Berlusconi, Running Again, Is No Longer Promising ‘Italian Miracle’
By IAN FISHER
ROME — The endless clowning remains, like when he grasped his chest recently as if dying after eating buffalo mozzarella, now the focus of a dioxin scare.
But other than the superwhite teeth, gone are many of the trademarks of Silvio Berlusconi in the heat of an election. The comic-book energy has declined, at 71, to self-acknowledged fatigue. Loose tongued in the best of times, he now says “anything that comes into his head,” one commentator wrote, like proposing mental health screening for prosecutors apparently unhinged enough to charge him with corruption.
Mostly, though, what is gone are the big promises: Italy, he seems to be saying, is so ill that not even the mighty Berlusconi can be sure of curing it.
“The cross I will have to bear has never been so heavy, because never has the situation before us been so difficult,” he said last week, the cross being the office of prime minister, which he is seeking for the third time in elections on Sunday and Monday. This man who once said his leadership would herald “a new Italian miracle” now says, “We can’t promise and can’t achieve miracles.”
(His fortunes have fallen, if slightly, in other ways. For years Italy’s richest man, he is now listed in Forbes as No. 3.)
Polls consistently show the center-right Mr. Berlusconi ahead, two years after voters ejected him from office in favor of a center-left government that itself collapsed in January.
But his carefree behavior — and the remarkable calm of his opponent, Walter Veltroni, the 52-year-old former mayor of Rome — suggests what Italians have long been saying: that this election, no matter who wins, is unlikely to bring much change to an Italy that badly needs it.
The broad issue is that Italy seems, in a word in vogue here, “blocked,” its economy again near zero growth, garbage still piling up around Naples, a yearlong effort to sell its troubled airline, Alitalia, seriously hurt this month by its unions, a symbolic victim of the difficulty of making even crucial things happen here.
“The impression is that whether it leans to the left or the right, Italy has a political class that is unable to decide, that doesn’t have the courage to take responsibility for unpopular decisions,” said Antonio Campi, a political science professor at the University of Perugia. “And so the situation has been allowed to deteriorate.”
But more specifically, many experts say that despite Mr. Berlusconi’s lead in the polls, the election itself may be inconclusive, largely because of Italy’s electoral law.
While Mr. Berlusconi looks likely to win in the lower chamber of Parliament, the Chamber of Deputies, the upper chamber, the Senate, is problematic, since its seats are apportioned under a complex formula based on Italy’s regions.
And at the moment, even Mr. Berlusconi has hinted that he may not be able to win enough seats to govern. Some experts believe Mr. Veltroni’s bloc could actually win the Senate — a situation that would pit the two chambers against each other and create an even worse paralysis.
The paradox is that the election law was created by Mr. Berlusconi before the 2006 elections when it looked, correctly, like the center-left would win — and he wanted to make it impossible for it to govern. After that government fell, because of a too-slim majority in the Senate, Mr. Berlusconi rejected changing the law before this election.
“It’s a crazy thing,” said Antonio Noto, director of IPR Marketing, an independent polling firm here. “It’s his law. It was created in a different era to make life difficult for the center-left. Now it could be a boomerang.”
In confronting this difficulty, Mr. Berlusconi has acted with typical audacity: This week, he suggested he could give Mr. Veltroni’s new Democratic Party control of one of the parliamentary houses — if the center-left president, Giorgio Napolitano, stepped down. For critics, the proposal confirmed long suspicions that what Mr. Berlusconi really wants is the presidency, an appointed job with power and influence but not the trouble of daily politics.
He has also often suggested, though recently backed off on, a German-style grand coalition, in which left and right would govern together. Mr. Veltroni, though, says he rejects that unconditionally.
“That’s not going to happen,” he said in an interview in a recent sweep, by bus, through southern Italy.
In his campaign, Mr. Veltroni, an amiable and relaxed politician sometimes accused of trying to accommodate everyone, has sought to disarm Mr. Berlusconi of one of this greatest strengths: a great antipathy for the left as fractured do-nothings, a reputation cemented by the two years of Prime Minister Romano Prodi’s unwieldy nine-party coalition.
Last year, the two largest center-left parties fused into the Democratic Party, with Mr. Veltroni as its leader. Then he did something unheard of in Italian politics: He said his new party would run alone without the scores of small, and often extreme, parties that helped make Mr. Prodi’s government untenable. He thus earned enemies on the far left, but, in theory, friends in the center.
