Pirelli & C.

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Internal community

“The Pirelli Group recognizes the crucial importance of human resources, in the belief that the key to success in any business is the professional input of the people that work for it in a climate of fairness and mutual trust.

The Pirelli Group safeguards health, safety and industrial hygiene in the workplace, both through management systems that are continually improving and developing and by promoting an approach to health and safety based on prevention and the effective handling of occupational risk.

The Pirelli Group consider respect for workers’ rights as fundamental to the business. Working relationships are managed placing particular emphasis on equal opportunity, on furthering each person’s career development, and on turning their diversity to account by creating a multi-cultural working environment.”

(Ethical Code – “Human Resources”).

The above-mentioned principles are reiterated in the “Social Responsibility Group Policy for Occupational Health, Safety and Rights, and the Environment”. The commitments taken by Pirelli through this Policy reflect not only the contents of the regulations above but also the SA8000® prescriptions. This standard has long represented the reference tool for the Group social responsibility management.

Such Policy has been largely dealt with in the first chapter of the present report.

Description of workforce

To facilitate reading of the following tables, note that the indicated professional categories are identified according to the “Hay” international occupation classification system. The higher the Hay score, the higher the degree of complexity and responsibility associated with the position.

The categories mentioned in the tables imply the following Hay scores:

  • Executives = Employees with Hay Points >750
  • White collar = Employees with Hay Points >300 and <750
  • Blue collar = Employees who work mainly on the factory floor. The classification is also based on local legislation.

Workforce breakdown by category

Tyre Pre Pbs Other *
Businesses
Other ** TOTAL
2009
Executives 232 90 11 15 59 407
White collar 5,029 963 114 126 434 6,666
Blue collar 22,220 86 3 182 6 22,497
TOTAL 27,481 1,139 128 323 499 29,570
2008
Executives 241 143 9 14 57 464
White collar 5,109 1,324 101 105 472 7,111
Blue collar 23,251 91 3 128 8 23,481
TOTAL 28,601 1,558 113 247 537 31,056
2007
Executives 250 216 15 16 67 564
White collar 5,135 1,954 166 66 536 7,857
Blue collar 21,839 522 15 13 13 22,402
TOTAL 27,224 2,692 196 95 616 30,823
DELTA 2009 VS 2008
Executives -9 -53 2 1 2 -57
White collar -80 -361 13 21 -38 -445
Blue collar -1,031 -5 0 54 -2 -984
TOTAL -1,120 -419 15 76 -38 -1,486
DELTA 2009 VS 2007
Executives -18 -126 -4 -1 -8 -157
White collar -106 -991 -52 60 -102 -1,191
Blue collar 381 -436 -12 169 -7 95
TOTAL 257 -1,553 -68 228 -117 -1,253

* OTHER BUSINESSES: They include the employees of the companies: Pirelli & C Ambiente SpA, Pirelli Eco Technology and Pzero Moda

** OTHER: It includes the employees of the corporate companies and service centres

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Geographical distribution of employees

Tyre Pre Pbs Other *
Business
Other** TOTAL
2009
Europe 10,526 1,139 124 323 499 12,611
North America 248 0 0 0 0 248
Central and South America 11,750 0 4 0 0 11,754
Asia, Africa, Oceania 1 4,702 0 1 0 0 4,703
TOTAL 27,481 1,139 128 323 499 29,570
2008
Europe 11,830 1,558 111 247 523 14,269
North America 265 0 0 0 0 265
Central and South America 11,804 0 1 0 14 11,819
Asia, Africa, Oceania 1 4,702 0 1 0 0 4,703
TOTAL 28,601 1,558 113 247 537 31,056
2007
Europe 11,893 2,692 191 95 599 15,470
North America 262 0 3 0 0 265
Central and South America 10,531 0 1 0 16 10,548
Asia, Africa, Oceania 1 4,538 0 1 0 1 4,540
TOTAL 27,224 2,692 196 95 616 30,823
DELTA 2009 VS 2008
Europe -1,304 -419 13 76 -24 -1,658
North America -17 0 0 0 0 -17
Central and South America 1,219 0 3 0 -14 -65
Asia, Africa, Oceania 1 255 0 -1 0 0 254
TOTAL -1,120 -419 -15 76 -38 -1,486
DELTA 2009 VS 2007
Europe -1,367 -1,553 -67 228 -100 -2,859
North America -14 0 -3 0 0 -17
Central and South America 1,219 0 3 0 -16 1,206
Asia, Africa, Oceania 1 419 0 -1 0 -1 417
TOTAL 257 -1,553 -68 228 -117 -1,253

* OTHER BUSINESSES: They include the employees of the companies: Pirelli & C Ambiente SpA, Pirelli Eco Technology and Pzero Moda

** OTHER: It includes the employees of the corporate companies and service centres

1 Includes Turkey

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Trend of Group employment


Incoming and outgoing Group flows - geographical breakdown

Incoming Outgoing
2009
Europe 852 2,164
North America 7 13
Central and South America 1,752 1,961
Asia, Africa, Oceania 1 984 719
TOTAL 3,595 4,857
2008
Europe 1,703 2,034
North America 28 18
Central and South America 3,803 2,803
Asia, Africa, Oceania 1 1,206 1,044
TOTAL 6,740 5,899
2007
Europe 2,166 1,472
North America 35 35
Central and South America 1,972 1,211
Asia, Africa, Oceania 1 1,457 786
TOTAL 5,630 3,504
1 it also includes Turkey.

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During the past year, a substantial headcount reduction took place at the Group (-1,486 employees), especially in the Tyre and Real Estate Businesses.

At Pirelli Tyre, there was a reduction of 1,120 employees compared with December 31, 2008, including 89 management and staff employees and 1,031 blue collar workers. The total reduction for "mature countries" was 1,384 employees, including 247 management and staff and 1,137 blue collar workers. Most of the decrease occurred in the following countries: Spain
(-444) following the shutdown of production activity at the Manresa plant, Italy (-397), both at the Turin Centre due to technological and organisational changes in view of construction and start-up of the new Car and Truck Centre, and in the staff areas, UK (-384) including sale of the company Central Tyre, and Germany (-137).

Counting the additional layoffs at the Manresa plant at the beginning of January 2010, resulting from the second and final phase of terminating production activity, there was a total reduction of 1,569 employees.

However, Pirelli Tyre hired 264 new employees in emerging countries. At Pirelli Real Estate, there was a reduction of 419 employees from 2008, due to restructuring and reorganisation of the entire business. The cuts were made both in Italy
(-314) and abroad (Germany -67, Poland -29, and other countries -9).

In terms of annual incoming and outgoing flows of employees, there was a net decrease from 2008 due to reduced labour market mobility after worsening of the global economic crisis. Seasonal employees, who are a characteristic of the Tyre Business to maintain constant production volumes, declined in number (about 250 as compared with the traditional 700).

The Group does not employ anyone under the age of 14. The Tyre Business employs 16 young workers between 16 and 18 years of age (7 in Brazil and 9 in Germany), and 6 young workers between the ages of 14 and 16 (all in Brazil), as part of training and induction schemes in compliance with local laws.

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Diversity and equal opportunities

Just as in previous years, Pirelli placed special emphasis in 2009 on promoting the diversity and spread of an "inclusive" labour culture, i.e. a culture that relies on mutual diversity to increase the possibilities of success of the entire organisation and the capacity to meet challenges posed by the external market.

Relying on different nationalities, for example, represents a competitive advantage for a company like Pirelli, which has made internationalism its priority. Likewise, enforcing respect for individual differences, be they gender-based or otherwise, and even more so exploiting them as a common factor of the organisation is key to healthy, competitive business development.

This inclusive approach has been decisively encouraged by Pirelli’s commitment to spreading an “equal opportunities culture.” Since 2005, this commitment has been fully expressed with the “Group Equal Opportunities Project” and the “Group Equal Opportunities Statement” signed by the Chairman and distributed with the Project objectives to all employees in their local language on the website www.pirelli.com.

Compliance with workplace equal opportunity principles is monitored locally and centrally through a dedicated Complaint Procedure, which is designed to reveal any cases of sexual harassment and/or discrimination that the employee believes he/she has suffered at the Company. It is worth noting that not even in 2009 this Procedure was ever activated.

Specific actions support the enhancement of diversity amongst Pirelli employees. In particular:
From this point of view, Pirelli has long supported the growth and development of its own managers through international experiences that are designed to develop the creative and managerial potential inherent in multiculturalism and in the context of different professional environments, even through its advanced policies in the field of international mobility (please refer to the following paragraph).

Of note, eighty-five per cent of the Group’s senior management was hired and is working in their native country.

