xcel
06-08-2006, 06:48 AM
Unlike the recipe applied at struggling U.S. automakers, Colaninno didn't fire a single worker … (http://www.heraldtribune.com/apps/pbcs.dll/article?AID=/20060606/SPORTS/606060351/1006)
Gabriel Kahn – WSJ – May 6, 2006
http://www.cleanmpg.com/photos/data/500/Vespa_II.jpg
PONTEDERA, Italy - In "Roman Holiday," Audrey Hepburn hitched a ride on the back of Gregory Peck's Piaggio Vespa and took in some of Rome's iconic sights.
In the years since that 1953 film, the scooter has itself become a global symbol of Italy and Italian design.
But in 2003, the company, based outside of Pisa, found itself in such dire straits that it teetered on the brink of default. Years of revolving-door management and millions of euros squandered on ill-conceived expansion plans had saddled Piaggio with crushing debts and left it vulnerable to competition from cheaper Asian rivals.
But now, like a deft driver, Piaggio has transformed a potential wipeout into an unlikely turnaround.
Three years after it was bought by maverick Italian industrialist Roberto Colaninno, Piaggio has returned to the black for the first time in years, opened new factories in China and is planning a stock-market listing for this year.
Faltering industry
Italy's manufacturing sector, once the engine of the world's seventh-largest economy, has been in freefall for years, as Asian exporters have eaten into traditional strongholds from clothes to cars. During the past five years, manufacturing output has dropped by 4.1 percent.
Many investors and economists inside and outside the country have already written the obituary for Italian industry, reckoning that it faced fatal strategic disadvantages such as high energy and labor costs, lack of scale and miles of red tape.
Even top brands such as Armani and Prada have begun to move some of their production out of Italy.
"A lot of companies have just been run over by new competition from lower-cost countries," says Alessandra Benedini, an economist with the Bologna-based think tank Prometeia.
Yet Piaggio's success offers a management lesson in how an against-the-odds comeback is possible with the right strategy.
"People said this was never going to turn around," says Colaninno.
Starting with ships
Since it was founded by Rinaldo Piaggio in 1884, the company has always been a prominent player in Italian industry. It started out as a maker of ship interiors but later designed and made airplanes for Italian dictator Benito Mussolini's army.
In 1946, one of its aeronautical designers, Corradino D'Ascanio, a pioneer in helicopter design, came up with a new motorbike called a Vespa, which means "wasp" in Italian.
Unlike other motorbikes of the day, the Vespa's engine was covered by a metal frame, which meant riders wouldn't get their clothes dirty with exhaust fumes. The design allowed riders to sit comfortably as if they were in a chair.
The Vespa succeeded so quickly that the company president, Enrico Piaggio, told D'Ascanio to stop designing helicopters and focus on the stylish scooter.
In 1959, Piaggio came under the control of a member of Italy's powerful Agnelli family, the owners of car maker Fiat SpA, and for the next two decades the scooter-maker thrived around the world.
In 1992, Giovanni Alberto Agnelli, the most promising scion of the prominent industrial dynasty, was dispatched to run the company, at age 29. But Agnelli died of cancer five years later, leaving Piaggio rudderless, just as it needed a strategy to take back market share from Asian competitors who were introducing cheaper products, such as scooters with plastic frames instead of steel.
In 1999, Morgan Grenfell Private Equity acquired Piaggio, hoping to resell it quickly. But the company was already stumbling due to a series of management missteps.
Heading for a wipeout
A joint venture the company launched in China fell apart before a single scooter rolled off the assembly line. In Italy, Piaggio invested 15 million euros, or $19.4 million, in a new motorcycle but dropped it after building a prototype.
By the end of 2002, the company had run up 577 million euros in debt on revenues of 945 million euros. That year it booked a loss of 129 million euros. Banks which had lent Piaggio the cash were growing nervous. Morale was low.
"We knew the cash could run out any day," recalls Marcello Casati, a former Piaggio & C. SpA worker and leader of one of the company's main unions.
But when Colaninno first toured the Piaggio factory in Pontedera, he sniffed potential.
"A lot of people told me I was crazy," says the 62-year-old. "Piaggio wasn't dying. It just needed to be treated better."
Though Piaggio's finances were in shambles, the brand still resonated. Piaggio scooters were a favorite Hollywood prop, finding their way into films such as "The Talented Mr. Ripley," "Alfie," and more recently, "The Interpreter."
