U.Forner - PREMIUM AND EFFICIENCY

PREMIUM AND EFFICIENCYUgo Forner

BU Car

2

AGENDA

INVESTMENT PLAN

TARGETS 2011-2013

MARKET SCENARIO

LEVERAGE ON PREMIUM

3

NEW CAR REGISTRATIONS CONFIRM PREMIUM TREND

Non PremiumVehicles fitting Premium

5.6%5.6%

2.0%2.0%

56

69

74

84

90

2000 2010 2011 2013 2015

11%

12%13%

15%

2.8%2.8%

1.9%1.9%

9.6%9.6%

5.0%5.0%

Mln Passenger + Light Commercial Vehicles

Source: Global Insight, Eurostat, Anfac, Pirelli estimates

4

EMEA + NAFTAEMEA + NAFTA LATAM + APACLATAM + APAC

SAME TREND IN ALL REGIONS

6.1%6.1%

8.1%8.1%

5.1%5.1%

41

14%

2000

35

19%

2010

38

20%

2011

44

2013

47

2015

20,9%21%

-1.5%-1.5%

15

3%

2000

34

5%

2010

36

6%

2011

40

2013

43

2015

20,9%8%

1.4%1.4%

-2.1%-2.1%

8.3%8.3%

5.5%5.5%

13.1%13.1%

7.9%7.9%

14.4%14.4%

4.5%4.5%

Mln Passenger + Light Commercial Vehicles

Source: Global Insight, Eurostat, Anfac, Pirelli estimates

Non PremiumVehicles fitting Premium

5

Global Tyre marketGlobal Tyre market

2.8%2.8%

4.3%4.3%

925

12211287

1402

1505

2000 2010 2011 2013 2015

9%

10%11%

12%

4.7%4.7%

2.6%2.6%

6.5%6.5%

4.0%4.0%

TYRE MARKET EVOLUTION REFLECTS THE SAME TREND

Non Premium TyresPremium Tyres (W, Y, Z only)

Mln pieces

Source: Europool, RMA, Anip, CRIA, Pirelli estimates

6

EMEA + NAFTAEMEA + NAFTA LATAM + APACLATAM + APAC

SAME TREND IN ALL REGIONS

2.5%2.5%

5.8%5.8%

7.1%7.1%

669

11%

2000

770

14%

2010

798

15%

2011

839

2013

871

2015

20,9%16%1.4%

1.4%

256

2%

2000

450

4%

2010

490

4%

2011

563

2013

635

2015

20,9%5%

Non Premium Tyres

Mln pieces

Source: Europool, RMA, Anip, CRIA, Pirelli estimates

4.0%4.0%

1.1%1.1%

5.2%5.2%

2.0%2.0%

11.9%11.9%

5.6%5.6%

14.0%14.0%

6.8%6.8%

7

Premium Tyres (W, Y, Z only)

AGENDA

INVESTMENT PLAN

TARGETS 2011-2013

MARKET SCENARIO

LEVERAGE ON PREMIUM

8

Replacement Price Index

Overall Tyre Diameter, Load & Speed Performances

1X 3X

225/45 R17 W

245/50 R18 RF Y

6X

FOCUS ON HIGH VALUE PREMIUM SEGMENTS

295/35 ZR20 (Y)

10X

155/80 R13 T

9

SUV D - F

SUVA - C

BEST PRODUCT RANGE LINED UP TO MEET CONSUMER NEEDS

Launch Year Renewal Year

URBAN

TOURING

PURE PERFORMANCE

CONSUMER STYLE

VEHICLE SEGMENT

A B D FEC Race

20072012

2012

2010

2010

2011

2009

2010

10

New Products (% on Total sales) OEM’s Homologations

GREEN, RENEWAL SPEED, INNOVATION AND OPTIMIZATION

21%

2010 2013 20152009

25%30% 28%

31%

20152009

35%

50%

61%

138

2010 2013 20152009

140160 170

2010 2013

Green Products (% on Total sales) Portfolio Optimization

Size covered

From 2009… …To 2015

496 680

Product lines

SKU

47

~1.700

35

~1.600

SKU = Stock-Keeping Unit

11

EXPECTED DIRECT RETURNS Increased Pirelli Sales, especially

PZero (double speed growth vs. average) Higher Dealer penetration Higher price positioning Stronger partnerships with “high-end” car-

makersF1 marketing investments will

create concrete returns through commercial support programs

F1 MARKET ACTIVATION WILL DRIVE VALUE SALES GROWTH

++

EXPECTED INDIRECT RETURNS Brand awareness (particularly in RDE) Brand value Increase of Consumer consciousness

(proud to fit Pirelli tyres)

12

RIDING THE PREMIUM INCREASE WITH ONE POWER BRAND

~95%~95%

~97%~97%

Weight of Premium products on total sales

Weight of Pirelli branded products on total sales

2010

2013

2015

66%

71% 73%

2005

62%

~93%~93%

13

2010

14

64% 71%

% on OE sales

VALUE CREATION IN OE BEING SELECTIVE ON CUSTOMERS, MODELS AND SIZES

2013

Prestige

Premium

Synergic

Pirelli Segment

Share

Pull-through

++

--

# 1

Strong,2- digits

Low,1- digits

Premium Mix on OE Sales

72%

2015

WHILE THE REPLACEMENT FOCUS CONTINUES TO BE THOSE CONSUMERS THAT SEEK, RECOGNIZE AND PAY FOR VALUE

Supporting Actions

EMEA + NAFTA 75% 80%

% on sales

Replacement rate

RDE mkts 47% 57%

79%

52%

Enlarge retail network Develop the B2C platform and Web-Market

Place for our hard-franchise network F1 Market Commercial Activation Exploit Moto best practices in