Effective equal opportunity and multicultural dialogue, like the perception of diversity (gender, religion, race...) are constantly monitored at the central level through adequate KPIs and Opinion Surveys conducted by the Group. The new survey will be carried out in 2010, while the operating measures suggested by the outcome of the previous one, conducted in 2008, were implemented in 2009. In the 2008 Survey analysis, the equal opportunity and diversity indicators did not reveal particular criticalities. On the contrary, in the case of the plants in Romania for example, where there is a higher proportion of female employees, the results were particularly positive.

To monitor compliance with the equal opportunity and non-discrimination principles affirmed by the Group from the recruitment stage on, a control mechanism was introduced in Italy in 2008 based on the compilation of an anonymous postcard/questionnaire by every candidate interviewed by the Company. In 2009, 97% of the candidates confirmed the perception of total respect of equal opportunity principles during the recruitment process.

In the area of training, which has long been identified as a key tool for impacting the cultural change connected with enhancement of diversity, specific modules are dedicated to "diversity management" in the company. Group sustainability and Equal Opportunity principles are also included in "Pirelli's way Joining the Group," a course dedicated to the new hires.

At the end of 2009 a workshop was also held that targeted the human resources population, aimed at raising the sensitivity of HR Managers on the issues related to providing advice to mothers returning to work after maternity leave.

Specific positive actions for monitoring compliance with cultural diversity have also been adopted at affiliated companies: different foods are clearly marked in company canteens so that everyone may freely comply with their own religious dietary restrictions, multilingual bookstores in the factory, multilingual welcome kits for those joining Pirelli at a facility in a country other than their home country.

Initiatives designed to promote reconciliation of personal life and work, like day care centres or organised holidays for employee children round out a pro-active scenario.

In regard to the breakdown of employees according to gender, 19% of managerial positions were filled by women at 31 December 2009, which reflects the 12% of executive positions and 20% of middle management positions held by women, unchanged from the previous two years. Women hold 38% of white collar staff positions (substantially unchanged over the past two years) and 4% of blue collar positions (unchanged from the past two years). Their number as a percentage of the total workforce is substantially the same as the figure reported for 2008.

The following statistics illustrate the situation of wage and salary equity – while emphasising that the situations described here represent a snapshot of 3/4 of the total work force covered by wage and salary policy (blue collar employees are normally covered by national collective bargaining contracts):

Italy – the average wage or salary for men is about 4% higher than the average wage or salary for women in the contractual category of middle managers, while the difference falls to about 2% in the case of white collar staff.

Latin America – the difference reported for Italian contracts is even further reduced. In the white collar staff category, the difference is 2% in favour of men, while there is no difference for the middle manager category.

Executive – considering the fact that women represent 12% of this population, it is observed that, when the position of men and women carries the same weight, the pay difference falls within a maximum of 8%, in favour of men.

To satisfy its obligations under Law 68/99, the Pirelli Group has made and signed specific agreements with the relevant authorities to promote hiring of disabled workers. The Group believes that these agreements, in compliance with current law, are the best way to satisfy the social interest in employing these workers, by reconciling their needs with the Company's organisational and technical-productive requirements. Outside of Italy, it is objectively difficult to measure the number of disabled workers, both because there are no specific regulations protecting the employment rights of disabled persons in certain countries where Pirelli operates and because this information is sensitive and often protected by privacy laws.

The Group is highly committed in valorizing diversity even outside Pirelli, both at a national and international level.

Pirelli has been a member of the European Alliance for CSR since 2007. This initiative is promoted by the European Commission to encourage the spread and exchange of the best sustainability practices amongst businesses. This membership is based on the conviction that sharing experiences with the external community and especially with other firms that seriously wish to address the issue of equal opportunity and management of cultural and other forms of diversity and desire to establish forms of governance for this purpose creates social value.

Through this Alliance, the Group participates at the European Laboratories coordinated in Italy by the Sodalitas Foundation, whose Executive Committee has a member representing Pirelli.

In 2009 the "Multiculturalism Laboratory" created the toolkit Multiculturalism, an Asset for Business. A Comparison of Experiences and Programmes: Stimulus for Improvement of Company Life, presented in Milan on October 27, 2009 by Pirelli and the other companies that co-authored the book, together with UNAR-National Office against Racial Discrimination, during the conference "Diversity Management: an Asset for Business."

This document, based on a general scenario of the situation of multiculturalism, presents best business practices in various ambits: strategies and organisational process for the management of multiculturalism, management of human resources and business areas (customer relations, new products development, suppliers’ management, relationship with the internal and external community).

In 2008, the “Equal Opportunities” Laboratory created the toolkit Practicing Gender Equality in Careers, presented at the Marketplace on CSR in 2007 and again on June 19, 2008 in Brussels, during the CSR Europe General Meeting.

Between 2008 and 2009 Pirelli, together with other Sodalitas’ member firms, drafted the Italian Charter for Equal Opportunities and Equality at Work, presented in Milan on October 5, 2009 and promoted by the Sodalitas Foundation, AIAF (Italian Association of Family Businesses), AIDDA (Association of Women Business Owners and Corporate Executives), Impronta Etica, UCID (Christian Union of Business Owners and Executives), the National Equal Opportunity Advisor's Office, with the participation of the Ministry of Labour, Health and Social Policies and the Equal Opportunity Ministry.

The Charter provides a benchmark framework of values to guide the businesses who want to sign it. It does not contain detailed rules but a few programmatic commitments based on principles and key elements of effective programmes of change. The Charter, and the description of the commitments that it envisages for the signatory businesses, may be found on the dedicated website www.cartapariopportunita.it .

In 2009 Pirelli continued its participation in the activities of the Diversity Management Observatory at the Bocconi University, in order to monitor business activities and trends in the management of diversity.

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Compensation and International Mobility Policies

To manage the crucial phases of integration and development of human resources, Pirelli implements an extensive policy system both at Group and Sector/foreign affiliate company level.

Salary Review policies are implemented locally on a country-by-country basis, except for procedures involving Group executives and key resources involved in international mobility schemes, as these categories are centrally coordinated by the parent company in order to ensure uniform application of these policies worldwide.

In the area of compensation, Pirelli decided to implement two joint measures for 2009, consistently with the economic trends and the results achieved. On the one hand, it adopted a zero bonus policy for the 2008 skills incentive, and on the other hand, it took the decision to freeze any pay increase tied to merit policies.

In regard to the Group annual incentive system (MBO – Management by Objectives), which involves all executives and about 60% of managers), the process of defining objectives was radically simplified in 2009. This was in response to the rigour imposed by the changed macroeconomic situation at the beginning of the year, and the application of parameters consistently with the firm’s business strategy (e.g. great focus on cash and cost containment).

In April 2009 a Medium Term Cash Incentive Plan for 2009-2011 was implemented, affecting about 90 Group senior managers, based on challenging targets defined in accordance with the 2009-2011 Industrial Plan submitted to the financial community on February 11, 2009.

The principal characteristic of the Plan was the introduction of a mechanism for “co-investment” by the individual manager of a portion of his annual bonus to support the three-year plan. The purpose was to promote medium-term performance over short-term interests, in view of realising a greater return at the end. The three-year bonus, including the "deferred" portion of the annual incentive with the additional amount granted by the Company on the basis of a given multiplier is paid out only when the three-year targets are met.

The International Mobility Policy, of considerable strategic value in the development of leadership within the Company, deserves special attention. About half of current Pirelli management and senior management personnel have had one or more significant work experiences in a foreign country, which represents a strategic value for internationalisation in the development of leadership.

Over the past decade, an average of about 250 people, including executives, managers and white-collar employees of different nationalities and cultures have exchanged know-how, developed their professional skills and exploited new managerial opportunities, thereby contributing to the creation of truly international Group.

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Distribution of expatriates

Distribution of expatriates Distribution of expatriates

Breakdown of industrial countries

Breakdown of Industrial Countries Breakdown of Industrial Countries

Many aspects of the global labour market have imposed a more flexible approach to the international framework that can readily satisfy organisational and individual requirements. With this aim in mind, a thorough audit was carried out in 2008 on processes and practises adopted for international mobility, leading to a proposal for general revision of Group policy. The new international mobility policy was introduced worldwide in June 2009. This new policy substantially revised all possible cases of foreign assignments, regulating the different scenarios in a uniform manner. The principal drivers are comprised by development/growth of talent resources and the transfer of technical know-how in support of the start-ups.

The percentage of all expatriates who are women remained unchanged for the second year in a row, with this figure standing at about 15% on December 31, 2009.

