Pirelli & Cwill invest an additional $100 million in China

Pirelli & Cwill invest an additional $100 million over the next two years to double its tyre production capacity in China by 2011, its chairman said on Thursday.

The expanded capacity could double Pirelli's share of China's market to 10 percent within five years as long as raw material prices do not continue to rise, Chairman Marco Tronchetti Provera told reporters on the sidelines of a press conference.

"We are doubling the capacity in car tyres, and increasing the capacity in truck tyres," said Tronchetti.

While the executive was optimistic about China's robust vehicle market, the world's second largest, he cautioned that continued rises in raw material prices could deflate his forecasts.

Pirelli, whose main tyre business accounts for the bulk of profits, posted flat quarterly results due to rising raw materials costs and weaker car sales in key markets, such as the United States and Europe.

The company's investment will boost total capacity to 11 million car and truck tyres by 2011, and help China become Pirelli's second largest global market within five years, said Tronchetti.

China is now the company's fifth largest market, accounting for about 10 percent of volume sales. About half of Pirelli's Chinese production is targeted for the domestic market and half for export, he said.

Pirelli swung to an attributable net profit of $258.8 million profit in 2007, and expects to match that level this year.

French rival Michelin was forced to cut its earnings target as it struggled with rising raw materials prices Tronchetti has said previously he was interested in expanding the tyre business in China, India and Russia, where he aimed to open a plant by the end of 2009.

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