How many friends is unclear, but the well-connected and America-loving Mr. Veltroni has relied on his own famous ones to help make his case.
He knows Senator Barack Obama, wrote the introduction for the Italian edition for one of the senator’s books and uses him as a model as a fresh young face (though detractors note that he has been in politics for nearly 30 years). “Si puo fare!” — “Yes we can!” — is his slogan. The actor George Clooney, who has a house on Lake Como, stumped for him this week.
“He is a great speaker able to lead many people towards a common goal,” Mr. Clooney told reporters in Rome. He compared him with Mr. Obama, saying that Mr. Veltroni “also appeals to the young, he speaks of hope and a clean environment, rare in Italian politics.”
While Mr. Clooney is very popular here, his appearance in some ways underscored a criticism of Mr. Veltroni, that he escorted movie stars around Rome more than doing his job. Mr. Veltroni strongly denies the charge, listing improvements in tourism, jobs and infrastructure.
In his campaign, he has made some daring moves — like publicly telling members of organized crime groups not to vote for him — but much of his campaign aims at asking Italy if it really wants Mr. Berlusconi back. He said he could understand a vote for Mr. Berlusconi in 2001, when Mr. Berlusconi did, in fact, win, because he campaigned as a nonpolitician who would shake Italy up.
“Italians trusted him,” Mr. Veltroni said in the interview. “He promised everything, low taxes for everyone, anything for anybody. But in the end, he ran the country for five years and nothing happened. Frankly, I don’t get it.”
In a mood of national disgust, many Italians say that neither man represents the change they want. Pollsters say turnout on Sunday and Monday may be one of the lowest in years, and that in a nation where voting remains an important civic virtue. There is a low-grade campaign urging Italians to boycott the elections, also rare here but another sign of deep displeasure.
“Nothing is ever going to change, because they gobble up everything,” said Danilo Berre, 30, a salesman in Rome. “I am not going to vote because I don’t believe either in the left or in the right; there is nothing we can do.
“We need a new political class, a young one,” he added. “I am sick of these oldies.”
Saturday, April 12, 2008
In with the old? New party names offer few fresh choices for Italy - di Guy Denmore in the Financial Times dell'10 Aprile 2008
In with the old? New party names offer few fresh choices for Italy
By Guy Dinmore
Published: April 10 2008 20:09 | Last updated: April 10 2008 20:09
Italians will drag themselves to the polls this Sunday, much as some go to church, more out of a sense of duty than conviction. But more than any election in modern times – and in Italy there have been many – this campaign has been fought amid a deep sense of national crisis and despondency.
It is not just that the economy is again hovering on the edge of recession – and, according to some surveys, nearly two-thirds of families cannot make it financially to the end of the month – or that the vast majority of voters detest a system that encourages unstable coalitions.
Now, there is a more profound fear that Italy is in serious decline, at least relative to the rest of Europe, and that its highly paid politicians are incapable or unwilling to reverse it.
Silvio Berlusconi
In 1994 Silvio Berlusconi (pictured right) burst on to the political scene as a novelty. A super-rich media entrepreneur, he campaigned as an anti-politician and an antidote to the corrupt postwar parties that were then imploding. Now 71, Mr Berlusconi is fighting his fifth campaign and aiming to be prime minister for the third time. His newly branded, centre-right People of Freedom alliance looks as tired as he does on stage (despite the cosmetic surgery), surrounded by the same cast of politically incompatible allies. His programme of tax cuts, less public spending, more security and tighter controls on immigrants is little changed.
If the view from Ponte Milvio, known as a rightwing stronghold in northern Rome, is anything to go by, Mr Berlusconi still inspires popular support but no longer passion. “People will vote for Berlusconi because they are tired of the left,” says one woman. She does not like the billionaire but will vote for him because she is a fan of his coalition partner, Gianfranco Fini, leader of the rightwing National Alliance.
Walter Veltroni, leader of the new, centre-left Democratic party and a relatively popular mayor of Rome for nearly seven years, has been dashing all over Italy in a big green bus in an attempt to claim the reformist mantle for his party. Created last October out of a merger of former Communists and progressive Catholics, the Democratic party is bidding to capture the centre ground by dumping its coalition allies on the far left and promising tax cuts and a slimmer government.
