 2000/1999

Exchange rate

Price

Volume and mix

Materials

Efficiency

Other

Exchange rate

Price

Volume and mix

Materials

Efficiency

Other

TOTALTOTAL

Euro mnEuro Euro mnmn

+13

(71)

+129

(61)

+26

(41)

+13

(71)

+129

(61)

+26

(41)

(5)(5)

PIRELLI TYRESSECTOR SALES

PIRELLI TYRESSECTOR SALES

+16.5%

15.2%

+12.2%

5.2%

+25.4%

9.4%

-1.8%

1.7%

YoY

ROS

TYRESTYRES

ROS 6,3%

MotoMotoTruckTruckCar / Car /

Light TruckLight TruckOtherOther

2,8802,880YoYYoY +12.5% +12.5%

1981981,6881,688 583583 411411

PIRELLI TYRESENVIRONMENT

PIRELLI TYRESENVIRONMENT

Size is not anymore the only driver for success

Tyre perceived as a critical component: continuousquality enhancement

Innovation through technological transformationmust match customer demand

Web is improving the brand name recognition andis giving a “virtual” globalization to companies

Size is not anymore the only driver for success

Tyre perceived as a critical component: continuousquality enhancement

Innovation through technological transformationmust match customer demand

Web is improving the brand name recognition andis giving a “virtual” globalization to companies

•

•

•

•

•

•

•

•

Car +Car +Light TruckLight Truck

�� Deployment of newDeployment of newplants based on newplants based on newprocesses (MIRS)processes (MIRS)

�� Focus in HP/UHPFocus in HP/UHP

�� Concentration of M/LConcentration of M/Lsegment in low costsegment in low costfactoriesfactories

�� New productsNew productsintroductionintroduction

TruckTruck

�� Allocation ofAllocation ofproduction in lowproduction in lowlabour costlabour costcountriescountries

�� Renewal of productRenewal of productrangerange

�� Fleet managementFleet management

MotoMoto

�� Introduction ofIntroduction ofMIRS processMIRS process

�� LeadershipLeadershipstrengtheningstrengtheningthrough Pirellithrough Pirelliand and MetzelerMetzelerbrandbrandmanagementmanagement

�� WorldwideWorldwideindustrial processindustrial processoptimizationoptimization

PIRELLI TYRES BUSINESS UNITS STRATEGIC GUIDELINES

PIRELLI TYRES BUSINESS UNITS STRATEGIC GUIDELINES

PillarsPillars DriversDrivers

PIRELLI TYRESSTRATEGIC PILLARS PIRELLI TYRES

STRATEGIC PILLARS

�� Technical innovationTechnical innovation�� Tyre as Tyre as a a sensorsensor

�� MIRS MIRS updateupdateInnovationInnovation

�� InternetworkingInternetworking�� StandardisationStandardisation

�� Individual accountabilityIndividual accountabilityEfficiencyEfficiency

�� Business Business UnitsUnits�� Customer CentricityCustomer Centricity�� FocusedFocused Value Value propositionspropositions

FocusFocus

PillarsPillars DriversDrivers

PIRELLI TYRESSTRATEGIC PILLARS PIRELLI TYRES

STRATEGIC PILLARS

�� Technical innovationTechnical innovation�� Tyre as Tyre as a a sensorsensor

�� MIRS MIRS updateupdateInnovationInnovation

�� InternetworkingInternetworking�� StandardisationStandardisation

�� Individual accountabilityIndividual accountabilityEfficiencyEfficiency

�� Business Business UnitsUnits�� Customer CentricityCustomer Centricity�� FocusedFocused Value Value propositionspropositions

FocusFocus

FocusFocus

Truck Moto

Business UnitPerformance

Market Development Unit

Shared services

and competencies

TyreSector

SteelCord

StandardProduction

Unit

Car & Light truck

PIRELLI TYRESBUSINESS UNITS ORGANISATION

PIRELLI TYRESBUSINESS UNITS ORGANISATION

FocusFocus

End userdatabase

Dealer

End-usersEnd-users

e-basede-basedtoolstools

TraditionalTraditionaltoolstools

• Channel management

• Trade marketing

• Specialised salesforce

• Channel management

• Trade marketing

• Specialised salesforce

PIRELLI TYRESCUSTOMER CENTRICITY

PIRELLI TYRESCUSTOMER CENTRICITY

FocusFocus

ProductPortfolio

Efficient promotion • Campaign

• e-CRM promotion

• Fitted Unit Package

• B2B2C

• e-ProcurementValue chain enrichment

• B2B supply chain solutions portfolio

• Stock management

Efficient replenishment

• Assortment Deployment

• Category strategy

Category management

PIRELLI TYRESFOCUSED VALUE PROPOSITION

PIRELLI TYRESFOCUSED VALUE PROPOSITION

FocusFocus

PillarsPillars DriversDrivers

PIRELLI TYRESSTRATEGIC PILLARS PIRELLI TYRES

STRATEGIC PILLARS

�� Business Business UnitsUnits�� Customer CentricityCustomer Centricity

�� FocusedFocused Value Value propositionspropositionsFocusFocus

�� Technical innovationTechnical innovation

�� Tyre as Tyre as a a sensorsensor�� MIRS MIRS updateupdate

EfficiencyEfficiency�� InternetworkingInternetworking

�� StandardisationStandardisation�� Individual accountabilityIndividual accountability

InnovationInnovation

New Tyres

Innovativeprocesses

+ + +Materials and technology

+Integrate systems“Tyre as a sensor”

End usersVehicleDriving Systems

Trends---

Run Flat

Summer

Recreat.

