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 free trade union activities is one of the key values on which Pirelli bases its human resource management system.

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 practices 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.

This activity achieved important results in 2011 with the signing of renewed collective bargaining agreements at different Group sites, including Argentina, Venezuela, Mexico, the United Kingdom, Spain, Germany, Egypt and Romania. In this last country, the new Romanian law governing trade union representation was also incorporated in the agreement.

These accomplishments were accompanied by the major role played in Italy upon signing of three supplemental company agreements applying to the Milan Bicocca, Bollate and Figline Valdarno sites.

In Italy, the Company also continued the restructuring and reorganisation process undertaken at the Settimo Torinese Industrial Centre, undertaken in 2009. In particular, during the month of November, an agreement was signed with local trade union representatives and organisations for the sharing, definition and management of the 2012-2014 Industrial Plan, which calls for additional investments totalling about euro 27.5 million to rebalance truck and car production, in accordance with the Industrial Centre guidelines aimed at encouraging higher value added (Premium) car production. With this agreement, the procedures for non-traumatic management of employment criticalities were also agreed, including recourse to welfare benefits.

At the Pirelli Eco Technology S.p.A. plant in Arese, a cost containment plan was implemented to deal with the consequences of the drastic fall in sales of retrofit systems since the beginning of the year due to failure of issuance of previously announced environmental protection regulations. As part of this plan, two specific agreements were signed with trade union representatives and local union organisations. These acknowledged realisation of the new industrial plan and defined the terms for streamlining the company organisational structure, by encouraging reassignment of redundant employees to Pirelli Tyre S.p.A.

At the Bollate plant, two major agreements were signed with trade unions in February and November. Then a euro 10 million plan of investments in environment, occupational safety and products was agreed for the three-year period 2011-2013, in accordance with the “green technology” strategy. A new work shift system was also agreed, involving 19 weekly shifts that replaced the previous continuous cycle system, in order to assure the most efficient management of productive assets.

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

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

The Group’s commitment on Health and Safety also involved the participation of Industrial Relations through the participation of trade unions at many of the sites where Pirelli operates, as allowed by local laws in different countries. Mixed company – union representative committees have been set up at several plants, where current issues and awareness and action plans/programmes are periodically monitored and addressed, with the support of specialists. This is done in view of continuous dialogue aimed at improving the various activities performed by Pirelli to protect the health and safety of its employees. One such example is the aforementioned Bollate agreement.

The 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 Annual Financial Report, for updates on operating performance, financialeconomic 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 to delegates in view of transnational events involving significant changes to the corporate structure: new openings, restructuring or closure of sites and major, widespread 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. At the annual meeting with the Industrial Relations Department, scheduled for February 2012, the members of the EWC will be informed of the Group’s annual operating and earnings performance and the contents of the Business Plan.

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

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

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

These requirements are often the subject of agreements with trade unions, in line with the regulatory context of each country.
There are no restrictions on any worker’s right to use his/her total number of holidays.
The holiday period is generally agreed by the employee and the company.

Likewise, and as also publicly declared in the Group Social Responsibility Policy, Pirelli does not use child labour or forced or compulsory labour. In accordance with, inter alia, 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, Pirelli monitors application of the prescriptions governing social sustainability and, in particular, compliance with human and labour through periodic audits commissioned to specialised independent consultants. These audits are obviously conducted after constant coordination and monitoring by headquarters functions. Special attention is dedicated to the sustainability of Pirelli and supplier sites in and emerging countries and countries at risk (also defined as countries of concern by EIRIS).

The Auditors conduct their audits on the basis of a checklist of sustainability parameters derived from the SA8000® standard (a reference tool officially adopted by the Group for the management of social responsibility since 2004), from the Group Social Responsibility Policy for Occupational Health, Safety and Rights, and Environment and the Group Ethical Code.

In 2008 audits were conducted at Company sites located in Turkey, Brazil, Venezuela, Argentina, Egypt, China, Romania, Colombia, Mexico and Chile.

In 2011, Pirelli commissioned new, independent audits at production sites located in Argentina, Venezuela, Brazil, China, Egypt, Turkey and Romania.

All managers at the affiliates involved in the audits have been adequately trained and informed about the audit aims and procedures by the delegated headquarters functions: Sustainability and Industrial Relations.

The audits, each of which lasts an average of at least three days in the field, have included extensive interviews of workers, management and labour representatives.

Although the instances of non-compliance revealed by the audits were not serious, they were addressed in action plans agreed by the local managers and central management.

The Internal Audit function will be directly involved in the process of monitoring undertaken actions beginning in 2012. The Pirelli Internal Audit function is exquisitely independent insofar as it reports to the Pirelli Internal Control, Risks and Corporate Governance Committee, which is comprised solely of independent directors.

Labour and social security laws uits

In 2011, 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 level of litigation 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. Labour lawsuits are widespread in that country and reflects the local culture.
Therefore, it concerns not only Pirelli but also other multinational companies operating in Brazil. 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.

Unionisation levels and industrial action

It is impossible to measure the percentage of union membership at Group companies, since this information is not available in all countries where Pirelli has a presence (over 160 countries on four continents). However, it is estimated that about half the Group’s employees are trade union members. The percentage of workers covered by a collective bargaining agreement in 2011 grew from previous years, reaching all’82% as compared with 78% in 2010 and 2009. This figure is associated with the historical, regulatory and cultural differences between each country.

The total number of disputes recorded in 2011 was quite limited, in line with what was reported in 2010. The industrial actions that occurred during the year mainly affected Italy and were focused on issues strictly tied to operating and/or labour organisation matters and actions in support of political and union issues of national interest.

Occupa tional pension and health-care plans

Defined benefit plans are in place in the United Kingdom (the fund was closed for all employees on the payroll at April 1, 2010), in the United States (these plans were closed a number of years ago to employees on the payroll, in favour of defined contribution plans; since then, they only apply to retired employees but are 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, but they represent a relatively insignificant liability for the Group.

Group affiliates still provide supplemental company medical benefits 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 note 24 (“Employee benefit obligations”) and 32 (“Personnel expense”) in Volume A of the Annual Financial Report at December 31, 2011.