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Selection, training & development

Selection: Talent Attraction initiatives and tools and Employer Branding

Due to cyclical market conditions, the recruitment and selection of new university graduates were temporarily suspended for the first two quarters of 2009, in view of containing costs. These activities gradually resumed only in the fourth quarter, with increasing emphasis being placed on streamlining the process to identify and select recruitment channels that best meet Pirelli targets and to emphasize the principles of transparency and clarity during the communication process.

Once this process was implemented, these efforts resulted in a significant increase in the percentage of candidates who passed the classroom assessment process as compared with the previous year.

The corporate recruitment department constantly supervised the process of recruiting new interns, so that it would address real needs and offer genuine hiring opportunities at the end of the internship period.

The monitoring of candidate feedback continued, through the anonymous compilation of postcards and questionnaires distributed at the end of the interviews to measure the candidates’ perception of the fairness and quality of the day-long assessment process (see paragraph “Diversity and Equal Opportunities”).

In consequence of the reduced hiring of new university graduates in 2009, the employer branding activities carried out during the year were increasingly focused to support students approaching graduation from university and provide them with useful tools for making career choices through specially designed events.

In this view, the Company maintained its presence on university campuses, by using channels and tools that had already been consolidated over the years, in particular Career Days, Career Books, presentations by Pirelli managers at major Italian universities, orientation meetings for young university students, visits to Group facilities by student delegations from foreign universities.

In 2009 the Group’s employer branding activity was focused on updating Pirelli’s image among young recent university graduates and consolidation of its orientation practises.

The principal orientation projects that were started and/or continued in 2009 included:

  • Romania: in November 2009 the corporate and Romanian employer branding managers formally initiated employer branding and recruitment projects at local institutions, particularly the University of Petrosani, the Tirgujiu Technical Institute and University, and the Bumbesti-Jiu Technical Institute.
  • POLITONG: a cooperative project between the Milan Polytechnic and Turin Polytechnic and Tongji University in Shanghai began 2007 and continued for two consecutive years, with targeted actions involving our managers in China. After attending alternate years studying at the participating Italian and Chinese universities, the Italian and Chinese students participating in the project received a specialised degree recognised both in Italy and in China.
  • Egypt, the first Career Day at the University of Alexandria was held as scheduled in January 2009.

Aside from the usual programmes of collaboration between Pirelli and leading national and international university centres, a project launched in 2008 was continued in 2009 for the financing of academic research on materials at Jinan University in Shandong Province, China. A contract for setting up an IT project with the University of Craiova was also made for the first year.

In addition to its long-standing presence in the academic world, the Group reinforced its network in Italy with local technical high schools. The Company actively participated in the working groups envisaged by the experimental project of reform by the Ministry of Education and designed to revise the study plans. The objective was to encourage alignment between scholastic training and the technical needs of local enterprise, to facilitate the hiring of young graduates.

As part of the project launched in 2008 to promote the Company's image amongst its target pool of new university graduate job candidates, Pirelli continued to update the “Career” section on its website, www.pirelli.com , revising its content and style. An Edutainment Video was added, with the specific aim of promoting visits to the website by young university graduates and providing them with an enjoyable, informal tool for learning about the Group and undergoing a simulated selection process.

These efforts resulted in the "Career" section being ranked as one of the best sites in the international ranking prepared by Halvarsson & Halvarsson.

Top employers Italy 2009Thanks to the policy of internal and external transparency, as well as to the numerous projects involving young talents at the Group, Pirelli earned the “Top Employers Italy 2009” recognition.

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Training and Development

Talent Management and Talent Retention tools and measures

The mapping and management of Group talent pools initiated in the second half of 2008 continued in 2009, through the Career Development Program. The career growth and development of persons belonging to this pool are monitored and managed at the corporate level through special meetings arranged with members of senior management, continuous updates and tracking of opportunities, and ad hoc compensation measures designed to promote individual career development and retention. All of these activities were carried out at the corporate and local country Human Resources Department.

The Group Career Development Programme continued in 2009. This historic, international programme supports the identification, growth and development of talented individuals in the Company. The entire programme is dominated by constant alternation of opportunities for assessment and development of strategic skills (local and Group Development Centers) and actual training courses (on “Understanding Business Complexity”, “Managing Growing Complexity” and “Developing Managerial Excellence”).

The following tables illustrate the number of events and participants in the Career Development Programme over the last three years:

Training workshops

Understanding Business Complexity (UBC)
Italy Germany Spain Turkey Brazil UK China Egypt France Argentina USA Mexico Romania Australia Portugal TOT
2009 21 10 2 10 5 4 2 7 1 2 2 3 1 1 71
2008 27 7 2 12 7 1 7 63
2007 18 8 2 5 16 2 5 1 1 68
Managing Growing Complexity (MGC)
Italy Germany Spain Turkey Brazil UK China Egypt Romania Singapore USA Argentina France Russia Benelux Poland TOT
2009 29 1 3 2 5 1 2 1 1 1 1 47
2008 16 6 1 3 4 1 1 4 2 1 2 41
2007 27 8 4 2 4 3 1 1 50
Developing Managerial Excellence (DME)
Italy Germany France UK Romania China Turkey Brazil Canada Switzerland TOT
2009 7 1 1 2 1 12
2008 13 3 3 1 20
2007 10 4 1 2 1 2 1 1 22

The methods used at the Development Centres were significantly improved in 2009.

A series of online tests were introduced, and the activities for assessment upgrading of the skills according to which participants are assessed and challenged were redesigned. These changes made the entire process of monitoring and assessing skills more reliable, making it possible to transmit the consequent training strategies more effectively.

In April 2009 a Medium Term Cash Incentive Plan for 2009-2011 was implemented, affecting about 90 senior managers at the Group, based on challenging targets defined in accordance with the 2009-2011 Industrial Plan and presented to the financial community on February 11, 2009.

More details about this plan are provided in the section dedicated to Compensation in this report.

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Performance Management Process

The PMT-Performance Management Tool is the online tool for measuring performance that was introduced at the Group level in 2007 and gradually extended to all the staff of the Pirelli industrial companies linked by SAP HR. In 2009, the process involved over 4,700 employees, more than 85% of whom have received performance objectives to pursue over the course of the year. In anticipation of being involved in the online system, the remaining population of countries not operating on the SAP HR system participated in the process by using an analogous paper tool. In 2009, the performance management process was carried out more quickly than in previous years. In view of updating the personal and professional data of employees and updating the data resident on the various HR systems currently in use, an automatic process of updating HR Management data amongst the SAP HR, LearningLab and PM Tool systems and other data repositories (e.g. final data received from consulting firms on assessment centres) was defined in 2009.

The Performance Management Tool is of enormous importance both for managing employee skills and promoting their continuing education.

A specific space is dedicated inside the tool, so that the supervisor and employee may discuss the employee’s training needs and enter them on the PM.

A section dedicated to filling out the curriculum vitae has also be created inside the Performance Management Tool. Using the precompiled form, the employee may update and complete his own data and emphasise any future projects in the specially created spaces.

The PM Tool will be updated again in 2010 and revised consistently with other projects for human resources development and improvement.

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Principal international projects in 2009

Contact Centre Training. In 2009 the entire Customer Service unit at the international level participated in training to realise the following objective: driving the contact centre through a common and shared vision able to build a new identity focused on value added services and proactive approach.

The training project was carried out in May-July 2009 and involved over 200 from 20 countries.

International training program for Outbound Logistics. This was an international training project conceived and provided in collaboration with MIP Milan Polytechnic and dedicated to 28 individuals belonging to the Logistics Team from local and corporate departments. Four days of intense activity were offered, full of training opportunities to promote growth and the exchange of professional experience in the Distribution Logistics unit. The first three were held at the Istituto Piero Pirelli and focused on topics regarding supply chain management theories and theories/models based on distribution logistics, using both the didactic part and tools including best practices and comparisons with other industries (Whirlpool, etc). On the morning of the fourth day, the team was received by DHL EXEL Supply Chain Italy in Liscate, where it visited the Samsung Electronics Italy warehouse with the training opportunity to analyse the logic and practices of a logistic service provider operating in a sector different from our own. In the afternoon, the team travelled to Verona to visit the highly automated spare parts warehouse of Volkswagen Group Italy, where they observed the business and organisational logic of in-house logistics and the management of a highly automated warehouse.

BU Moto Sales Training: organised on the basis of the survey of the BU Moto sales force conducted in 2008, this training course was focused on the entire commercial team. It was launched in 2009 in order to develop the capacity to build business partnerships. The project involved 150 persons in five countries, for an average total of six training days a person.

