Italy's government acts to curb Chinese influence on tiremaker Pirelli

Italy's government said on Friday it had taken steps to limit the influence of Chinese investor Sinochem on tiremaker Pirelli, including a mandatory qualified majority for strategic decisions made by the company's board.

Rome's decision comes after Sinochem, Pirelli's largest shareholder with a 37% stake, notified the Italian government in March of plans to update an existing shareholder pact with Camfin, the holding company of Pirelli CEO Marco Tronchetti Provera.

Prime Minister Giorgia Meloni's administration scrutinized the pact under "Golden Power" rules aimed at protecting assets deemed strategic for the country, at a time when relations between China and Western countries have entered a tenser phase.

Sinochem, a Chinese state-owned conglomerate, was not immediately available for comment, while Pirelli declined to comment.

Sources had previously told Reuters that the government was concerned about Sinochem's growing influence on Pirelli, as the proposed pact would have allowed the Chinese group to appoint more board members and potentially choose Pirelli's future CEOs.

On Friday, Rome said it had imposed prescriptions aimed at shielding "the autonomy of Pirelli," including a requirement that "some" strategic decisions by its board of directors should require approval by at least 80% of directors.

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.

"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.

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.

Changes needed

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 Tronchetti 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 Beijing on the Belt and Road Initiative (BRI).

Italy in 2019 became the first, and so far only, G7 nation to join China's hugely ambitious BRI initiative, which critics said could enable Beijing to gain control of sensitive technologies and vital infrastructure.

The BRI envisions rebuilding the old Silk Road with large infrastructure spending to connect China with Europe.