Tires and Rubber

Pirelli sticks to premium market as Europe struggles

 I hope we've touched the bottom in Europe: Pirelli
I hope we've touched the bottom in Europe: Pirelli

Europe remains difficult terrain, according to the head of Pirelli, who said the company is focussed on the premium sector ahead of the tire manufacturer finalizing supply agreements with all eleven Formula One teams for 2014.

Despite many commentators touting a European economic recovery in recent months as data beat expectations, the Italian company's chairman Marco Tronchetti Provera argued that the region is not out of the woods just yet.

"In Europe we see small signs of recovery," he told CNBC, adding, "The premium segment has been preforming well even in these uneasy years and Europe remains a region with a lower level of growth."

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He continued: "I think that we are not going to face a major improvement. There will be some improvement - I think and hope we've touched the bottom and some recovery will come."

Pirelli plans to expand into countries like Russia, Argentina and Indonesia in an effort to become a global premium brand by 2015. The company expects that between 2011 and 2015 the premium car market will grow by 4.7 percent annually, compared to 3.6 percent growth in the non-premium sector.

Tronchetti Provera recently met with the head of Russian oil company, Rosneft, to discuss a deal to open up Pirelli stores in the company's Russian filling stations. Tronchetti Provera said of the deal: "It is an important step in Russia. Now we have the two factories that are running better and better, so we have volume so we can supply all the region in a proper manner."

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At the weekend, Pirelli's motorsport director Paul Hembery announced that all Formula One teams had signed agreements with the company to continue supplying tyres next year, something also confirmed by Bernie Ecclestone. However, a formal announcement is not due until the end of September from the Formula One governing body.

Tronchetti Provera said the company had proven itself as a leader in motorsport tyres.

"In three years we did an amazing job that's been recognized by the teams, by Bernie Ecclestone," he said. "So we've been able to deliver what the teams wanted. And now we're asking for better regulation and I think that teams, Fiat, FOTA (Formula One Teams' Association), all of them are fine and are willing to work with us."

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Tronchetti Provera also discussed the political wrangling in his native country, Italy, where on Monday a special committee of the Italian Senate is expected to decide whether to expel former Prime Minister Silvio Berlusconi following his conviction for tax fraud. Some members of Berlusconi's People of Freedom (PDL) party have threatened to pull out of the coalition government if the former prime minister is expelled.

"I think that the sense of responsibility of the political leader is going to be challenged, and I hope that the leaders will act in a manner to guarantee to the country the stability we need," Tronchetti Provera said,

He added that Italy faces a huge challenge to improve its economy after the longest post-war recession in continental Europe. "I don't think we can accelerate the growth if we do not recreate confidence and to recreate confidence we need projects," he said, adding, "We need to speed up the modernization of the country."