Colaninno was no stranger to risk. Four years earlier, he had pulled off what was then Europe's largest-ever hostile takeover when he took control of Telecom Italia SpA. He sold out of that soon afterward, and was itching to get back into industry.
He got Piaggio for a good price, as there were no other takers. In October 2003, Colaninno made an initial investment of 100 million euros through his holding company Immsi SpA in exchange for just less than a third of Piaggio and the mandate to run it.
Colaninno swiftly appointed a chief executive, Rocco Sabelli, who set about redesigning the factory. Previously, each assembly line could only produce certain models. Sabelli made the system more flexible so that every Piaggio scooter could be made on any assembly line. That allowed the company to easily rev up production of hot-selling models when needed.
Getting closer to the floor
Sabelli also injected a culture of accountability into a company where -- as is often the case in Italy -- management had previously kept its distance from workers.
On one of his first days on the job, he gave his e-mail address to every employee, demanding that even assembly-line workers let him know personally about any problems or delays.
"We knew that execution had to be our focus," Sabelli says. "No magic recipe, just execution."
Unlike the turnaround recipe applied at struggling U.S. automakers, Colaninno didn't fire a single worker -- a move which helped seduce the company's skeptical unions.
"Everyone in a company is part of the value chain," Colaninno says. He based bonuses for blue-collar workers and management on the same criteria: profit margins and customer satisfaction.
Just as importantly, he installed air conditioning in the factory. Productivity began to increase.
He also gave the company's talented engineers, who had been idled by the company's financial crisis, deadlines for projects.
In the past few months, Piaggio has rolled out two world firsts: a gas-electric hybrid scooter it developed entirely in-house; and a scooter with two wheels in front and one in back which grips the road better.
One of Piaggio's problems Colaninno couldn't fix from the inside was its scale. Even though Piaggio was the European market leader, it was dwarfed by rivals such as Honda Motor Co. and Yamaha Motor Co., which produced many more units.
So, a year after rescuing Piaggio, Colaninno decided to salvage another Italian brand from the scrap heap: scooter and motorcycle maker Aprilia. At Aprilia, Colannino is reapplying the Piaggio strategy -- including not firing a single worker.
In the first quarter of this year, Piaggio recorded a net profit of 10.2 million euros on revenues of 374.2 million euros.
If the initial public offering goes ahead as planned, Piaggio could float as much as 40 percent of its shares on the market.
Gabriel Kahn – WSJ – May 6, 2006
http://www.cleanmpg.com/photos/data/500/Vespa_II.jpg
PONTEDERA, Italy - In "Roman Holiday," Audrey Hepburn hitched a ride on the back of Gregory Peck's Piaggio Vespa and took in some of Rome's iconic sights.
In the years since that 1953 film, the scooter has itself become a global symbol of Italy and Italian design.
But in 2003, the company, based outside of Pisa, found itself in such dire straits that it teetered on the brink of default. Years of revolving-door management and millions of euros squandered on ill-conceived expansion plans had saddled Piaggio with crushing debts and left it vulnerable to competition from cheaper Asian rivals.
But now, like a deft driver, Piaggio has transformed a potential wipeout into an unlikely turnaround.
Three years after it was bought by maverick Italian industrialist Roberto Colaninno, Piaggio has returned to the black for the first time in years, opened new factories in China and is planning a stock-market listing for this year.
Faltering industry
Italy's manufacturing sector, once the engine of the world's seventh-largest economy, has been in freefall for years, as Asian exporters have eaten into traditional strongholds from clothes to cars. During the past five years, manufacturing output has dropped by 4.1 percent.
Many investors and economists inside and outside the country have already written the obituary for Italian industry, reckoning that it faced fatal strategic disadvantages such as high energy and labor costs, lack of scale and miles of red tape.
Even top brands such as Armani and Prada have begun to move some of their production out of Italy.
"A lot of companies have just been run over by new competition from lower-cost countries," says Alessandra Benedini, an economist with the Bologna-based think tank Prometeia.
Yet Piaggio's success offers a management lesson in how an against-the-odds comeback is possible with the right strategy.
"People said this was never going to turn around," says Colaninno.
Starting with ships
Since it was founded by Rinaldo Piaggio in 1884, the company has always been a prominent player in Italian industry. It started out as a maker of ship interiors but later designed and made airplanes for Italian dictator Benito Mussolini's army.
In 1946, one of its aeronautical designers, Corradino D'Ascanio, a pioneer in helicopter design, came up with a new motorbike called a Vespa, which means "wasp" in Italian.