HR Training Lab: this programme consists of four training courses and will be held between 2009 and 2011. This three-year training programme is dedicated to HR professionals and managers HR and focuses on updating their professional skills and knowledge. It will specifically support evolution of the HR professional family towards a closer relationship with the Line. The programme began in 2009 with 10 different training sessions and involved 85 persons in 13 countries for a total of 3.6 training days on average per person.

Sustainability Training

The communication campaign to raise employee awareness of sustainability issues that began in 2007 continued in 2008 with specific classroom training activities involving blue-collar and white-collar employees inthe United States, Germany, Turkey, Romania, Egypt and Switzerland. In 2009 classroom training continued for employees in Brazil, Venezuela, Argentina and Italy (Turin Centre). Training activities at Group facilities in the other countries will continue in 2010.

Training activities, which were led by local managers supported by CSR Referents, focused on the concept of sustainability, the internal and external competitive advantage stemming from being a CSR Company that integrates it in its growth strategy, review of all corporate policies, from the Ethical Code to the HSE&CSR Policy and Global Compact as the model for sustainability formally adopted by the Group.

The analysis of stakeholders, the Company’s approach to human rights and the environment completed the training, which was offered to employees on an interactive basis. They were reminded of the importance of full operating collaboration to maintain Pirelli's high sustainability profile.

The contents of the presentations, which offered a uniform basis for training in the various countries, were defined by the corporate departments in view of disseminating business sustainability in a uniform way. Local managers were contacted in advance and their comments were obviously taken into consideration.

Training activities also included a post-training questionnaire so that the training experience could be tracked.

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LearningLab

In 2009 the Group’s new training portal, LearningLab, went online. It contains all of Pirelli’s international training courses and programmes dedicated to Italian employees. The area dedicated to training in Turkey was released in 2009, and the area dedicated to Romania was released in January 2010. Implementation of the project in the major industrial countries will continue in 2010.

Turin Centre

The training programme at the Settimo Torinese Centre was started up in 2009. It provided three man days of training for blue collar and white collar staff (involving a total of 1,200 persons) and six man days of training for the heads of all organisational levels (including the shift foremen having direct contact with worker teams).

This programme consisted of an intensive professional retraining course for employees at all levels, including operative levels. The scope of the planned investment is infrequent at the industrial companies: from 10 to 20 training days pro capita in the three-year period 2009-2011, in order to align technological and product skills with the new technologies that the Centre will host, and to focus employee activity and attention on the quality of internal processes, product processes and relationships.

Health & Safety in the Office Training Project

An online training programme on Health and Safety in the Office was launched in 2009, dedicated to everyone who works in the office. The first course of the project was offered in the form of e-learning and targets all employees whose activity involves use of the computer, with special attention being dedicated to pregnant women. The course lasts a total of about one hour and was broken down into three training modules:

  1. applicable laws and regulations;
  2. health, safety and prevention for visual processors;
  3. focus on pregnant women.

At the end of each module, simulations and interactive games assisted in the memorisation of course content, while a test assessing what was learned was carried out at the end of the course.

2009 Italy Catalogue

This programme has been the mainstay of training courses offered to employees at the Italian companies for years. Participation in Catalogue initiatives is decided by each supervisor together with his own assistant without having to obtain the approval of superiors, and is closely connected with the areas of improvement identified during the annual performance management interview. All courses are provided at the Piero Pirelli Institute, the Group’s training centre.

The number of participants and courses remained steady in 2009 as compared with previous years, involving a total of 634 participants, 105 classroom days and 50 courses.

The Italy Catalogue courses are attended by persons from all Company businesses and departments, and were conceived to improve management and behavioural skills through short, highly focused training sessions.

In 2009 the Catalogue was updated with courses on the most innovative topics (e.g. “Web 2.0,” “Decision Making,” “Communication Tools”) and updated with new classroom methods (e.g. diagnostic questionnaires, “forum theatre,” etc.). Invitations to participate in Catalogue courses are given only if participation was indicated in the Performance Management Tool.

Management of registration in courses using the LearningLab training portal was also implemented.

The second year of training for apprentices was initiated in 2009 (“Talent in Action” project), with conclusion of the project at a meeting dedicated to self-development skills. Forty youths now participate in the course (young university graduates with apprenticeship contracts).

Quantitative summary of training expenditure

In spite of the economic crisis and reduction in resources dedicated to training in 2009, there was a slight increase in total man/days provided at the Group level. Specifically, 4.7 man/days (1 man/day = 8 hours) were provided to white collar employees and 4.95 man/days to blue collar employees.

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Average number of pro capita training days

Average number of pro capita training days

* It includes the Pirelli Real Estate perimeter (Total man/days 2008 for Pirelli Real Estate only: 1.16).


This trend is explained by considering the use of:

  • greater resources dedicated to in-house training (e.g. in-house instructors) rather than external training;
  • major training expenditure on blue collar employees in Italy (Settimo Torinese Centre training project) and in Spain (professional retraining plan for employees at Manresa).

In a measure resulting from the 2008 Opinion Survey, a massive training programme was offered to white collar staff in Brazil, on HR management and CSR issues.

In all Latin American countries, two skills assessment programmes were completed in corporate operations and plants (involving 350 persons) and the Research and Development Departments (50 persons). These activities will lead to specific training plans for Latin American countries beginning in 2010.

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2010 training action plan

Numerous training programmes will be carried out in 2010. A summary of these programmes follows below. All of them will largely depend on and be determined by a highly strategic project, i.e. revision and distribution of the new leadership model throughout the Group.

In 2009 Pirelli initiated a review that would lead to revision of its leadership model in response to the new challenges posed by the strategic plan to management and the entire Company.

This project is broken down into several phases, of which the first was undertaken during the last two months of 2009. The bulk of the project will be realised in a plan activities spanning all of 2010.

The initial phase involved an analysis based on 60 interviews of individual Group executives from all countries where Pirelli operates and from all Company departments. These interviews were followed by workshops for strategic alignment with senior management and an encounter with top management.

Therefore, a model of new leadership skills was elaborated that all of Pirelli management must possess and develop over the next few years. It is essentially based on three priorities: skills for development of the business, enhancing individual skills, and management of consequent changes in organisation.

This new set of skills will be the basis for training measures in 2010, assessment of management and realignment of all human resource management systems.

A summary of the principal actions planned for 2010 follows.

  1. Leadership Training and Development Course for all executives and a pool of other key managers, in accordance with the new model drafted by senior management;
  2. Performance Management: participation in the performance management process with the online tool of all employees who are currently in countries without the HR SAP system (industrial and commercial units);
  3. Performance Management: conception, development and implementation of new sections dedicated to employee development and mapping of technical skills, in view of increasing alignment of the performance assessment system with the leadership project;
  4. Continued updating of the career section on the website and alignment of the www.pirelli.com website with the Group’s other foreign or business sites;
  5. Continuation and consolidation of Group collaboration projects with local technical institutes and with the Spinelli Technical Institute;
  6. Launch of 3rd Group Opinion Survey involving all employees worldwide;
  7. Lean Manufacturing Programme: the new training programme dedicated to the “Operations” and “Quality” professional families will be launched in the first several months of 2010. The objective will be to integrate “lean” methods and logics in managerial processes;
  8. Initiation of the second training phase dedicated to the Contact Centres (RAINBOW project) for on the job implementation of sales skills and the new role of the Contact Centre teams;
  9. Updating of the Italian Training Catalogue with the introduction of several changes to its content and communications approach;
  10. Creation of the new fully dedicated Apprentices Catalogue (Young in Action project) with the inclusion of several changes to behavioural and management training and professional training;
  11. Redesign of the Career Development Program.
  12. Initiation of the second phase of Office Health & Safety training through e-learning and planning of an off-the-job safety training course;
  13. New training step for the logistic professional family in all countries (about 80 persons from all countries);
  14. Italy sales training: launch of a training course dedicated to the Italian professional sales force family;
  15. Product Experience Project: planning and start-up of training activities in the project in order to improve product knowledge and technical training.

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Internal communication

In 2009, communication with the internal community was dedicated to information activities aimed mainly at familiarising the employee with the Company’s strategic choices, in response to the specific request made during the Opinion Survey 2008 and in favour of mass distribution of the contents of the 2009-2011 Three-Year Plan, which was published on February 1, 2009.

Green Performance, Refocusing on industrial business and Internationalisation are the topics that have inspired all internal communication worldwide, using all available channels – Intranet, company magazines, events – and newly introduced tools (the industry magazine Truck, the newsletter for the Settimo Torinese community, Polonews ) – with content and language targeted to their specific audiences.