Pax-like

Ultralite& strong

Recreationalvehicle

Hybrid vehicle

+C3 Intelligent

Wheel suspensionC1

C2

NewPolymers

NewFibre

Granular small

componentsPowdered

rubber

MirsTruck

AlternativeCuringMixing

roomMirsMoto

MIRS, I-II-III

PIRELLI TYRESTECHNICAL INNOVATION VISION

PIRELLI TYRESTECHNICAL INNOVATION VISION

InnovationInnovation

Competenciesto preside over

Integration of the offer

Intelligent compoundable to pick up andtransmit conditionvariations

Tyre + Sensors checkingtemperature, pressureand forces

Tyre + Sensors +devices in the rim inorder to modify“running” conditions

Tyre + Sensors +signal collection andprocessing:. Connecting

electronic on board. Driving style

MissionMission

Pirelli tyre centricsolutions for :- OE- AM- Fleets

Pirelli tyre centricsolutions for :- OE- AM- Fleets

Produce revenues inthe short term

Build upcompetencies withdevelopmentpartners

Produce revenues inthe short term

Build upcompetencies withdevelopmentpartners

TargetTarget

PIRELLI TYRESTYRE AS A SENSORPIRELLI TYRESTYRE AS A SENSOR

InnovationInnovation

PillarsPillars DriversDrivers

PIRELLI TYRESSTRATEGIC PILLARS PIRELLI TYRES

STRATEGIC PILLARS

�� Business Business UnitsUnits�� Customer CentricityCustomer Centricity

�� FocusedFocused Value Value propositionspropositionsFocusFocus

�� Technical innovationTechnical innovation

�� Tyre as Tyre as a a sensorsensor�� MIRS MIRS updateupdate

InnovationInnovation

�� InternetworkingInternetworking

�� StandardisationStandardisation�� Individual accountabilityIndividual accountability

EfficiencyEfficiency

. e-Procure- ment MRO. Rubber- network

Buy-sideBuy-side In-side

. Group Portal (e.g. KPI’s)

. Knowledge Management

. Demand Net Integration

Sell-sideSell-side

. B2B Tyres

. B2B2C

. e-CRM

. Salesforce Autom.

Sales,Marketing

and ServiceSuppliers Inbound

LogisticsOperations

1

Procure-ment

OutboundLogistics

Trade

OEMs

End User

Sector infrastructureSector infrastructure

Supply chainSupply chain

Finance, Administration and Control,IT, Human Resources, R&D and Product

PIRELLI TYRESINTERNETWORKING PIRELLI TYRESINTERNETWORKING

EfficiencyEfficiencyEfficiencyEfficiency

PIRELLI TYRESRESULTS ON KEY PROJECTS

PIRELLI TYRESRESULTS ON KEY PROJECTS

Projects Results so far Objectives 2001

B2B Tyres---

10 active markets27% on line transactions2.500 connected customers

---

15 active markets40% on line transactions3.600 connected customers

eProcurement MRO

---

37 active plants across 5 countries 800 orders/week1 Ml Euro/week

-

--

Turkey, Latin America andcommercial unit Europe extension2.500 orders/week2.3 Ml Euro/week

B2B applications:

e-CRM

- 200.000 profiles - 500.000 profiles on uniquedatabase centrally managed

Supply chain/DNI

- Demand planning on 5 Europeancountries

- Europe extension + North andSouth America integrationflows

EfficiencyEfficiencyEfficiencyEfficiency

T U R K E Y

••Standard Associate Brand

•UHP-HP•SUV•Run Flat•MIRS•PAX

-

-

-

Standardisation

Focused workingmodels

Product/processoptimisation

PIRELLI TYRESSTANDARDISATION

FOCUSED MANUFACTURING SYSTEMS

PIRELLI TYRESSTANDARDISATION

FOCUSED MANUFACTURING SYSTEMS EfficiencyEfficiency

Variable compensation: 30% - 60%

KPI : EBIT, FCF, EVA, Fixed costs

Reporting system on-line, on daily basis, to follow the targets

•

•

•

Performance responsibility:by business units/market/

channel/customer

PIRELLI TYRESINDIVIDUAL ACCOUNTABILITY

PIRELLI TYRESINDIVIDUAL ACCOUNTABILITY

EfficiencyEfficiency

MIRS processMIRS process

Summer SummerM+SM+S Perfect HP Perfect HP Sport Sport

PIRELLI TYRESNEW PRODUCTS: CAR PIRELLI TYRES

NEW PRODUCTS: CAR

P zero P zero neronero P6P6 P7P7 WinterWinter

Traditional processTraditional process

FG 85 TG 85

PIRELLI TYRESNEW PRODUCTS: TRUCK

PIRELLI TYRESNEW PRODUCTS: TRUCK

GTS 23 MT 450

Supercorsa Evo 21

PIRELLI TYRESNEW PRODUCTS: MOTO

PIRELLI TYRESNEW PRODUCTS: MOTO

Employeevalue

Share-holdervalue

Customervalue

PIRELLI TYRES2001 KEY MISSION PIRELLI TYRES2001 KEY MISSION

2000:

Growth

2001:

FocusInnovationEfficiency