If Mr Berlusconi does win – as the last opinion polls predicted when they were released two weeks ago – it will be largely due to Mr Veltroni’s inability to distance himself from the dysfunctional centre-left coalition government of Romano Prodi, former European Commission president, which collapsed in January after 21 months in office.
The centre-left had squeaked in by the narrowest margin ever. It is possible that Mr Berlusconi will end up like the hapless Mr Prodi, ruling with a slim senate majority and dependant on wayward allies. But demonstrating again how different Italy is from the rest of Europe, Mr Berlusconi has accused his opponents, with no evidence, of preparing electoral fraud.
For many Italians whose main wish is to live in a “normal country”, the electoral stage is set for a messy outcome. As one sceptical voter in Ponte Milvio exclaims: “We are just waiting for it all to be over.”
Crime bedevils politics in the pivotal south
The most powerful and efficient Italian “holding company”, as a recent 230-page parliamentary report characterised it, is not the rejuvenated Fiat carmaking group or one of the great names of fashion but the ’Ndrangheta criminal organisation.
From its historical stronghold in Calabria, the “boot” of southern Italy, the ’Ndrangheta has spread around the world and now controls much of Europe’s cocaine trade with South America.
The ’Ndrangheta is a secret society reputedly with close links to Masonic lodges. It has quietly penetrated the political and commercial establishment rather than confronting the state head-on, as the separate Cosa Nostra mafia attempted in Sicily with devastating attacks on the judiciary in the 1990s.
Unlike the hierarchical Sicilian mafia, which is in decline, the ’Ndrangheta is a more horizontally organised, family-based federation of some 300 clans with an estimated annual income of €40bn ($63bn, £32bn). Because almost all its members have blood ties, infiltration by the police is difficult and there are far fewer collaborators.
On top of drugs, it thrives on billions of euros siphoned from corruption in public services such as waste disposal. Having outgrown Italy, it is spreading across Europe into banking, property, shops, supermarkets and even the Russian oil trade.
“The ’Ndrangheta is growing every day and our resources are inadequate,” says Giuseppe Lombardo, an anti-mafia prosecutor in Reggio Calabria, the city that is a mafia heartland and has Italy’s second highest murder rate. “They thrive on the weakness of the state and are building their own parallel state,” he says. “They are exporting a model that functions. Their firms never go bankrupt. They destroy legal companies.”
Elections in Calabria are what could be called a family affair. Magistrates estimate that one in three of the population has some kind of connection to the mafia. With unemployment reaching the highest levels in Europe and some 1,300 people leaving southern Italy every week, the money and influence of the mafia go a long way.
Referring to the heads of the two leading political groupings contesting the general election nationally, Mr Lombardo adds: “[Walter] Veltroni and [Silvio] Berlusconi say they do not want the vote of the Mafiosi but there will be many and they will be decisive.”
One elderly shopkeeper laughed when asked how much people are paid to vote in a certain way: “They don’t need to give money. They are our friends. There is an understanding.”
Two-thirds of the centre-left regional government is under criminal investigation, according to politicians on the right, several of whom are also facing possible charges.
Since the north of Italy is set to vote largely for Mr Berlusconi’s centre-right alliance and the middle will lean towards Mr Veltroni’s centre-left, the outcome of the elections – especially in the senate – is likely to hang on the more volatile south.
In Calabria, the ’Ndrangheta has no political ideology. Instead it infiltrates all parties and, where possible, all levels of government from local councils to the senate. It likes to back the winning horse, say the magistrates. Last time the winning horse was the centre-left. This time it appears to be Mr Berlusconi.
Sicily lacks the political volatility of the rest of southern Italy, being historically a stronghold of conservative and Catholic parties, but the Mafia there is similarly entrenched. Salvatore Cuffaro, the region’s governor, is running for the centrist Union of Christian and Centre Democrats while appealing against a five-year jail sentence imposed for complicity with the Mafia. Senator Marcello Dell’Utri, a close ally and business partner of Mr Berlusconi, is also seeking re-election while fighting a nine-year, Mafia-related jail sentence.
Salvatore Boemi, Calabria’s veteran anti-Mafia chief public prosecutor, wants to ring Europe’s alarm bells. Like Italy 40 years ago, he says, the rest of Europe is asleep to the dangers posed by organised crime. “The Mafia are not content to control Italy’s economy alone. They are spreading through Europe.”
