Viewed 381 times | Published on 2019-05-27 13:35:03
A short post, opening the door to two themes that will generate a set of significant changes in Turin and Piedmont (and potentially Italy).
This post is a obviously a follow-up on the previous one in this series (2019-04 #Italy, A country between Milgram, Zimbardo, Hawthorne, and... a Gaussian distribution ( #RegionaliPiemonte and #EuropeanParliament2019 during #Brexit series )), but also on a previous one, that I posted in December 2018, on the future of a company town (Reinventing a company town - Turin, Italy and FIAT / FCA).
As I am writing, the counting for the administrative vote is ongoing, and of course also the answer from Renault to the merger proposed by FCA is not there.
Anyway, on both counts, yesterday, Sunday May 26 2019, was akin to getting to a point of no return.
A kind of invisible curtain between the latest 20 years, when (in 2001) the current Governor of Piedmont started his first mandate (he was elected twice as Mayor of Turin, and so far it seems once as Governor of Piedmont).
And when the FIAT group, after a crisis, few years down the road appointed as CEO an Italian from Canada, the late Mr. Marchionne.
Yesterday afternoon we had just the exit poll results, but Mr. Chiamparino (from PD) was de facto already conceding, as the same polls showed that only within the Turin district he led- otherwise, the votes cast for the Lega were exceeding expectations- 33% at the national level, over 40% in Piedmont outside Turin.
It is yet to be confirmed officially, but if confirmed this imply that Piedmont too will have a centre-right Governor, along with the other two nearby regions (Lombardy and Liguria).
Actually, what I wrote recently about "carrying out reforms during a crisis" was partially discussed at 1am last night during the short speech delivered by Mr. Salvini, the Home Secretary (Ministro dell'Interno).
To recap: "if it is difficult to have over 20 Member States agree (let's see how many will stay in or join in the next decade), imagine a country divided by location, tribes within location, and other additional overlapping allegiances.
The incumbent Government already will have to some head scratching between finding the couple of dozen of billion EUR needed to avoid a VAT increase as well as to offset the additional burden deriving from the spread rollercoaster."
Yesterday night Mr. Salvini said something paraphrasing, as I wrote to a friend, Churchill's famous speech on what is waiting for us.
Or: he was confirming that the Government should go on and complete its programme (meaning: also if this implies finding the resources to avoid the VAT increase and other issues- in the tens of billions of Euro).
The reason? In the same speech, he was showing off as a moderate- so, he has to stay in power to complete absorbing the centre-right (the government partner, M5S, failed so far at absorbing the centre-left), leaving the extreme right flank for the time being to Fratelli d'Italia.
As for the leader of Fratelli d'Italia, after obtaining 6.5%, she confirmed that sees an opening for a Lega-Fratelli d'Italia government.
Probably, because she would like to replicate the game done by Lega with M5S- join into a government, and expand.
I shared in Italian on Facebook that I think that the main result obtained since in government by Mr. Salvini is not his 33 or 34% at the European Elections, or the over 40% in zones outside major towns.
No, his main result is that he redefined the political discourse territory- tempting other parties not toward positioning themselves on their own proposals, but on his proposals.
A game that kept Mr. Berlusconi in and out of office for a quarter of a century, and attempted with less success also by Mr. Renzi.
Whatever will happen at the national and European Parliament level, anyway this is locally the end of an era, and having the incumbent Governor obtained a confirmation of support just from Turin confirms that the model developed over the last couple of decades did not appeal other districts of Piedmont.
And this is a continuation: when Mayor Appendino won the Turin elections vs. the incumbent Mayor, Mr. Fassino, from the same political party of Mr. Chiamparino, except the central zone and few areas that traditionally voted for other political parties, Mr. Fassino lost the traditional PD (and Communist party, one of the "ancestral components" of PD) areas of the town.
I will not repeat what I wrote in the previous articles of this series, so maybe I should instead shift to the second news item of today.