Other priority objectives in 2009 were employee involvement and personal improvement, in accordance with the development programme established in previous years and in synergy with the principal values of the Group industrial system.

Group Intranet

The only intranet shared by all employees at all Group companies worldwide, the Pirelli Intranet reconfirmed its role in 2009 as the key tool used by white collars for participation in the life of the company on the informational, functional and collaborative levels. Every day it carries news about the Company before it is reported in the external media (1,000 news items published during the year); it includes resident applications for the different professional families; through interviews and free comments, it publishes the contributions submitted by individual employees. By means of this function, which distinguishes the Pirelli Intranet from other companies and is the source of satisfaction for the community (with over 350 free comments being posted in 2009), several opinion leaders “concealed” amongst employees assumed visibility during the year. They represent a genuine intangible asset for the Company, which can be exploited through internal communication testifying to values and programmes for the entire community.

New services

As previously announced in the 2008 Sustainability Report, new services designed in response to specific employee requests have been implemented.

First and foremost, there is the Bacheca dei pirelliani (“Pirelli Community Bulletin Board”), which is restricted for legal reasons to the Italian population of 3,000 users. “A fabulous idea that has stimulated the collective imagination of employees for years. My compliments to the person who proposed it, to the person who had the courage to create it and to those who maintain it!!!”: this comment, posted on May 6 on the intranet by an employee at Milano-Bicocca testifies to the level of satisfaction with this new service, which has collected 160 wanted-offered announcements and a monthly average of 1,600 visits.

PZero online shop has also been online since the beginning of the year. This is the e-commerce of fashion products dedicated to Pirelli employees in the eurozone, with savings of up to 50% off the list price. This is the Company’s tangible answer to the numerous requests made by employees over the intranet through the free comments tool.

The Travel Risk Intelligence System has been online on the intranet since May. This platform is managed by Pirelli Security for all Group employees worldwide who travel either on business or for personal reasons. Directly accessible from the intranet, the portal provides real time updates about the political, social, health and other situations in all countries worldwide, and are useful for travelling safely. This portal is connected with an emergency service: in the event of real emergency – risk to personal safety, natural disasters, support in relations with law enforcement officers – every employee can contact Pirelli Security through dedicated telephone numbers.

The Portuguese home page on the intranet was up and running at the end of the year, in response to growing demand by the 3,500 Brazilian users so that they could participate more directly and effectively in the exchange of information amongst “pirelliani” (Pirelli employees).

Involvement and interaction in 2010

The introduction of new communication formats is planned, serving specific campaigns (Performance Management, 2010 Opinion Survey, etc.) and capable of involving employees ever more effectively through the use of multimedia language. Taken from television and internet, they will enrich the content of the intranet with communication increasingly focused on employees and in step with the reality of communication outside the Company.

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Pirelli Group Intranet – 2009 figures

Number of users: 14,000

Number of countries: 35 (Argentina, Australia, Austria, Belgium, Brazil, Bulgaria, Canada, Chile, China, Colombia, Egypt, France, Germany, Greece, Hungary, Indonesia, Italy, Japan, Mexico, Netherlands, Poland, Portugal, Romania, Russia, Singapore, Slovakia, South Africa, Spain, Sweden, Switzerland, Taiwan, Turkey, United Kingdom, United States, Venezuela)

Individual visitors (annual average): 10,000

(Italy 36.8% - Brazil 14.3% - Germany 13.0% - United Kingdom 6.9% - Turkey 6.6% - Romania 4.7% - Spain 2.3% - Others 15.4%)

Corporate Press

Communicating strategies and reorganisations

During 2009, Group magazines gave extended coverage to institutional communication, which punctually informed employees about strategic choices, reorganisation decisions and visions for the future, periodically using the most appropriate tools for the target audience.

In Fatti&Notizie, the periodical for Pirelli Group employees in Italy, the Chairman himself comments in an editorial complete with details on the highlights of the 2009-2011 Three-Year Plan: “Green performance’,” refocusing on the industrial business and focusing. In Pirelli World, which is the quarterly magazine for Group management worldwide, research and development, “green” tyres and particulate filters are the focus of articles, interviews and focus items.

Corporate press

Corporate press

The Group magazines “Fatti&Notizie”, “Pirelliw World”, “Pirelli Truck” and “Polonews"


This was the context for communication about Pirelli Eco Technology, the Group company dedicated to reducing harmful emissions that represents a strategically important business for the Company. In 2009, the objective of the magazines was to familiarise the entire community of employees – from top management to blue collar workers - with Pirelli Eco Technology employees, through individual interviews.

The operations newsletter PMS-Pirelli Manufacturing System has grown rapidly since its creation in 2008, to link the various plants worldwide with the experiences and projects of the individual countries with the new Pirelli production process. A monthly publication available on the Group intranet in Italian and English, PMS-Pirelli Manufacturing System enjoyed increasing international distribution in 2009, with spontaneous initiatives for translation in local editions.

The new magazine Truck was created in 2009 to serve the truck business unit – and in the framework of the Group refocusing on its industrial business. With 18,000 copies published in four editions (Italian, English, Spanish and German), it is the principal communications tool focused on trucks dedicated to transport professionals inside and outside Pirelli, providing them with updates about products, services, partnerships and legislation.

Managing Change

The magazine Polonews was created to support the radical transformation of the Settimo Torinese production site.

The main purpose of this bimonthly, which has a press run of 2,000 copies, is to support the direct link between the company and employees during the gradual, complex process that will lead to construction of the most innovative and sustainable tyre factory, the Settimo Torinese Industrial Centre. With 90% of its target readers being blue collar employees, the magazine uses concrete language reflecting daily issues : managers and foremen step forward and submit signed statements, articles and in-depth analyses. The interviews with department assistants, who are key to the success of the transformation process, recount the mood of workers and the project. In the column “L’Azienda risponde,” employees receive unequivocal answers to questions about quality, safety and other issues raised during training courses.

Polonews is part of the broader communication and training plan that is supporting and leading the entire Pirelli community at Settimo Torinese towards the new Industrial Centre. It helps provide the tools necessary to generate trust, cohesion and commitment towards this important industrial project, which needs the involvement and contribution of everyone.

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Brazil and Germany, success stories: two communication cultures in comparison

"Comunica Pirelli - A Pirelli Mais Perto de Você"

The in-house communication programme that was successfully introduced in Brazil two years for a community of about 11,000 blue collar and white collar employees, was consolidated and further developed in 2009. It now boasts about 16 communication tools, divided amongst magazines (e.g. Giro em Casa), newsletters (e.g. MaisQNotícia online), bulletin boards (e.g. Jornal Mural), canteen tool (video), meetings, etc. These tools target different audiences with different formats, frequency of publication and content, covering the entire community of employees at all levels, synergically responding to a plethora of needs, from information to collaboration and cohesion.

In 2009 Comunica Pirelli - A Pirelli Mais Perto de Você was extended to cover Group affiliates operating in Argentina and Venezuela and to the affiliates located in Chile, Mexico and Colombia with several tools that have been specifically created in the Spanish language, such as the newsletter, MásQNoticia online. It consequently feeds a continuous, coherent flow of information for about 13,000 employees within Latin America.

In 2009 the new communication channel Fale com o Superintendente (i.e Contact the CEO) was launched: this is an e-mail address to which all employees may write, asking the Chairman questions, to which he replies daily with at least ten letters. The purpose of this tool is to encourage direct dialogue between employees and the CEO.

The objectives of this advanced programme are to keep employees on track with Company strategies and policies, promoting communication and the exchange of information and guaranteeing an equal standard of information for everyone. This programme has received major recognition at the national level.

Germany, a single channel of communication for everyone: lean, punctual and focused on individuals

In Germany, the two tools that have been informing and engaging employees for years – the newsletter PirelliNews and general meetings – simultaneously target all audiences in the Company. Both have been confirmed over the years as highly appreciated, requested and used: the loyalty of the over 2,000 readers to Pirelli News is nearly absolute (as confirmed by the intranet statistics for the digital version available for download), as well as the general meetings that are held three times a year at the factory and bring all employees together in a single space with the CEO.

Punctuality and transparency are the hallmarks of these tools, combined with constant focus on each employee as an individual: in the newsletter through the columns dedicated to birthdays, weddings, births, retirements and obituaries, but also travel stories or small ads for buying, selling and exchanging.

German in-house communication is simultaneously massive but lean, confirming its success year after year.

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Company initiatives for the Internal Community

The Company’s initiatives for the Internal Community vary from country to country, to respond to the specific needs that are typical of the various social contexts in which the affiliates operate.

