Italy has approved measures to limit the control of a Chinese state-owned shareholder over the Italian tiremaker Pirelli, citing reasons of national security.
Rome’s decision comes after Sinochem, Pirelli’s largest shareholder with a 37 percent stake, notified the Italian government in March of plans to update an existing shareholder pact with Camfin, which is controlled by Pirelli CEO Marco Tronchetti Provera.
Camfin is a holding company with its main investment being a 14 percent stake in Pirelli.
The decision is a rare intervention in an eight-year-old investment by the Chinese regime. In 2015, the regime’s chemical group ChemChina bought a majority stake in Pirelli, considered one of the biggest Italian companies, for $7.7 billion.
ChemChina is another state-owned chemical group company under the Chinese regime.
The Italian government’s restrictions involve limits to accessing and sharing information between Pirelli and Sinochem and the need for a four-fifths majority for some “strategic” board decisions.
The aim is to protect “strategically relevant information and the company’s knowhow,” Italian Prime Minister Giorgia Meloni’s office said.
The restrictions are part of a government initiative called “Golden Power” that aims to protect assets deemed strategic for the country, at a time when relations between the Chinese regime and Western governments have entered a tenser phase.
The government, saying it had accepted some proposals made by Sinochem to address its concerns, also mentioned specific measures to protect cyber sensor technology that can be incorporated into Pirelli tires.
A specific technology through a microchip installed in the tires could allow geolocation and collection of drivers’ information and has national strategic importance, according to the Financial Times, citing Meloni’s office.
“The misuse of such technology can cause a variety of risks for customers and national security,” the office said.
“The relevance of such a technology can be identified in a variety of sectors: industrial automation, machine-to-machine communication, machine learning, advanced manufacturing, artificial intelligence, critical sensor, and actuator technologies, Big Data and Analytics,” the government said regarding cyber-sensor technology in the tires.
Provera had lobbied Rome to intervene in the company’s shareholder arrangement, warning of greater control the Chinese regime was gaining in Pirelli’s business decisions, the Financial Times reported.
Provera had unsuccessfully tried to persuade Sinochem to sell part of their stake, and frictions also emerged over his pay, which was 20.5 million euros (over $20.5 million) in 2022, according to the Financial Times.
Founded in 1872, Pirelli is one of Italy’s most storied companies. It specializes in high-end tires for premium carmakers like Ferrari, Porsche, and BMW and is the sole supplier for Formula One cars.
Meloni’s government refrained from imposing even tougher conditions on Sinochem, including blocking its voting rights in Pirelli. Its requirements will nevertheless force Sinochem and Camfin to amend their shareholders’ pact.
The Chinese group earlier this year confirmed its plans to remain a long-term investor in Pirelli.
The Italian company is due to appoint a new board at a shareholders meeting on July 31, with current Deputy CEO Giorgio Bruno set to become the new CEO and Provera staying as executive vice chairman.
Provera has been in charge of Pirelli since 1992.
The Italian government’s move to limit Sinochem’s grip on the tiremaker comes ahead of another key decision on whether to renew Rome’s partnership with the Chinese regime on the Belt and Road Initiative (BRI).
Italy in 2019 became the first and only Group of Seven (G-7) nation to join the Chinese regime’s BRI initiative, which can enable Beijing to gain control of sensitive technologies and vital infrastructure.
In May, Meloni said that good relations with China are possible even without being part of the BRI.
“Our assessment is very delicate and touches upon many interests,” said Meloni. The pact expires in March 2024 and will be automatically renewed unless either side informs the other that they are pulling out, giving at least three months’ notice.
In an interview with Reuters last year, before she won power in a September election, Meloni made clear she disapproved of the 2019 move, saying she had “no political will ... to favor Chinese expansion into Italy or Europe.”
Meloni noted that while Italy was the only one of the G-7 rich democracies to have signed the Belt and Road memorandum, it was not the European or Western country with the strongest economic and trade ties with the Chinese regime.
“This means it is possible to have good relations, also in important areas, with Beijing, without necessarily these being part of an overall strategic design,” she said.