He adds: “Economic power becomes political power. I am not allowed to talk politics but I can only say that Italian politics is unstable and that instability carries many dangers for society. The Mafia plays on this.”
Beaten on cost, companies seek to burnish their brands
Roberto Berloni would like to sell you a set of carbon-fibre kitchen cabinets for €160,000 ($252,000, £128,000), write Adrian Michaels and Peter Marsh. A Chinese businessman is discussing becoming the first buyer of these impossibly exotic products, which illustrate the efforts being made by Italian manufacturers to survive the pressures posed by the growth of China and other low-cost nations.
Berloni, the kitchen company run by Mr Berloni in the Adriatic town of Pesaro, developed the cabinets and worktops after suffering tough competition from companies entering the Italian market and undercutting his prices. “Selling products such as kitchens is all about perceptions; to do well in this business you have to offer something different,” he says. “You cannot survive in the middle ground.”
As Italy prepares to vote, it needs entrepreneurs such as Mr Berloni to succeed more than ever. Growth has averaged just 1.4 per cent over the past decade, while the proportion of output taken up by manufacturing fell from 19.1 per cent to 16.6 per cent between 2000 and last year.
Real GDP growth
Yet the figures mask success stories, particularly in the north, where small, family-run companies have been formulating a variety of strategies. Mario Monti, the former European Union commissioner now president of Milan’s Bocconi university, says: “In the key industrial districts of Italy one hears far fewer complaints about China than was the case two or three years ago.”
Many of the businesses that have reappraised their strategies are not expecting much help from Rome’s next government, of whatever colour. Paolo Giroldi, a director at Gessi, a tap-maker, says: “Till 1990 Italy was founded on basic products and recognised as a place of cheap production. The strength of business [today] comes from recognising that Italy is not only the home of Fiat but also of Ferrari.”
The first and dominant approach is to focus on higher value products. Taps by Gessi, which is just 18 years old, will feature in the bathrooms of designer Giorgio Armani’s super-luxury hotel due to open next year in Dubai. Mr Giroldi says his company has yet to spot any sign of economic downturn. “The low end of the fittings market is suffering but we are not.”
Panaria, a tile manufacturer near Modena, has also adopted this strategy. It says Italian tiles, at about €11 per square metre, generally cost about double Chinese tiles. But Panaria charges on average more than €19.
Customers have to be convinced, of course, that the higher price is worth paying. Many top-end companies seek to compensate for relatively high costs by offering high-quality items backed with novel concepts – aided by the country’s long-held reputation for stylish design. “There’s no novelty from China. People there can copy [products made in Europe] but that’s not enough,” says Ernesto Gismondi, president and founder of Artemide, a maker of light fittings with plants in Italy, France, Hungary, the US and the Czech Republic.
Novelty on one level can simply mean a greater variety and range of designs. Panaria sold 2,000 variations of its tiles in Italy at the turn of the decade; it now offers 10,000.
Fabio Porro, managing director at OMP Porro, which makes brass door fittings, says that 10 years ago the company used to make its products in a minimum batch size of 50,000. It now makes batches as small as 500. “It’s impossible to beat the Chinese on price,” he says. “We oriented ourselves to the personal needs of our clients.” This entails greater customisation and a willingness to swallow less profit than some manufacturers in China. “It’s a hard life,” says Carlo Molteni, managing director at the kitchen and furniture designer founded by his father. “But Italians are happier with lower volumes.”
This plays to a trend in western consumer tastes that favours originality and a bespoke aura rather than mass-manufactured homogeneity. Mr Molteni says his company makes 5,000 wardrobes a year that are all different and cost up to €7,000 each. It made a 15-metre table for Bloomberg’s office in New York as a special item, an order that he says would be turned down by cheaper manufacturers.
Customisation and a greater product range costs money, requiring a daunting level of capital investment for these small companies. At its site near Novara in northern Italy, Gessi is spending €120m on a new factory and warehouse – surrounded by a nine-hole golf course – in an effort to more than double sales to €200m by 2012. “We have already spent the money that we will generate in the next 10 years,” Mr Giroldi says.