Some of the most common of these initiatives are:

  1. subsidised holidays for employees’ children
  2. scholarships and support for the education of employees’ children
  3. Company social and sports clubs
  4. preventive health activities through campaigns and specialised medical examinations
  5. agreements with retailers and health care providers for Company employee discounts

These initiatives address all Pirelli employees regardless of their having a permanent, fixed term or part-time employment contract.

Details about some significant initiatives carried out in 2009 follow below.

Seasonal flu and swine flu A(H1N1) prevention campaigns

Once again in 2009, Pirelli offered all its employees the opportunity to be inoculated with the seasonal flu vaccine free of charge.

The seasonal flu prevention campaign was given new impetus by the A(H1N1) virus, also known as “new influenza” or “swine flu,” pandemic. But that was not all: Pirelli, in accordance with the guidelines issued by the World Health Organization, implemented a programme of information and prevention measures against the A(H1N1) flu virus, targeting employees at all Company locations worldwide.

In particular:

  • an information campaign in the local language of all Group locations was developed;
  • the importance of obtaining the free vaccination against seasonal flu was emphasised;
  • qualified emergency contacts were provided;
  • a “traveller’s kit” was prepared for “transient” employees, containing first aid drugs and medicine and specific individual protection supplies (e.g. FFP3/N95 masks and single-use gloves);
  • hundreds of automatic distributors of alcohol-based detergents were installed;
  • cleaning of work areas and their furnishings was intensified.

The Company deemed this to be a priority investment, reflecting its constant commitment to protecting the health of its own employees, many of whom travel on business and are consequently exposed to potential local epidemics.

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Open Day – Green edition – the Milano Bicocca case

Over one thousand employees participated at the Open Day at the Bicocca (Milan).

Arts and crafts workshops and ecology manuals were offered to children, together with safe driving courses for adults and children. Green was the theme colour used for Open Day once again in 2009, in synergy with all the internal communication tools that gave priority to illustrating the theme of “Green Performance” introduced by the 2009-2011 Three-Year Plan.

But ecology was not the only theme of interest. Guided tours to sites that are normally closed to the public, such as the 16th century Castello degli Arcimboldi, and a prize game invented by the Internal Communication Department, with questions about items and themes drawn from Pirelli history, reinforced the sense of identity and spirit of belonging amongst Pirelli employees.

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Industrial relations

Pirelli Group industrial relations are conducted on the basis of constructive dialogue, fairness and respect of the various roles involved. Guaranteeing and respecting employees' freedom to engage in union activities has always been one of the Company's main aims.

Relations and negotiations with trade unions are managed locally by each affiliate in accordance with the laws, national and/or company-level collective bargaining agreements, and prevailing customs and practises in each country. At this level, these activities are supported by the Central Departments, which coordinate activities and ensure that the aforementioned principles are observed throughout the Group.

Industrial relations activity realised major negotiating accomplishments in 2009, including renewal of collective bargaining agreements in Romania (for the Tyre and Steel Cord production units) and in Spain (for the Manresa production unit).

Due to expansion of the global economic crisis in 2009, the Company had to continue the cost-cutting process of organisational and productive rationalisation that began in the second half of 2008. This structural revision lead to a reduction in the overall Group headcount, especially in high-cost countries.

More specifically, the cost and production negotiation measures undertaken in 2008 in Spain, Italy, Great Britain, Turkey and Germany were finalised.

Corporate reorganisation and restructuring processes were carried out in Great Britain, as well as a major sale of a branch of business on the sales network. In Germany, an agreement was signed with trade union representatives, focused on cost containment through the revision of certain economic and pay issues and through corporate restructuring, in exchange for a commitment by the Company to production volumes and capital expenditure. Restructuring of the local corporate organisation was carried out in Turkey.

In Spain, as announced during the year by the CEO of Pirelli Tyre S.p.A., the industrial production of tyres at the Manresa plant was terminated in December 2009. New projects in the logistic and photovoltaic sectors are currently under development. These new projects, together with the remaining activities being carried out at the site, absorbed about 130 employees from the current factory, in addition to 250 who will continue handling the Group’s commercial activities. Laid off workers received the welfare benefits agreed on with the trade unions and local authorities.

In Italy, a trade union agreement was signed on June 9, 2009 in confirmation of the guidelines drafted in 2007 for creation of the new Settimo Torinese Industrial Centre, a new, highly advanced technological and production complex for car and truck vehicle product lines. This agreement envisages, for the period necessary to prepare the new Centre for operational activity, the use of both welfare benefits and implementation of a two-year training programme in 2010 and 2011, in order to develop the workers’ technical and professional skills and abilities at the same level. The parties confirmed that once it becomes fully operational, the organisation of the new Centre will require that about 264 workers be made redundant. Accordingly, in 2009 two distinct procedures for staff cutbacks at the two production units at Settimo Torinese were initiated, involving about 131 workers. Ninety-one have already been laid off with long-term unemployment benefits on a voluntary basis, pursuant to other, specific trade union agreements, while management of the other layoffs will continue in 2010.

Three other staff reduction procedures were also initiated in Italy, involving two of the Group’s companies located at Milano Bicocca (Centro Servizi Amministrativi Pirelli Srl and Pirelli Labs S.p.A.) and the Steelcord production unit located at Figline Valdarno. As part of the negotiations with trade unions, specific agreement was reached on the most appropriate ways to handle the lay-offs at the latter company with as little trauma as possible. Following the aforementioned union agreement, the number of laid-off workers was reduced from 40 to 36 compared to what was previously announced. The same approach was taken for the same purpose at Pirelli Labs S.p.A. and CSAP Srl.

Again in response to the effects of the crisis, which severely impacted the real estate sector, Pirelli Real Estate underwent not only streamlining of its human resources organisation but also structural measures involving purchases and sales of branches of business in the “Credit Management” and “Appraisals” units of Pirelli & C. Real Estate Property Management S.p.A. These measures were accompanied by major information and consultation activities with workers and their trade union representatives.

At the international level, the Group confirmed its interest in establishing production activities in emerging market countries, especially in Russia and North Africa, as well as a greater presence in China and Romania.

In compliance with local law and/or contractual regulations, these organisational streamlining and production measures designed to contain costs were implemented by Pirelli by giving the trade unions and/or worker representatives advance and/or prompt notice at the national or local site level.

Consistently with the Company’s sustainable approach to restructuring processes, professional reassignment plans were adopted through framework agreements with major outplacement companies.

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European Works Council (EWC)

The Pirelli European Works Council (EWC), set up in 1998, holds an ordinary meeting once a year, following the presentation of the Group’s financial statements, to be updated on operating performance, financial-economic forecasts, investments made and planned, research progress, etc. The agreement establishing the EWC also allows for the possibility of holding other extraordinary meetings to fulfil its obligations to provide information and consult with its delegates in view of transnational events involving significant changes to the corporate structure: new openings, restructuring or closure of sites and major changes in the organisation of work.

EWC delegates are provided with the IT tools that they need to perform their duties and a connection with the corporate intranet system, for the real time communication of official Company press releases.

Pursuant to its founding agreement, the European Works Council was promptly informed about the most significant restructuring activities mentioned above through negotiations with local unions. At their annual meeting, together with the Industrial Relations Department, EWC members discussed the global economic crisis and its impact on Europe.

The Committee currently has 14 members from the Pirelli sites located in the countries entitled to representation on it: Italy, Germany, Spain, France, Romania, Poland and Great Britain.

Compliance with statutory and contractual obligations governing overtime, time off, and bans against child and forced labour

Pirelli Group policy has always promoted compliance with all legal and/or contractual requirements concerning working hours, the use of overtime and the right to regular days of rest.

These matters are often the subject of agreements with trade unions, in line with the regulatory context of each country. There are no restrictions on any of the workers’ right to use their total number of holidays, and the holiday period is generally agreed between the worker and the company.

Likewise, and as declared in the Group Social Responsibility Policy, Pirelli does not use child or forced or compulsory labour.

In accordance with the prescriptions of the SA8000® international standard, which was adopted by Pirelli in 2004 as the benchmark tool for management of social responsibility at its own affiliates, the respect of labour rights described hereinabove is constantly monitored both through coordination between corporate headquarters and its subsidiaries, and through independent audits. These issues have been specifically addressed in the first section of this Report, in the part entitled “Risk Management System”.

Labour and social security lawsuits

In 2009, as in previous years, the level of disputes remained low, generating a very small number of labour and social security lawsuits that was virtually unchanged from the previous year.

