Growth Drivers

In recent months, the tyre market was impacted by overall decrease in demand, conversely it has grown in Latin America and Asia. Three elements in particular led to such state, which had been sparked off by the subprime crisis:

• Raw material cost increase, particularly natural rubber and oil derivative cost increase;
  
  
• Difficult business performance in Western Europe, and decline in spare part market;
  
  
• Significant increase of imports from low-cost Countries compared to the past.
  
  

In this scenario, the lines of action planned by Pirelli and aimed to success despite the current economic situation are the following three:

• Investing in new markets with high growth potential and foreseeable development (Romania, China & Russia), at the same time strengthening its position in those Countries where Pirelli is already leading the market (Europe, U.S. & LA), by means of effective "business reorganization";
  
  
• Price increase contextually to "cost saving" strategy, in order to better cope with the sudden rise of raw material costs, and with demand decrease in Europe and the US;
  
  
• Restructuring Pirelli Real Estate, developing a new business model more consistent with European Real Estate market features, and capable to deal with new markets.
  

All this follows on from the wide-minded approach towards innovation and value creation that has always distinguished Pirelli's operations. Principally, the competitive strength of the Group is the result of the following elements:

• Outstanding industrial ability together with diversification of services, aiming to successful results;
  
  
• Great enhancement of technology, innovation and research, and Pirelli Labs have been a testimony of that, since their establishment in 2001 as a pole of technological excellence, and a veritable "engine of innovation" for every industrial operation;
  
  
• High professional skills of human resources;
  
  
• Highly effective Corporate Governance, recognized globally, and constantly consistent both with Law and its changing, and with the best domestic and international practices;
  
  
• Regular use of the Internet as primary communication medium towards our Stakeholders.