Successful manufacturers have often shied away from relocating the bulk of production to China, in spite of the savings available. Businesses including Alessi, a leader in consumer products such as fashionable corkscrews, and Luxottica, the maker of luxury sunglasses, have kept their main manufacturing operations in Italy. But they have started Chinese satellite plants or formed ties with specialist subcontractors, as a way to keep a check on costs. Andrea Guerra, chief executive of Luxottica, which is still family-controlled but large and publicly quoted, told the Financial Times last year that the immediate costs of manufacture could be 50 per cent lower in China but those savings might fall to just 20 per cent once other factors such as planning, distribution and supplier relations were included.
There is a patchy Italian record in mergers and acquisitions – a seemingly obvious route to cost savings and better margins – because family companies are often reluctant to cede control. Savino Rizzio, chairman of Vir, a valve-maker, says: “If two companies decide to be together, who will be number one? It’s possible to have a lot of people in the car, but only one can be the driver.”
But acquisitions or a loss of family control do happen, often when companies are on the point of bankruptcy. That is what prompted Roberto Gavazzi to move from a background of finance in large corporations to take over from the founding family at Boffi, a kitchen-maker, in 1989. Mr Gavazzi says Italian manufacturers need to shake off their traditional independent-minded approach and pursue alliances and mergers if they are to make headway against growing global competitors. “The owners of these small businesses should show more imagination in terms of linking up with others – perhaps informally, not necessarily in a full merger – to provide a full product offering and so give themselves a bigger platform for selling their brands.”
Boffi has pursued this idea through linking with two Italian furniture companies in a marketing alliance through which the three sell certain products on a joint basis. Some families have managed to build empires through acquisition. Riello, a machine tool-maker based in Verona, has bought three other companies, in Italy, Germany and Canada, trebling sales to an expected €130m this year. Andrea Riello, chief executive, says: “The only way to buy companies [has been] when they are bankrupt.” But he predicts that Italy will fast “leave the micro dimension” as a “new generation understands that growth is a strategy to maintain competitiveness”.
Marazzi, a maker of luxury ceramic tiles, has transformed itself through a series of acquisitions over the past 20 years to become the world’s second biggest. Ferretti, a maker of “super-yachts” that sell for up to €50m, has followed a similar approach.
Going public is a route to building a bigger name, but again is scarcely used. There are only 300 quoted Italian companies in total. Poltrona Frau, a producer of luxury furniture, was taken over by private equity and soon became a holding group, which includes Cassina and Cappellini, two other Italian design companies. Poltrona then went public and is promising its broader shareholder base considerable synergies.
Giuliano Mosconi, chief executive, says the 2007 results were worse than expected because the company was “only now becoming a group”. Some 40 different arms are becoming 20 and eight manufacturing plants will be reduced by the end of this year to five, of which one will be in China. The group’s margins are projected soon to hit 18 per cent, up from 10 per cent in 2006.
All these various strategies have shown the way for Italian manufacturers, but it is clearly hard work. Mr Porro at OMP Porro admits without humour: “Absolutely, yes it would be much more economical to sell it all ...If we sold up and put the money in the stock exchange it would be worth more.” But he adds that “life behind a computer is not very attractive”.
At least, even in a period of economic weakness there will be a continued appetite among the world’s richest people for upmarket goods. Vincenzo Cannatelli, chief executive of Ferretti, says: “If you own five houses and want something that will set you apart, you are much more likely to opt for an Italian yacht rather than one made in China.”
Copyright The Financial Times Limited 2008
By Guy Dinmore
Published: April 10 2008 20:09 | Last updated: April 10 2008 20:09
Italians will drag themselves to the polls this Sunday, much as some go to church, more out of a sense of duty than conviction. But more than any election in modern times – and in Italy there have been many – this campaign has been fought amid a deep sense of national crisis and despondency.
It is not just that the economy is again hovering on the edge of recession – and, according to some surveys, nearly two-thirds of families cannot make it financially to the end of the month – or that the vast majority of voters detest a system that encourages unstable coalitions.
Now, there is a more profound fear that Italy is in serious decline, at least relative to the rest of Europe, and that its highly paid politicians are incapable or unwilling to reverse it.
Silvio Berlusconi
In 1994 Silvio Berlusconi (pictured right) burst on to the political scene as a novelty. A super-rich media entrepreneur, he campaigned as an anti-politician and an antidote to the corrupt postwar parties that were then imploding. Now 71, Mr Berlusconi is fighting his fifth campaign and aiming to be prime minister for the third time. His newly branded, centre-right People of Freedom alliance looks as tired as he does on stage (despite the cosmetic surgery), surrounded by the same cast of politically incompatible allies. His programme of tax cuts, less public spending, more security and tighter controls on immigrants is little changed.