The litigation level remains high in Brazil, to the point of representing about 90% of all the labour lawsuits currently pending against the entire Group, just as in previous years. This remains a traditionally widespread phenomenon in Brazil, due to the local judicial culture, affecting not only Pirelli but also other multinational companies operating there. Labour lawsuits are generally initiated when an employment agreement is terminated, and they usually involve the interpretation of regulatory, legal and contractual issues that have long been controversial.

The Company has made a major commitment both to prevent these disputes – to the extent possible within the previously mentioned cultural context – and resolve them, including use of settlement procedures.

In 2009, a settlement agreement satisfactory to both parties resolved a long-standing dispute that had been initiated by a group of 77 workers against Pirelli Hellas S.A. (a company that is now in liquidation). It originated from a series of strikes held between April and September 1991 against the company’s decision to close the plant at Patrasso, which was closed in September that year.

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Unionisation levels and industrial action

The Group's unionisation levels cannot be calculated precisely, as this information is not available in all countries. However, it is estimated that about half the Group’s employees are trade union members. The percentage of employees covered by collective bargaining agreements in 2009 (81%) remained largely unchanged from previous years. This figure is largely the result of the historical and cultural differences between one country and another.

Individual contracts continue to be held by about 10% of the employee population, including executives worldwide, except for Italy, managers in the United Kingdom, the “Non Tarif” in Germany, the “Excluidos” in Spain, the “Senior” and the “Esecutivi” in Brazil.

The total number of industrial actions reported in 2009 was far lower than what was reported in 2008. Most of the industrial actions that took place during the year occurred in Italy, Argentina, Turkey and Brazil, and were caused by strictly operational and/or labour organisation issues, as well as - at the Bollate plant - renewal of the framework agreement for production award.

Occupational pension and health care plans

During 2009, in compliance with the guidelines adopted by the Group in previous years that envisage abandonment of defined benefit plans in favour of defined contribution plans, major negotiations were positively concluded between the Company and Fund member representatives in the United Kingdom, which will extend the defined contribution plan to all workers, effective April 1, 2010. This arrangement replaces the previous system, which limited defined contribution treatment only to workers hired after a certain date.

Defined benefit plans are in place in the United Kingdom (the fund will be closed for all employees on the payroll at April 2010, pursuant to the agreements mentioned above), in the United States (these plans were closed a number of years ago to active employees in favour of defined contribution plans; since then, the fund covers retired employees and is not tied to wage increases) and in Germany (this scheme was closed to new hires in 1982). Other defined benefit plans exist in The Netherlands and at Pirelli Real Estate in Germany, but they represent a relatively insignificant liability for the Group.

Group affiliates still provide supplemental Company health care plans according to local requirements. These healthcare schemes vary from country to country in terms of allocation levels and the types of coverage provided. These schemes are managed by insurance companies or specially created plans. The Company participates by paying a fixed fee, as in Italy, or an insurance premium, as in Brazil and the United States.

For measurement of the liabilities and costs represented by these benefits, reference is made to Book One Notes 23 (“Employee benefit obligations”) and 31 (“Personnel costs”) on the Consolidated Financial Statements of Pirelli & C. S.p.A. at December 31, 2009.

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Occupational Health, Safety and Hygiene

“The Pirelli Group safeguards health, safety and industrial hygiene in the workplace, both through management systems that are continually improving and developing and by promoting an approach to health and safety based on prevention and the effective handling of occupational risk.”

(Ethical Code– “Human Resources”)

“The Pirelli Group pursues and supports compliance with internationally proclaimed human rights. Pirelli considers protection of the integrity, health and welfare of its employees and the environment as one of the primary needs to be satisfied in organising and developing its activities.

......omitted.....

The Pirelli Group is committed to:

  • management of its activities by adopting occupational health, safety and rights and environmental policies in compliance with the highest international standards;
  • the dissemination of occupational health, safety and labour rights and environmental information to its internal and external stakeholders, both by communicating with them and actively co-operating with national and international government and academic bodies;
  • promoting use of the most advanced technologies to achieve excellence in occupational health and safety and environmental protection ”

(Pirelli Group “Social Responsibility Policy for Occupational Health, Safety and Rights, and Environment”)

“The Pirelli Group considers protection of employee safety, health and well- to be basic and general elements in defining its own strategies and objectives, in view of obtaining ever-more competitiveness on the global market on a long-lasting and sustainable basis.”

(Pirelli Group “Quality Policy”)

The management approach to Occupational Health, Safety and Hygiene is based on the principles and commitments set out in the cited Sustainability documents, which are discussed in the introductory section of this report and whose complete text has been distributed to all Group employees in their local languages as well as having been published in the “Sustainability” section of www.pirelli.com.

A note on methodology:

The procedures used for processing and reporting 2009 financial figures have changed from the previous years. To improve comprehension of Pirelli activities and performance in the Occupational Health, Safety and Hygiene filed, aggregate "group" data will be provided, while no longer providing such data on a separate basis for each company. Furthermore, to permit comparison with the data reported in 2008 while also focusing attention on the core business, the group figures will be broken down for the Pirelli Tyre and Eco Technology plants.

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Safety management system

A Safety Management System organised and certified to meet OHSAS 18001 standards has long been in operation in the Tyre Sector (which also comprises steel cord production plants). Following implementation of the system at the new plant in Slatina, Romania, an objective set in 2008 for 2009, the operating units were certified under this standard have climbed to 21 out of a total of 23 plants.

In the particulate filters sector (Eco Technology), implementation of the management system is currently being assessed at the Bumbesti, Romania plant.

The process that would lead to certification of the Milano Bicocca site was temporarily suspended following internal reorganisation.

The Safety Management System implemented at the Pirelli Tyre production units has been developed on the basis of centrally drafted common procedures and guidelines. This has enabled the use of a “common language” within the Group, in terms of the key elements of occupational safety management and a uniform shared mode of operations. This system has also been replicated for the sites of other companies outside the Tyre Sector that might decide to implement a management system.

Pirelli decided many years ago to adopt the same standards of safety worldwide for machines, installations and work environments as those in force at its European facilities, which are regulated by specific EU directives.

This decision has resulted in the installation of machines and equipment in emerging countries with safety features that are not required under local law but rather in compliance with European standards.

The principles of the adopted excellence system are based on a consolidated process, named PDCA (plan, do, check, act):

Plan
  • Define the corporate organisation for management of safety issues and management methods (procedures, operating instructions, etc.).
  • Identify and assess the specific significance of all aspects regarding worker health and safety, defining improvement objectives to reduce their significance.
DO
  • Implement what is planned.
Check
  • Periodically audit actual performance of the planned activities and their effectiveness.
Act
  • Subject the management system to periodic effectiveness reviews to verify achievement of the assigned targets and define subsequent ones.

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Safety culture

The Excellence in Safety project was launched in 2009, aiming to introduce safety culture in factories, which consequently does not base the wellness of individuals only on the application of rules, but leads those individuals to “sense” this issue as a form of responsibility first and foremost towards themselves.

The project, which was implemented in collaboration with Dupont, an international leader for activities of this type, was undertaken at the new industrial centre currently being constructed at Settimo Torinese. That centre will serve as a benchmark for other Group plants both in terms of occupational safety and in terms of technological applications and savings. Conclusion of the project is scheduled for 2011, and the programme envisages involving the entire population of workers who will be assigned to the site.

The principles and guidelines for Excellence in safety have already been distributed to other Group operating units.

In 2009, additional measures were implemented for changing internal culture, including creation of the Safety Bulletin newsletter, training courses for comprehending, controlling and modifying behaviour, entitled “BBS, Behaviour Based Safety,” and periodic announcement of important events through the usual channels of internal communications.

In 2009 Pirelli officially joined the “Safe and Healthy Workplaces” campaign as partner of the European Agency for Safety and Health at Work (EU-OSHA).

The Campaign addresses a different issue every two years, being dedicated in 2008 and 2009 to Risk Assessment. Its objective was to promote a participatory approach to risk assessment, based on consultation and the involvement of everyone present at the workplace, so that all hazards would be accounted for, not only on the basis of theoretical principles but also through actual knowledge of the environmental conditions and situations that have a negative impact on workers.

The commitments made by the Group with EU-OSHA during this Campaign have ranged from promoting the risk prevention culture through internal and external communication channels to organisation of ad hoc meetings at Pirelli sites with the participation of Agency representatives.

Pirelli’s commitment with the European Agency will continue during the two-year period 2010-2011 as part of the new campaign, focusing on safety in maintenance work.

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Safety training

The initiative Pirelli HSE Campus was launched at the beginning of 2009.

It offers a catalogue of courses and seminars given at Group operating units by qualified Company personnel.

