Research and Development Activities

The core of Pirelli’s growth strategy focused on the premium segment is its consolidated capacity to innovate products and processes.

Group R&D costs, which are fully expensed in the annual income statement, totalled Euro 170 million, with a 3% ratio to sales. Of this amount, euro 132 million refers to activity involving premium products, with R&D costs amounting to 7.2% of net sales of premium products.

Pirelli aims to become world leader in the premium segment in 2015. To achieve that goal, it will focus on technological innovation to expand its product line, meeting the needs both of mature markets like Europe and those of rapidly developing countries.

Pirelli operates a research centre in Italy and eight application centres around the world, staffed by over 1,200 employees. The amount of investments to be made in Research and Development over the next three years will remain at around 3% of sales, which is one of the highest rates in the sector. All of these factors will help increase the number of patents held by the Group (currently over 4,500), guarantee its ability to reduce the time needed to update its line of premium products approved as original equipment, and fully eliminate highly aromatic oils from its entire product line worldwide by 2013.

The exchange of know-how amongst the Group’s various businesses, partnership with best-of-class suppliers and continuous collaboration with leading university research centres and major car makers provide the Group with the technology necessary to develop cutting-edge products, which are successfully tested in the most important motorsport disciplines. The experience in supplying Formula 1 tyres represents an important source of innovation. Traditionally focused on the development of new premium products (UHP, winter, runflat, SUV and motorcycle tyres), R&D activity has been complemented by increasing strategic attention to the reduction of environmental impact, through the exploitation of technological components and the most advanced know-how.

The Group has entered into numerous agreements and partnerships with suppliers and universities. Among the most important of these is the Joint Labs agreement with the Milan Polytechnic, which has been made to promote research and training in the tyre industry. Pirelli aims to operate a network of research and development centres in every region around the world, to exploit solid ties at the local level. Its leadership in innovative materials is pursued through research in the field of polymers, fillers and chemistry, for the development of ever-more stable compounds, lighter structures and more impermeable liners.

Special attention is dedicated to green materials: the search for alternative sources is more and more necessary, both in view of cost savings and sustainability. The Group’s Brazilian plants produce silica from rice husks, an ecological material that will account for about 30% of use in Latin America in 2015. The use of alternative sources will enable the Group to deal more flexibly with the possible scarcity of raw materials. The development of innovative production processes (like the new generation of MIRS – Modular Integrated Robotized System – a robotized process owned exclusively by Pirelli, or extension of the PTSM – Pirelli Twin Screw Mixing – process, which represents the evolution of the CCM – Continuous Compound Mixing System) is one of the Group’s key tools for achieving a competitive advantage. For example, the robotized Next Mirs system allows reductions in CO2 emissions and energy consumption, and improved product performance.

The CCM compound production process and PTSM make it possible to reduce consumption per unit of product by about 20% and realise major benefits for the uniformity of compounds, with a reduction of 30% in energy consumption as compared with traditional techniques.

Collaboration with the Turin Polytechnic was also deepened in 2011 for the development of certain important technologies, including: Cyber Tyre, Next MIRS and TSM. The innovations have been implemented at the new industrial site in Settimo Torinese, as part of a process to assure higher standards of factory efficiency and productivity (“green factory”).

Cyber Tyre

Tyre electronics (like the microchip contained in the Cyber Tyre, which makes it possible to monitor changing road surface conditions by sending the vehicle key information for stability and safe driving), are the “spare tyre” in Pirelli’s premium innovation strategy. The first generation of TPMS (Tyre Pressure Monitoring System) and RFId (Radio Frequency Identification) devices will be introduced on the market in 2012, initially being offered for management of truck fleets. After having offered the K-Pressure™Optic system to the replacement market over the past several years, Pirelli now offers to original equipment the most evolved system for measurement of tyre pressure and temperature, the Cyber™ Tyre “Lean”, which can fully satisfy the new regulatory requirements in force in Europe since 2012. Consisting of a small sensor mounted on the tyre, it represents the first step towards a deep transformation of tyres into an active system, capable of transmitting useful data and information to the vehicle.