Some weeks back, watching the news on Italian television, I was intrigued by the almost positive twist given to a very sad event.
The Chinese government, through its China National Chemical Corporation, made an attractive bid to shareholders and is poised to eventually acquire a 65 per cent controlling interest in Italian tyre company Pirelli.
The news shocked me as I was not aware this company was facing difficulties that called for a rescue.
As yet, Pirelli, which ranks fifth in international tyre sales after Bridgestone, Michelin, Continental and Goodyear, is a competently managed multinational, successfully competing worldwide. It has a turnover of €6.5 billion and operates 19 plants in 13 different countries.
It is one of the world leaders in premium tyre technology. Through research agreements, it collaborates with 14 universities worldwide, employs 1,400 engineers and operates 10 research centres.
This edge in technology, plus a developed commercial acumen and an extensive EU and worldwide market penetration, all go to confirm this company is an enviable asset to any country. It plays an important part in the Italian economy as it supplies essential components to the automotive and so many other industrial operators. Worldwide it directly generates 30,000 jobs.
China is set to acquire an asset and the EU is set to sell off an asset
This is what will be handed on a plate to the Chinese government once this takeover bid is concluded. This company will move out of Italian and European control and all kinds of decisions may be taken by the new owners.
It is of concern that the prospective new owner is not a commercial entity but a foreign government that may, or may not, have other not so commercial objectives.
The new owner may decide to replace Pirelli’s top management. It may decide to relocate the headquarters and all research activities out of Italy. So many Italian plants may be closed down.
It may be that the focus of the new owner will not be the development of the ‘Pirelli’ company but it could be the advancement of the national Chinese tyre sector. There could be an intention on the part of the China National Chemical Corporation to eventually de-list Pirelli from the stock exchange and so reduce disclosure requirements and public scrutiny, with less restrictions to decide on the future of the business.
The company culture of Pirelli could be in for radical changes and a particular Chinese perception of corporate social responsibility may prevail.
Are we going to witness an adoption of current Pirelli employment standards and practices by the Chinese parent company or will Chinese standards gradually prevail in Pirelli’s employment policies?
The EU must wake up and confront the problems that arise from such takeovers.
Should alien governments, directly or through proxies, be allowed full liberty to buy into another country’s vital industrial and commercial enterprises, with full freedom to run them down and divest them of accumulated commercial and technological expertise ?
To avoid such an economic suicide, perhaps the EU should consider legislation to be able to intervene and contain purchasing forays by alien governments that appear to have dubious objectives.
It is very evident that the Pirelli event is not a case of China investing in Italy. No investment is occurring, no enterprise is being created, or salvaged. It is just a question of a purchase of an existing asset that operates with good returns to the current shareholders.
China is set to acquire an asset and the EU is set to sell off an asset. Now it could be that the capital funds realised from the sale will not go into productive and high yielding alternative new investment. Could it be that the funds realised will, over time and indirectly, percolate down to an ‘unproductive’ reduction in a national debt or to the ‘unproductive’ sustenance of an ever-proliferating and unsustainable social Europe?
The EU appears more and more bereft of capable leadership that is able to plan for a viable future for the next generation. Instead, we have a very incompetent, fickle and confused leadership that ignores the writing on the wall and continues to entertain short-term unsustainable and unrealistic whims of a spoiled blackmailing electorate. With this kind of frivolous behaviour, a decent future does not belong to Europe.
I spoke earlier of a positive twist to the news of the Pirelli takeover by China. This attitude increases my pessimism about the EU’s ability to comprehend and react to such economic blows. Is Europe so myopic and so far gone into its pathetic leaderless decline?
In conclusion, however, to be fair, some concern was expressed by the newscaster. He proceeded to manifest serious worry about a possible discontinuation of that feature of fundamental importance which is the annual publication of the famous Pirelli girl calendar. Unbelievable!
Arthur Muscat is an employment and industrial relations specialist involved in employer bodies