Italian firms have had a hard time competing with Chinese firms, especially those making textile and furniture products that directly compete in export markets with the Chinese steamroller. The euro which has been especially strong as of late is unlikely to be welcome, either. In 2005, TIME featured a series of stories on Italy versus China. While the former had better manufacturing than the latter, the latter's lower prices have increasingly won out in world markets.Here, we have a test case for future alliances between Italy and China in the sense of "if you can't beat them, join them." If you are a motorcycle enthusiast, the name Benelli might be familiar to you as one of Italy's makers of high-end bikes. In 2005, it was bought out by the Chinese scooter maker Qianjiang. This new article from TIME makes the argument that some Italian firms might as well look to the future not only by producing in China, but by being owned by Chinese firms. The promise may be the best of both worlds, combining Italian design flair and manufacturing expertise with Chinese abundance of capital and relatively inexpensive labor:
Once one of Europe's most revered bikemakers, [Benelli] was also the first Italian firm to be bought outright by a Chinese company when, in October 2005, the Qianjiang Group, China's third-largest scootermaker, purchased Benelli for $24 million. At the time of the bid, Qianjiang's purchase of the storied brand from its last Italian owner was seen as another sign of the country's industrial decline, with local newspapers deriding the sale as a "disaster" and an "ugly story." Indeed Italy's manufacturing model — built largely on small and midsize companies that turn out easily replicable products from light fixtures and heavy tools to sofas and office chairs — has proved particularly vulnerable to Chinese competition, though Italians hope that their luxury consumer brands, valued for their European cachet and design, can attract China's burgeoning shopping class, and help stave off a looming trade-imbalance crisis.But the fate of Benelli doesn't fit neatly into conventional accounts of Italy vs. China. For starters, the motomaker had already suffered the consequences of a very different era of Asian competition. In the 1970s, it took a hit from top-performing Japanese bikes. What was once a company of 1,000 employees largely responsible for Pesaro's post-1945 growth had halted new production twice in the past two decades. By 1995, it had laid off all but the shell of a staff; those who were left merely produced replacement parts for existing bikes. Mauro Righi, who has worked 33 years at his hometown company, has survived repeated rounds of layoffs. Currently responsible for emission systems, Righi is the only employee left who worked when the Benelli family (which sold out in the early 1970s) was still in charge, and he recalls the days when, "We were once considered the avant garde."
The company's most recent owner, Italian appliance giant Merloni, invested heavily but never managed to turn a profit, and announced in early 2005 that a buyer had to be found if the 94-year-old company was to survive. With no Italian bidders, offers came from Russia and Britain, though they were focused merely on acquiring the brand. Qianjiang, instead, which turns out 1.2 million scooters a year in China, saw value in buying — and relaunching — Benelli's design and production. That would give them a foothold in the European market, and the move had an industrial logic: unlike Japan three decades earlier, China still lags well behind the Western motor industry in know-how and design, which means the Chinese saw the small Italian firm as a vehicle for the improvement of Qianjiang's own products back in China. Dai Wei, Benelli's export manager, and one of just two Chinese employees on-site in Pesaro, spends time chaperoning colleagues from China. "Here they know how to make motorcycles better and faster," says Dai. "We consider this our European research and development center."
One of Qianjiang's first moves was to give Benelli's technical director, Pierluigi Marconi, the same title for the Chinese company, too. Though he confesses that he'd "never even eaten an egg roll" before meeting his new employers, Marconi is now in constant contact with his Chinese counterparts, and often visits headquarters in the southeast China city of Wenling. "They understand that we have the history in this sector," he says, "which is not something you can just buy or invent from scratch."
The main responsibility for Yan "Klara" Haimei, Qianjiang's chief in Pesaro, is to watch Benelli's balance sheet, leaving design and production in the hands of the Italians. Both the Chinese and Italian managers emphasize that the aim is to boost the Italian brand while improving the performance of the smaller and simpler Chinese scooters. It's a question of knowing your markets. The 500cc motorcycles popular with European and American riders are not even permitted on Chinese roads. Says Marconi: "In China they've produced the same scooter for the past 20 years." Marconi says the equation is not mysterious: Italy has the know-how and style and China has low labor costs — and, increasingly, ready capital. "This is the reality. If we don't produce with the Chinese, we'll eventually lose the technology too."
Downstairs on the shop floor, where 18 motorcycles are produced a day, there is not a single visible sign that Benelli is Chinese-owned. With his handlebar moustache and thick sideburns, veteran worker Righi believes Qianjiang has brought a real change for the better. "We've seen more investment and new projects in the past 18 months than we'd seen in the past decade," he says. On the local level, this might be the most meaningful effect of the Benelli-Qianjiang model: the hundred or so Italian employees at the plant see the Chinese parent as the savior, not the usurper, of their jobs. "We would have closed down without them. They were the only ones with a serious plan," says Stefano Michelotti, a Benelli engineer. "We have to begin to think globally — Italian companies have had a tendency to fossilize."
Cash-rich Chinese enterprises have garnered attention for their mega-investments in Africa and other parts of the developing world. In Italy, Chinese investment has been most noteworthy in the textile business and in the purchase of bars and restaurants in northern Italian cities. Increasingly, Chinese investors are looking at all sectors of the European economy, including high-tech and heavy manufacturing. Thomas Rosenthal of the Italy-China Foundation says there are now 27 Chinese companies doing business in Italy, and that China has jumped from the 33rd largest foreign investor in Italy in 2004 to 10th in 2006.
The China-Italy storyline, though, is not just happy economics. Social integration, for example, has not always gone smoothly. In April, street violence erupted among Chinese immigrants in Milan complaining that they were singled out for parking tickets. The clashes left a dozen police officers and several Chinese residents injured. According to the latest figures from the National Statistics Institute, the number of Chinese residents in Italy jumped from 47,000 in 2001 to 112,000 in 2005. Claudio Morganti, who heads a local branch of the right-wing Northern League party, wrote on a blog: "The reality of Chinese immigration, with its apparently tranquil and quiet exterior and cover of legal business, hides a world of mafia, racketeering, prostitution and black markets."
Giuseppe Berta, a professor of economic history at Milan's Bocconi University, does not endorse such views. Nevertheless, he says that the clashes in Milan were a reminder that the growing economic role of an immigrant group almost inevitably brings disruptions. Even so, these disruptions have been relatively minor since Chinese investment in Italy has, so far at least, focused on small, decentralized industries. "The Chinese presence is growing, but it's a penetration from below," says Berta.
Not all international investment works immediately, of course, regardless of where it originates. Italian automaker Fiat, for example, failed in its initial attempts to build cars in India because of India's protectionist policies and its own ignorance of the market. Now, however, Fiat has a partnership with Tata Motors that will turn out cars geared to local Indian needs. "There are great opportunities in both directions," says Berta, "but the way in must be soft. Europeans can't be aggressive in Asia. And Asians can't be aggressive in Europe."
One thing is clear: learning your partner's language always helps. Qianjiang boss Yan can now get by in Italian and engineer Michelotti often throws a few Mandarin phrases into conversation with his colleagues in Wenling. He's also begun to pick up certain words they keep repeating. Chinese Professor Brezzi explains the difference between "we should" (yinggai) and "we must" (yao). "I always hear 'yao,'" says Michelotti. That's a reminder of who's in charge.