Probably waiting the elections, to avoid converting the discussion into gasoline for the elections, FCA announced the proposal for a merger of equals with Renault.
In any merger, obviously the perception of value of all the parties involved needs to converge, but the starting point is focused on relative strenghts.
Looking just at the news as published this morning by what used to be the "house organ" of FIAT, "La Stampa", the first noticeable item was that, consistent with the concept of "merger of equals", as FCA currently is worth on stock markets more than Renault, the proposal includes rebalancing, by distributing a dividend to current shareholders of FCA, on the tune of 2.5bln Euro.
Along with the financial proposal, the new merged company would adopt a structure similar to the one previously used by Mr. Marchionne for other mergers within the FIAT group, i.e. based in The Netherlands, but in this case listed on three stock markets: Milan/BorsaItaliana, Paris/Euronext, NYSE.
Within the December 2018 article, I shared what is frankly just common wisdom: "Background: our mobility model since the early XX century was mainly focused on transportation between locations, and, also if generally across Europe public transport played a role, the individual mobility element was, following the USA model, a main point of reference.
Public or collective transport? Second fiddle in the mobility orchestra.
The current and expected increased urbanization will alter that framework of reference, shifting from different industries toward a cross-industry segmentation.
Future mobility vehicles will be quite different from what we are used to call "cars" or "autobus" or "taxi".
It is not just about electrification, it is a paradigm shift in terms of roles and use of vehicles, as well as in terms of ownership and interaction between vehicles, or between vehicles, those using them, and the environment."
Recently Turin announced few new competence centres and the kick-starting of a self-driving in-town circuit, nearby the current main offices of FCA in Turin.
These might actually be useful even after a merger, thanks to the recent investments to renew synergies between educational and R&D facilities.
Anyway, this would require a re-arrangement of industrial and political relationships, as local authorities in Turin, decades ago, instead of considering e.g. investing in FIAT through companies that were partially or completely owned by local authorities, funded FIAT investments and other activities- i.e. assuming a stance that was probably appropriate to the 1960s-1970s, as if a multinational company were a local company.
Instead, the French state owns a share of Renault (see The Guardian), and would be able be better assess benefits and costs, also if some activities were to be restructured or relocated.
Whatever happened this morning at the meeting of Renault's board will anyway affect the centre of gravity of both companies.
Over the next few days there will be obviously more details, but, frankly, looking from the outside, a merger of equals on those terms would be beneficial mainly for FCA shareholders.
Because the merger is of two industrial groups within a market that already the late Mr. Marchionne saw oriented toward a consolidation, and therefore, beside the current stock market value, should look also at the potential value (patents, R&D, brands, market presence, distribution network, any differences in treatment from shared suppliers, etc), and not just to the 5bln of potential synergies (e.g. cost savings, potential improvement in conditions toward suppliers due to increased scale and streamlining, etc).
Anyway, opening the dances for a merger, that could eventually turn into an acquisition, represents the second paradigm-shifting news item for Turin.
It doesn't really matter now if either Mr. Chiamparino or Mr. Cirio are confirmed as Governor of Piedmont: whoever will be there, will have to get rid of old habits from the 1970s approach to industrial policy, and "retaining" approach of the 1990s and 2000s (i.e. giving away and in exchange expect continued presence).
If what is needed to retain in Turin manufacturing is investment, then any such investment (including immaterial investment in intellectual property, or specific support offices) should generate a return, not assume just to create goodwill.
Discussing on those terms would actually make easier to both negotiate and set/adapt priorities- both for local authorities and industrial partners (FCA and Renault included).
Otherwise, as I discussed often with others in Turin over the last few years (since I became resident in late 2015, before relocating nearby few months ago), the risk is that all those investments in educational facilities, competence centres, etc will just be used as the Film Commission services are used: coming here, shooting, and then generating the benefit of those investments elsewhere.
Until the point when the operational income generated isn't able to sustain the renewal and improvement of the assets generated by those investments.
Stay tuned... as more posts will follow- on both themes (and others related to my business experiences).