If the view from Ponte Milvio, known as a rightwing stronghold in northern Rome, is anything to go by, Mr Berlusconi still inspires popular support but no longer passion. “People will vote for Berlusconi because they are tired of the left,” says one woman. She does not like the billionaire but will vote for him because she is a fan of his coalition partner, Gianfranco Fini, leader of the rightwing National Alliance.
Walter Veltroni, leader of the new, centre-left Democratic party and a relatively popular mayor of Rome for nearly seven years, has been dashing all over Italy in a big green bus in an attempt to claim the reformist mantle for his party. Created last October out of a merger of former Communists and progressive Catholics, the Democratic party is bidding to capture the centre ground by dumping its coalition allies on the far left and promising tax cuts and a slimmer government.
If Mr Berlusconi does win – as the last opinion polls predicted when they were released two weeks ago – it will be largely due to Mr Veltroni’s inability to distance himself from the dysfunctional centre-left coalition government of Romano Prodi, former European Commission president, which collapsed in January after 21 months in office.
The centre-left had squeaked in by the narrowest margin ever. It is possible that Mr Berlusconi will end up like the hapless Mr Prodi, ruling with a slim senate majority and dependant on wayward allies. But demonstrating again how different Italy is from the rest of Europe, Mr Berlusconi has accused his opponents, with no evidence, of preparing electoral fraud.
For many Italians whose main wish is to live in a “normal country”, the electoral stage is set for a messy outcome. As one sceptical voter in Ponte Milvio exclaims: “We are just waiting for it all to be over.”
Crime bedevils politics in the pivotal south
The most powerful and efficient Italian “holding company”, as a recent 230-page parliamentary report characterised it, is not the rejuvenated Fiat carmaking group or one of the great names of fashion but the ’Ndrangheta criminal organisation.
From its historical stronghold in Calabria, the “boot” of southern Italy, the ’Ndrangheta has spread around the world and now controls much of Europe’s cocaine trade with South America.
The ’Ndrangheta is a secret society reputedly with close links to Masonic lodges. It has quietly penetrated the political and commercial establishment rather than confronting the state head-on, as the separate Cosa Nostra mafia attempted in Sicily with devastating attacks on the judiciary in the 1990s.
Unlike the hierarchical Sicilian mafia, which is in decline, the ’Ndrangheta is a more horizontally organised, family-based federation of some 300 clans with an estimated annual income of €40bn ($63bn, £32bn). Because almost all its members have blood ties, infiltration by the police is difficult and there are far fewer collaborators.
On top of drugs, it thrives on billions of euros siphoned from corruption in public services such as waste disposal. Having outgrown Italy, it is spreading across Europe into banking, property, shops, supermarkets and even the Russian oil trade.
“The ’Ndrangheta is growing every day and our resources are inadequate,” says Giuseppe Lombardo, an anti-mafia prosecutor in Reggio Calabria, the city that is a mafia heartland and has Italy’s second highest murder rate. “They thrive on the weakness of the state and are building their own parallel state,” he says. “They are exporting a model that functions. Their firms never go bankrupt. They destroy legal companies.”
Elections in Calabria are what could be called a family affair. Magistrates estimate that one in three of the population has some kind of connection to the mafia. With unemployment reaching the highest levels in Europe and some 1,300 people leaving southern Italy every week, the money and influence of the mafia go a long way.
Referring to the heads of the two leading political groupings contesting the general election nationally, Mr Lombardo adds: “[Walter] Veltroni and [Silvio] Berlusconi say they do not want the vote of the Mafiosi but there will be many and they will be decisive.”
One elderly shopkeeper laughed when asked how much people are paid to vote in a certain way: “They don’t need to give money. They are our friends. There is an understanding.”
Two-thirds of the centre-left regional government is under criminal investigation, according to politicians on the right, several of whom are also facing possible charges.
Since the north of Italy is set to vote largely for Mr Berlusconi’s centre-right alliance and the middle will lean towards Mr Veltroni’s centre-left, the outcome of the elections – especially in the senate – is likely to hang on the more volatile south.