Unlike other motorbikes of the day, the Vespa's engine was covered by a metal frame, which meant riders wouldn't get their clothes dirty with exhaust fumes. The design allowed riders to sit comfortably as if they were in a chair.
The Vespa succeeded so quickly that the company president, Enrico Piaggio, told D'Ascanio to stop designing helicopters and focus on the stylish scooter.
In 1959, Piaggio came under the control of a member of Italy's powerful Agnelli family, the owners of car maker Fiat SpA, and for the next two decades the scooter-maker thrived around the world.
In 1992, Giovanni Alberto Agnelli, the most promising scion of the prominent industrial dynasty, was dispatched to run the company, at age 29. But Agnelli died of cancer five years later, leaving Piaggio rudderless, just as it needed a strategy to take back market share from Asian competitors who were introducing cheaper products, such as scooters with plastic frames instead of steel.
In 1999, Morgan Grenfell Private Equity acquired Piaggio, hoping to resell it quickly. But the company was already stumbling due to a series of management missteps.
Heading for a wipeout
A joint venture the company launched in China fell apart before a single scooter rolled off the assembly line. In Italy, Piaggio invested 15 million euros, or $19.4 million, in a new motorcycle but dropped it after building a prototype.
By the end of 2002, the company had run up 577 million euros in debt on revenues of 945 million euros. That year it booked a loss of 129 million euros. Banks which had lent Piaggio the cash were growing nervous. Morale was low.
"We knew the cash could run out any day," recalls Marcello Casati, a former Piaggio & C. SpA worker and leader of one of the company's main unions.
But when Colaninno first toured the Piaggio factory in Pontedera, he sniffed potential.
"A lot of people told me I was crazy," says the 62-year-old. "Piaggio wasn't dying. It just needed to be treated better."
Though Piaggio's finances were in shambles, the brand still resonated. Piaggio scooters were a favorite Hollywood prop, finding their way into films such as "The Talented Mr. Ripley," "Alfie," and more recently, "The Interpreter."
Colaninno was no stranger to risk. Four years earlier, he had pulled off what was then Europe's largest-ever hostile takeover when he took control of Telecom Italia SpA. He sold out of that soon afterward, and was itching to get back into industry.
He got Piaggio for a good price, as there were no other takers. In October 2003, Colaninno made an initial investment of 100 million euros through his holding company Immsi SpA in exchange for just less than a third of Piaggio and the mandate to run it.
Colaninno swiftly appointed a chief executive, Rocco Sabelli, who set about redesigning the factory. Previously, each assembly line could only produce certain models. Sabelli made the system more flexible so that every Piaggio scooter could be made on any assembly line. That allowed the company to easily rev up production of hot-selling models when needed.
Getting closer to the floor
Sabelli also injected a culture of accountability into a company where -- as is often the case in Italy -- management had previously kept its distance from workers.
On one of his first days on the job, he gave his e-mail address to every employee, demanding that even assembly-line workers let him know personally about any problems or delays.
"We knew that execution had to be our focus," Sabelli says. "No magic recipe, just execution."
Unlike the turnaround recipe applied at struggling U.S. automakers, Colaninno didn't fire a single worker -- a move which helped seduce the company's skeptical unions.
"Everyone in a company is part of the value chain," Colaninno says. He based bonuses for blue-collar workers and management on the same criteria: profit margins and customer satisfaction.
Just as importantly, he installed air conditioning in the factory. Productivity began to increase.
He also gave the company's talented engineers, who had been idled by the company's financial crisis, deadlines for projects.
In the past few months, Piaggio has rolled out two world firsts: a gas-electric hybrid scooter it developed entirely in-house; and a scooter with two wheels in front and one in back which grips the road better.
One of Piaggio's problems Colaninno couldn't fix from the inside was its scale. Even though Piaggio was the European market leader, it was dwarfed by rivals such as Honda Motor Co. and Yamaha Motor Co., which produced many more units.
So, a year after rescuing Piaggio, Colaninno decided to salvage another Italian brand from the scrap heap: scooter and motorcycle maker Aprilia. At Aprilia, Colannino is reapplying the Piaggio strategy -- including not firing a single worker.
In the first quarter of this year, Piaggio recorded a net profit of 10.2 million euros on revenues of 374.2 million euros.
If the initial public offering goes ahead as planned, Piaggio could float as much as 40 percent of its shares on the market.