Abstract: The Weight of the Company: Leopoldo Pirelli's Years in the Family Business, 1965-1992

Franco Amatori

Abstract

This essay has its origins in a note written by Leopoldo Pirelli toward the end of his life. He was the heir of one of Europe's most important dynasties—one of the world's largest rubber producers, Pirelli. In 1992 Leopoldo left the company in almost the same state as he found it when he assumed leadership in 1965. So, in a certain sense, he did not follow the rule of the third generation ("from riches to rags"). Nevertheless, he was forced to resign when he failed to take over the German rubber producer, Continental. Over the course of his life, one of the major problems that haunted Leopoldo Pirelli was the limited amount of control exercised in the Group. The family holding owned little more than 7 percent of the operating companies that he was able to control thanks to the support of close friends like Gianni Agnelli (head of automobile manufacturer Fiat), the Orlando family (tycoons in copper), and the powerful banker, Enrico Cuccia (leader of Mediobanca, one of the few merchant banks in Italy). Leopoldo Pirelli was a prestigious figure in Italian capitalism and took on a central role in many episodes that make up the history of industrial Italy—for instance, the merger between the chemical company, Montecatini, and the electric company, Edison. He also held many roles outside Pirelli, but he was deeply committed—almost in a Calvinistic way—to his company. Pirelli expressed his endorsement of Thomas Edison's declaration that the activity of an entrepreneur is 90 percent perspiration and 10 percent inspiration. He was a day-by-day entrepreneur. But he constantly faced the problem that the company was divided into three sectors: tires, cables, and diversified rubber products. The latter two were doing well, but tires had a particularly turbulent market, afflicted by a saturation of demand and fierce competition. In the early 1970s Pirelli envisioned a merger with the British corporation, Dunlop. But that move was highly unsuccessful. One of the reasons for the failure was the different structure of ownership; while Dunlop was a public company, Pirelli was a family business that did not intend to change its corporate equilibrium. A decade later Pirelli tried another merger, this time with Continental, but it also was unsuccessful because the German stakeholders did not want a foreign company in command of one of their nation's most important firms. In a talk delivered to the Milan Association of Engineers in the late 1980s, Pirelli stressed that the duty of an entrepreneur was to give profits (or dividends) to shareholders. If the entrepreneur did not succeed the first time, he was to try again. But, Pirelli continued, if he does not succeed more than once, it would be time to resign. Faithful to this statement, after the Continental defeat in 1992, Leopoldo Pirelli resigned.