In August 2006, management of the Pirelli group tyre division announced that it had decided to transfer part of its production plant in Figline Valdarno, just outside Florence, to Romania. The company’s management announced its decision without notifying the workers in advance or without consulting the trade unions. For these reasons, the company’s trade union representatives staged a series of strikes aimed at bringing the company to the negotiating table.
Company profile
In 2005, the Pirelli group had around 27,000 employees, 3,102 of whom were on fixed-term contracts. The employees are spread across 24 plants located in 12 countries around the world, namely in Italy and Brazil (five plants each), in the UK, Germany, Turkey and Romania (two plants each), and in Argentina, China, Egypt, Spain, the US and Venezuela (one plant each). Pirelli’s core business is tyre production, a sector in which it has a 6% share of the global market; moreover, the company is the fifth largest worldwide operator in terms of sales volume. Its production covers the entire range of tyres for cars, motorbikes, buses, trucks, agricultural machinery and industrial vehicles.
Restructuring initiatives
In the second half of the 1990s, the Pirelli group embarked on a strategy to restructure and diversify its production – rather like the Fiat group had done some years before. This strategy coincided with its acquisition of one of the most important players in the telecommunications sector, the former publicly-owned Telecom Italia (previously SIP), which it purchased jointly in 2001 with Benetton and the two banks Unicredit and Banca Intesa; the Pirelli group is currently the largest shareholder in Telecom Italia. This substantial investment increased the level of debt within the Pirelli group as Telecom Italia – notwithstanding its importance (IT0512305F) – has incurred large losses: in the first six months of 2006, Telecom Italia recorded losses amounting to €41 billion.
To balance its budget, the Pirelli group decided in 2004 to sell its cables division, specialising in the manufacturing of fibre optic cables, to the American bank Goldman Sachs. The group’s cables division represented a total of 12,000 employees and 52 plants located in 25 countries, and was Pirelli’s second most important division after tyre production.
Importance of Figline Valdarno plant
Among the group’s plants in Italy, the Figline Valdarno plant, located in Florence in the Tuscany region to the north of the country, specialises in the manufacturing of steel cord – a component of car and lorry tyres. Pirelli is a world leader in the production of this component, which is also manufactured at a further four Pirelli-owned plants located in Turkey, Germany, Brazil and Romania. The steel cord produced by Pirelli plants is also sold to other tyre manufacturing companies, like Goodyear and Continental. However, the most important of these five plants is the division’s parent factory located in Figline Valdarno, which also comprises the research and development (R&D) centre for the product.
Nevertheless, in August 2006, Pirelli’s management decided to transfer 45 machines from the Figline Valdarno plant to its factory in Slatina in the south of Romania, which it opened in 2005. At the same time, the group declared that a further 200 machines in the Figline Valdarno plant, out of a total of 600 machines, were deemed ‘unproductive’. The Pirelli management took its decision without consulting the trade unions in advance, as well as subsequently informing them that the decision was non-negotiable.
Reactions to announcement
The Florence branches of the sectoral unions of the Italian Federation of Blue-collar Metalworkers (Federazione Impiegati Operai Metallurgici, FIOM-CGIL), the Italian Federation of Metalworkers (Federazione Italiana Metalmeccanici, FIM-CISL) and the Italian Metalworkers’ Union (Unione Italiana Lavoratori Metalmeccanici, UILM-UIL), together with the company’s unitary workplace union structure (RSU), immediately expressed their concerns about the future of the Figline Valdarno plant. With a total of 520 employees, 40 of whom are temporary agency workers, the plant is one of the largest production units in the area. According to the worker representatives, one of the initial outcomes of the plan announced by Pirelli will be the loss of at least 50 jobs. For this reason, the workers held a series of rotating four-hour strikes during work shifts, after the announcement in August.
In the meantime, following the intervention of local authorities – principally the labour department of the Tuscany regional administration, as well as the provincial administration of Florence and the municipality of Figline Valdarno – local-level negotiations have begun with the company and the trade unions in order to ascertain Pirelli’s strategies. The negotiations aim to determine the group’s business plan and the actual amount that the group intends to invest in the plant over the next few years. The overall aim of the talks is to find a solution to the dispute by the end of the year, and one which does not involve any lay-offs.
Commentary
The management’s decision to downsize the Italian plant seems to signal Pirelli’s broader strategy of transferring production to more cost-effective regions. Nevertheless, this decision seems to run contrary to the supplementary company-level agreement that was signed in 2005 by the management and trade unions. Under this agreement, in exchange for higher productivity resulting from night and Sunday work, the company pledged to invest €8 million in 2005–2006 in the Figline Valdarno plant’s steel cord production and R&D activities, in addition to drawing up a plan to stabilise the jobs of temporary agency workers.
Livio Muratore, Ires Lombardia