In Calabria, the ’Ndrangheta has no political ideology. Instead it infiltrates all parties and, where possible, all levels of government from local councils to the senate. It likes to back the winning horse, say the magistrates. Last time the winning horse was the centre-left. This time it appears to be Mr Berlusconi.
Sicily lacks the political volatility of the rest of southern Italy, being historically a stronghold of conservative and Catholic parties, but the Mafia there is similarly entrenched. Salvatore Cuffaro, the region’s governor, is running for the centrist Union of Christian and Centre Democrats while appealing against a five-year jail sentence imposed for complicity with the Mafia. Senator Marcello Dell’Utri, a close ally and business partner of Mr Berlusconi, is also seeking re-election while fighting a nine-year, Mafia-related jail sentence.
Salvatore Boemi, Calabria’s veteran anti-Mafia chief public prosecutor, wants to ring Europe’s alarm bells. Like Italy 40 years ago, he says, the rest of Europe is asleep to the dangers posed by organised crime. “The Mafia are not content to control Italy’s economy alone. They are spreading through Europe.”
He adds: “Economic power becomes political power. I am not allowed to talk politics but I can only say that Italian politics is unstable and that instability carries many dangers for society. The Mafia plays on this.”
Beaten on cost, companies seek to burnish their brands
Roberto Berloni would like to sell you a set of carbon-fibre kitchen cabinets for €160,000 ($252,000, £128,000), write Adrian Michaels and Peter Marsh. A Chinese businessman is discussing becoming the first buyer of these impossibly exotic products, which illustrate the efforts being made by Italian manufacturers to survive the pressures posed by the growth of China and other low-cost nations.
Berloni, the kitchen company run by Mr Berloni in the Adriatic town of Pesaro, developed the cabinets and worktops after suffering tough competition from companies entering the Italian market and undercutting his prices. “Selling products such as kitchens is all about perceptions; to do well in this business you have to offer something different,” he says. “You cannot survive in the middle ground.”
As Italy prepares to vote, it needs entrepreneurs such as Mr Berloni to succeed more than ever. Growth has averaged just 1.4 per cent over the past decade, while the proportion of output taken up by manufacturing fell from 19.1 per cent to 16.6 per cent between 2000 and last year.
Real GDP growth
Yet the figures mask success stories, particularly in the north, where small, family-run companies have been formulating a variety of strategies. Mario Monti, the former European Union commissioner now president of Milan’s Bocconi university, says: “In the key industrial districts of Italy one hears far fewer complaints about China than was the case two or three years ago.”
Many of the businesses that have reappraised their strategies are not expecting much help from Rome’s next government, of whatever colour. Paolo Giroldi, a director at Gessi, a tap-maker, says: “Till 1990 Italy was founded on basic products and recognised as a place of cheap production. The strength of business [today] comes from recognising that Italy is not only the home of Fiat but also of Ferrari.”
The first and dominant approach is to focus on higher value products. Taps by Gessi, which is just 18 years old, will feature in the bathrooms of designer Giorgio Armani’s super-luxury hotel due to open next year in Dubai. Mr Giroldi says his company has yet to spot any sign of economic downturn. “The low end of the fittings market is suffering but we are not.”
Panaria, a tile manufacturer near Modena, has also adopted this strategy. It says Italian tiles, at about €11 per square metre, generally cost about double Chinese tiles. But Panaria charges on average more than €19.
Customers have to be convinced, of course, that the higher price is worth paying. Many top-end companies seek to compensate for relatively high costs by offering high-quality items backed with novel concepts – aided by the country’s long-held reputation for stylish design. “There’s no novelty from China. People there can copy [products made in Europe] but that’s not enough,” says Ernesto Gismondi, president and founder of Artemide, a maker of light fittings with plants in Italy, France, Hungary, the US and the Czech Republic.
Novelty on one level can simply mean a greater variety and range of designs. Panaria sold 2,000 variations of its tiles in Italy at the turn of the decade; it now offers 10,000.
Fabio Porro, managing director at OMP Porro, which makes brass door fittings, says that 10 years ago the company used to make its products in a minimum batch size of 50,000. It now makes batches as small as 500. “It’s impossible to beat the Chinese on price,” he says. “We oriented ourselves to the personal needs of our clients.” This entails greater customisation and a willingness to swallow less profit than some manufacturers in China. “It’s a hard life,” says Carlo Molteni, managing director at the kitchen and furniture designer founded by his father. “But Italians are happier with lower volumes.”