This programme targeted managers in order to provide them with skills and knowledge about the best operating practises. The campus offered about 100 hours of classroom instruction, with about 150 persons participating at the plants in Turkey, Italy, Germany, Egypt and China.

Both the importance of this initiative and internal satisfaction with it have encouraged increasing the number of training hours and workers involved in the HSE Campus, with simultaneous refinement of the system used to monitor the hours dedicated to it and the number of participants (see paragraph “Objectives for 2010-2011”).

Monitoring of performance and sharing of experience

In parallel with the definition of specific common guidelines and procedures for drawing up and implementing management systems, the Pirelli company intranet contains a web-based management system for “Health, Safety and Environment Data Management” (HSE DM), created and operated at corporate level by the Health, Safety and Environment Department. This system permits the monitoring of HSE performance and the preparation of a wide variety of reports that are required for management and operational purposes.

In particular, the HSE-DM system collects all the information regarding accidents that take place in factories (accident analysis, adopted corrective measures, etc.) and, if the dynamics of the specific case are significant, all plants are not only provided with the information but also urged to conduct an internal audit as to whether conditions similar to the ones that caused the injury exist at their plants too and define any corrective measures.

This information system is used to pool the solutions adopted by the various sites and share those that are considered the best.

In 2009, the HSE DM system was extended to Pirelli Broadband Solutions, and starting from 2010 it will be gradually extended to other production sites, and then to other non-industrial sites.

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Performance

The accident Frequency index (FI) (the ratio of the number of reported accidents to the number of hours actually worked) in 2009 fell overall by 15% from 2008.

However, the Severity index (SI) increased by 19% due to worse performance in the Tyre Sector (industrial) and certain significant events that occurred at companies classified as "Others".

The information is also provided by business, i.e. Pirelli Tyre, Eco Technology and Others. The Others category is comprised of several companies that are grouped together according to the type of activity performed or their size. This group includes Pirelli RE, Pirelli Labs, PBS and Pirelli & C.

The trend for the frequency index at Pirelli Tyre industrial was particularly significant. It fell by 20% from the previous year and by 32% over the 2007-2009 period.

The values reported for Others are impacted by the occurrence of certain significant events (fracture). Consequently, the frequency index rose to 1.99 (a 27% increase from 2008) and the seriousness index rose sharply, to 0.49 from 0.18 in 2008.

To better understand these data, it should be kept in mind that the SI was calculated by considering all calendar days (excluding the date of the accident) between the injured person’s work interruption and the employee’s return to the factory as “lost,” i.e. the actual days necessary for complete rehabilitation.

The calculation of the aforementioned indices does not include "in itinere" accidents, which will be separately discussed in the following table and that show a significant decrease from 2008.

The following table illustrates the principle indicators of the companies belonging to the Pirelli Group. As previously mentioned in the introductory section, all information is processed on a final basis for the Group.

Calculation of the indicators refers to the activities performed by both industrial and office employees. The indicators referring to frequency and severity for external entities cannot be calculated, insofar as it is not possible to monitor the hours that are actually worked or the days that are actually lost.

Frequency index (FI) (total injuries/hours worked * 100,000)

2007 2008 2009
Pirelli 2.34 2.06 1.76
Pirelli Tyre (industrial) 2.54 2.15 1.73
Pirelli Eco Technology - 13.61 * 1.16
Pirelli Other Business 0.94 1.56 1.99

* The high level of the 2008 index, which reflects only the Arese research centre (the Eco Technology factory in Romania began operation in 2009), is impacted by the small size of the organisation and the low total number of hours worked on which the calculation was performed. However, it is confirmed that a low number of injuries were suffered and all had an extremely short duration.

Severity index (SI) (total days lost/hours worked * 1,000)

2007 2008 2009
Pirelli 0.48 0.43 0.51
Pirelli Tyre (industriale) 0.53 0.47 0.52
Pirelli Eco Technology - 0.54 0.28
Pirelli Other Business 0.12 0.18 0.49

Injuries in Itinere

2007 2008 2009
Pirelli 108 148 119
Pirelli Tyre (industrial) 84 114 82
Pirelli Eco Technology - 0 2
Pirelli Other Business 24 34 35

Fatal accidents

No Pirelli employee or employee of outside contractors working at the Group's operating sites suffered a fatal accident in 2009.

Best practices

Mention of the internal benchmark plants must be made in regard to Pirelli Tyre industrial activity. In particular, the Slatina Tyre and Slatina Steel Cord sites (both in Romania) had the lowest frequency index, i.e. 0,16.

Just as worthy of mention are the Settimo Veicoli Industriali (Italy) and Celikord (Turkey) plants, whose improvement trend in the frequency index for the period 2006-2009 exceeded 75%.

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Occupational Diseases

As shown in the table, the Frequency Index of occupational diseases at the Company fell over the three-year period, to 0.27 in 2009.

Occupational disease Frequency Index (total of new cases of occupational disease/hours worked *100,000)

2007 2008 2009
Gruppo Pirelli 0.43 0.33 0.27
Pirelli Tyre (industrial) 0.49 0.38 0.34
Pirelli Eco Technology - - -
Pirelli Other Business - - -

Improved definition of the cases required revision of the calculations made in previous years, resulting in a revision of the indices for 2007 and 2008 as well. A refinement in the definition of the cases attributable to “occupational disease” together with internal information activities regarding them resulted in a revision of the indices for 2007 and 2008, which were erroneously higher (0.51 in 2007 instead of 0.49) or lower (0.21 in 2008 instead of 0.38) than they actually were.

In 2009 the Frequency Index of new cases of occupational diseases reported at Pirelli Tyre was 0.34, down 11% from 2008 and 30% from 2007.

The decrease in hours worked (the parameter used to calculate the index) recorded in 2009, did not have a significant impact on the Frequency Index.

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Investments for Health and Safety

The largest investments for 2009 were made at Pirelli Tyre. In 2009 health and safety investments by Pirelli Tyre totalled Euro 10 million.

Investments (in millions of euro)

2007 2008 2009
Pirelli Tyre 7 11.3 10

The System for Identification and Assessment of Improvement Opportunities, introduced in 2008, made it possible to target the distribution of expenditure more effectively. Operational start-up of the computerised management system in 2009 further improved the capacity of assigning economic resources, based on the concept of priority and number of persons that will benefit from the measure.

The expenditure made targeted improvements on machines and plant and, more in general, workplace environment as a whole (e.g. improvement of microclimate and lighting conditions, changes in layout for ergonomic improvement of activities, measures to protect the healthfulness of infrastructure, etc.).

These expenditures were complemented by safety related expenses that are essentially attributable to environmental monitoring (i.e. sampling and analysis, consultancy studies, etc.), the purchase of personal protection equipment (e.g. safety boots, gloves, safety goggles, etc.) and collective protection devices (e.g. better protection of machinery, suction systems and measures to improve the workplace environment not covered by specific expenditure projects).

Satisfaction of 2009 “Health and Safety” objectives

QUANTITATIVE
10% reduction in the frequency index of accidents at factories (Pirelli Tyre Industrial) fully satisfied
QUALITATIVE
OHSAS 18001 certification of the Slatina Tyre (Romania) site obtained
Certificazione OHSAS 18001 Pirelli Broadbandsolutions obtained
OHSAS 18001 certification of Milano Bicocca site certification process temporarily suspended (see the above section dedicated to the Safety Management System)
Refinement of data collection procedure for accidents at non-production sites initiated and continued in 2010.

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Objectives for 2010-2011

QUANTITATIVE
2010 Reduction of frequency index (Pirelli Tyre Industrial) by 10% vs. 2009 (FI 2010=1.55%)
2010 Increase in number of HSE Campus training hours: >100 hours
QUALITATIVE
2010 Monthly monitoring of training hours at industrial sites using HSE-DM
2010 Extension of HSE Campus activities to LATAM plants
2010 Audit of level of application of Group Risk Assessment standard
2010 targeted investments to resolve riskiest situations
By 2011 Definition of a new Group standard for maintenance activities
By 2011 OHSAS 18001 certification of the Eco Technology plant in Bumbesti, Romania
By 2011 OHSAS 18001 certification of Guacara plant in Venezuela

Healthcare assistance during working hours

Pirelli has operated infirmaries for decades in its production plants, with nurses and doctors available to provide all employees with medical care during working hours. These facilities provide first aid care, advice on health problems unrelated to work and health supervision for workers exposed to specific hazards.

For example, the Bicocca-Milano, Italy infirmary provided a total of more than 20,000 medical services to a resident population of about 2,000 employees.

Healthcare promotion campaigns developed in line with local programmes also make use of these facilities (see paragraph “Initiatives for the Internal Community” and the following paragraphs).