In May 2018, three years after ChemChina bought Italy’s Pirelli for $7.7 billion, Ren Jianxin, the chemical group’s founder and chairman, celebrated when he hosted the tire maker’s chief executive, Marco Tronchetti Provera, at the Beijing State Guesthouse. The “happy marriage” of the two companies.
But Pirelli’s happy alliance – with Sinochem after the state giant’s takeover of ChemChina – is in crisis, with the Italian tycoon warning the Rome council this week that “the Chinese are dangerous” and that the company’s future is threatened by the Communist Party.
The Italian government has been reviewing Sinochem’s stake in Pirelli under so-called golden powers rules that give it broad oversight over strategic state assets, and it can decide to include the tire maker’s technology, said Tronchetti Provera, 75. Like to describe it as an example of “Italian excellence”.
The son of a Milanese steel entrepreneur first took a stake in the company in the mid-1980s after marrying into Pirelli’s founding family. The investment came through the sale of a logistics company he founded after returning from a job at P&O Ferrymasters in London in his 20s.
Tronchetti Provera took over in 1992 when his then-father-in-law Leopoldo Pirelli was forced to resign after a failed hostile takeover of German rival Continental put the Italian group on the brink of collapse.
After a painful but successful turnaround, divesting of non-core assets and focusing on the development of high-end tire technology, he has established himself as an integral part of Italian corporate life, known for his dedication to Pirelli and his reverse and sometimes contrarian attitude. Known for his controversial views.
“He still works 15 hours a day, seven days a week,” said Federico Imbert, the former head of Credit Suisse Italy who has worked on several deals with Pirelli since the 1990s. “There’s no one who knows the company better than this.”
A former Pirelli executive describes Tronchetti Provera as “undisputed Deus Ex group.
The Chinese deal, which has raised eyebrows in the West and raised investor concerns about technology transfers, has fueled the single-minded reputation he has earned through various initiatives, including his controversial takeover of former monopoly Telecom Italia in the early 2000s, six years later. He sold it, along with Pirelli’s expansion into Russia under Vladimir Putin. Tronchetti Provera prefers to describe himself as “willing to go it alone”.
He said in 2019: “One of the important things in life is that it’s important to keep your promises and keep them. When you keep your promises, no one wants to change anything.”
After the Chinese takeover, Tronchetti Provera was careful to maintain control of the group. Before Pirelli returned to the market with a public offering in 2017, he allayed investor concerns by negotiating a new company charter to curb the risk of turning one of Italy’s most respected manufacturing groups into a Chinese operating entity.
“He dedicated his life to Pirelli, one of the few Italian global brands,” said Imbert.
According to the three-year agreement signed with the Chinese side, Tronchetti Provera, who was originally scheduled to step down in 2020, has the right to appoint his successor and four board members. While his designated successor is his deputy, Giorgio Bruno, allies and executives say the chief executive secretly hopes his role will eventually be taken over by his son, Giovanni, who has been in power since 2017. Serve as a member of the board of directors.
“He’s in charge,” said Domenico De Sole, a Pirelli board member and former chief executive of Gucci and Tom Ford.
Investors and colleagues were impressed by Tronchetti Provera’s ability to maintain a firm grip even after Sinochem took over. “He is the de facto owner of a company, he actually only owns a minority stake,” said a person close to Pirelli.
But that has changed as the Chinese Communist Party seeks greater influence over the 150-year-old Italian group. Two executives in Milan said the U.S. imposition of anti-dumping duties of 76 percent by value on Pirelli’s imports from China five years ago was a wake-up call.
Then, in late 2020, the Trump administration placed Sinochem and ChemChina on a Pentagon watch list of companies with close ties to the Chinese military doing business in the United States.
Tronchetti Provera is determined to do something and is sounding out potential alternative investors in Europe and the Middle East, but the Chinese won’t budge.
That came to a head last summer when the respected chairman of Sinochem, Ning Gaoning, retired and was replaced by Li Fanrong. Meanwhile, Bai Xinping, chairman of Sinochem’s tire division, has been replaced by Wang Feng, who will become a Pirelli director at an upcoming shareholder meeting, and who is described as the antithesis of Tronchetti Provera by those who know both men.
Then in September, Sinochem asked Pirelli to give it advance notice of meetings with public officials, including Italians.
This was followed by instructions from the Sinochem Group’s internal party committee. Pirelli’s subsidiaries in China have been told to select board members and talent based on President Xi Jinping’s “thought on socialism with Chinese characteristics for a new era.”
“As businessmen, we look at the numbers, and Sinochem was the same until a certain point,” De Sole said. “Then it changed and the issue became purely political.”
As the expiration of the shareholder agreement approached, the new Chinese management updated the agreement with more favorable terms for them.
According to a person close to the executive, Tronchetti Provera is appalled by this, but he hopes to resolve the issue without escalating to Rome.
He hopped on a private jet to Hong Kong to meet Sinochem’s new chairman and try to persuade him to sell his 37% stake in the company down to around 10%. But Lee declined, saying he had no say in the matter, according to multiple people familiar with the discussions.
The notice to Rome of the amendment to the shareholder agreement dragged the Italian government into a years-simmering corporate dispute and became a litmus test for Sino-Italian business ties as Rome considers curbing Chinese influence in one of Italy’s industrial crown jewels.
In the words of one ally, “this is also the fight on which Tronchetti’s legacy rests”.