This plays to a trend in western consumer tastes that favours originality and a bespoke aura rather than mass-manufactured homogeneity. Mr Molteni says his company makes 5,000 wardrobes a year that are all different and cost up to €7,000 each. It made a 15-metre table for Bloomberg’s office in New York as a special item, an order that he says would be turned down by cheaper manufacturers.
Customisation and a greater product range costs money, requiring a daunting level of capital investment for these small companies. At its site near Novara in northern Italy, Gessi is spending €120m on a new factory and warehouse – surrounded by a nine-hole golf course – in an effort to more than double sales to €200m by 2012. “We have already spent the money that we will generate in the next 10 years,” Mr Giroldi says.
Successful manufacturers have often shied away from relocating the bulk of production to China, in spite of the savings available. Businesses including Alessi, a leader in consumer products such as fashionable corkscrews, and Luxottica, the maker of luxury sunglasses, have kept their main manufacturing operations in Italy. But they have started Chinese satellite plants or formed ties with specialist subcontractors, as a way to keep a check on costs. Andrea Guerra, chief executive of Luxottica, which is still family-controlled but large and publicly quoted, told the Financial Times last year that the immediate costs of manufacture could be 50 per cent lower in China but those savings might fall to just 20 per cent once other factors such as planning, distribution and supplier relations were included.
There is a patchy Italian record in mergers and acquisitions – a seemingly obvious route to cost savings and better margins – because family companies are often reluctant to cede control. Savino Rizzio, chairman of Vir, a valve-maker, says: “If two companies decide to be together, who will be number one? It’s possible to have a lot of people in the car, but only one can be the driver.”
But acquisitions or a loss of family control do happen, often when companies are on the point of bankruptcy. That is what prompted Roberto Gavazzi to move from a background of finance in large corporations to take over from the founding family at Boffi, a kitchen-maker, in 1989. Mr Gavazzi says Italian manufacturers need to shake off their traditional independent-minded approach and pursue alliances and mergers if they are to make headway against growing global competitors. “The owners of these small businesses should show more imagination in terms of linking up with others – perhaps informally, not necessarily in a full merger – to provide a full product offering and so give themselves a bigger platform for selling their brands.”
Boffi has pursued this idea through linking with two Italian furniture companies in a marketing alliance through which the three sell certain products on a joint basis. Some families have managed to build empires through acquisition. Riello, a machine tool-maker based in Verona, has bought three other companies, in Italy, Germany and Canada, trebling sales to an expected €130m this year. Andrea Riello, chief executive, says: “The only way to buy companies [has been] when they are bankrupt.” But he predicts that Italy will fast “leave the micro dimension” as a “new generation understands that growth is a strategy to maintain competitiveness”.
Marazzi, a maker of luxury ceramic tiles, has transformed itself through a series of acquisitions over the past 20 years to become the world’s second biggest. Ferretti, a maker of “super-yachts” that sell for up to €50m, has followed a similar approach.
Going public is a route to building a bigger name, but again is scarcely used. There are only 300 quoted Italian companies in total. Poltrona Frau, a producer of luxury furniture, was taken over by private equity and soon became a holding group, which includes Cassina and Cappellini, two other Italian design companies. Poltrona then went public and is promising its broader shareholder base considerable synergies.
Giuliano Mosconi, chief executive, says the 2007 results were worse than expected because the company was “only now becoming a group”. Some 40 different arms are becoming 20 and eight manufacturing plants will be reduced by the end of this year to five, of which one will be in China. The group’s margins are projected soon to hit 18 per cent, up from 10 per cent in 2006.
All these various strategies have shown the way for Italian manufacturers, but it is clearly hard work. Mr Porro at OMP Porro admits without humour: “Absolutely, yes it would be much more economical to sell it all ...If we sold up and put the money in the stock exchange it would be worth more.” But he adds that “life behind a computer is not very attractive”.
At least, even in a period of economic weakness there will be a continued appetite among the world’s richest people for upmarket goods. Vincenzo Cannatelli, chief executive of Ferretti, says: “If you own five houses and want something that will set you apart, you are much more likely to opt for an Italian yacht rather than one made in China.”
Copyright The Financial Times Limited 2008
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