engaging the Consumer Enhance Web-based customer integration

to optimize Supply Chain

++

--

2010 2013 2015

Premium on total Replacement Sales

Premium high/end

cars

Mass market

15

AGENDA

INVESTMENT PLAN

TARGETS 2011-2013

MARKET SCENARIO

LEVERAGE ON PREMIUM

16

PREMIUM & EFFICIENCY

Greenfield New capacity / Mix improvement … Capex

ROMANIA

+60% by 2013 focused on Premium / Specialties

MERCOSUR

+10% by 2011 andanother 10% available

thanks to Mexican ramp-up by 2012

MERCOSUR

+10% by 2011 andanother 10% available

thanks to Mexican ramp-up by 2012

MEXICO

Operational by 2012Better service and lower costs to deliver high-end NAFTA marketsDebottlenecking Latam

MEXICO

Operational by 2012Better service and lower costs to deliver high-end NAFTA marketsDebottlenecking Latam

Operational by 2012 Radial only to serve

International markets

Operational by 2012 Radial only to serve

International markets

ITALY

Hi-Tech Prestige Competence Center Next MIRS100% Green Performance 30% higher efficiency

RUSSIA

JV with initial output by2012

RUSSIA

JV with initial output by2012

CHINA

+100% by 2013 focused on Premium / Specialties

CHINA

+100% by 2013 focused on Premium / Specialties

2010

56

70

≤80

Mln pieces (Radial only)

800 ml€800 ml€

500 ml€500 ml€

7080

2013 2015

+25%

+15%

YEAR END CAPACITY

Improve focus, simplify operations

17

Production by Plant MaturityPirelli Industrial FootprintProduction by Area

“Old Plants”

“New Plants”

GermanyGermany

TurkeyTurkeyTurkeyTurkeyTurkey

UKUK

ItalyItalyItalyUSAUSA

ArgentinaArgentinaArgentina

VenezuelaVenezuelaVenezuela

Greenfield

Mix Improvement

Capacity Increase

China

Romania

MexicoMexico

Mature

RDE

COMPETITIVE CAPACITY INCREASE IN HIGH GROWTH AND LOW COST AREAS

2010

70%

30%

2013

61%

2015

48%

39%52%*

2010

29%

71%

2013

26%

2015

20%

74% 80%

Russia

Localization: increase of local for local production from 83% to 89% (reduction of logistic and duties costs)

Specialized platform, product customization and new processes (NEXT MIRS and PTSM for a flexible UHP production in small lots)

Average plant capacity +30% 2015 vs. 2010

New and recent Greenfields capacity projected > 10 mln pcs

* 10% coming from new machineries in old factories

18

AGENDA

INVESTMENT PLAN

TARGETS 2011-2013

MARKET SCENARIO

LEVERAGE ON PREMIUM

19

SalesSales EBIT MARGINEBIT MARGIN

BU CONSUMER *: TARGETS

~8.5%

€/ bln

> 4.1

2013E

3.3

2010E

2.8

2009A

> 3.5

2011E 2013E2010E2009A 2011E

9÷10%11÷12%

8.3%

89%

89%

89%90%

10%

11%

11%

11%

Car

Moto

20

+7.6%+7.6%

CAGR

CONSUMER EBIT INDEX BRIDGE 2010-2013

21

Depreciation/ others

EfficienciesPrice/mix Raw materials

& cost of inputs

Volume EBIT 2013EBIT 2010

index “170”(30)50

60

index “100”60

(70)

Index “100” = Ebit Consumer 2010

ScaleProductivityTarget Cost Management

Total savings 2013 vs. 2010

Allocation to low Cost

plants

15%

30%

25%

30% 100%

AN EFFICIENCY PLAN WILL SIGNIFICANTLY CONTRIBUTE TO BUSINESS RESULTS IN THE NEXT 36 MONTHS

22

DISCLAIMER

23

This presentation contains statements that constitute forward-looking statements based on Pirelli & C SpA’s current expectations and projections about future events and does not constitute an offer or solicitation for the sale, purchase or acquisition of securities of any of the companies mentioned and is directed to professionals of the financial community. These statements appear in a number of places in this presentation and include statements regarding the intent, belief or current expectations of the customer base, estimates regarding future growth in the different business lines and the global business, market share, financial results and other aspects of the activities and situation relating to the Company. Such forward looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ materially from those expressed in or implied by these forward looking statements as a result of various factors, many of which are beyond the ability of Pirelli & C SpA to control or estimate precisely. Consequently it is recommended that they be viewed as indicative only. Analysts are cautioned not to place undue reliance on those forward looking statements, which speak only as of the date of this presentation. Pirelli & C. SpA undertakes no obligation to release publicly the results of any revisions to these forward looking statements which may be made to reflect events and circumstances after the date of this presentation, including, without limitation, changes in Pirelli & C. SpA business or acquisition strategy or to reflect the occurrence of unanticipated events. The Manager mandated to draft corporate accounting documents of Pirelli & C. SpA. Francesco Tanzi, attests – as per art.154-bis. comma 2 of the Testo Unico della Finanza (D.Lgs. 58/1998) – that all the accounting information contained in this presentation correspond to the documented results, books and accounting of the Company.