How to Insulate

ITALY How to Insulate

One way for a company to insulate itself against recession at home is to operate in so many other countries that somewhere, some branch of the company will be doing well. This theory is amply justified by Italy's Pirelli Group, which produces half of its tires, cables and rubber goods in Italy and the rest in 25 factories in eleven other countries. During Italy's 1964 recession, the home company lost $120,000, but thriving foreign operations gave the group as a whole a profit of $8,130,000.

Stamping Down. Last week stockholders gathered in the 32-story Pirelli headquarters in Milan to hear from Chairman Leopoldo Pirelli, 40, about the company's 1965 performance--and they learned that the theory works even better in good times. Production outside and production inside Italy each accounted for $370 million in sales. Profits of the parent company and Pirelli International totaled $11,526,041, and the earnings of subsidiaries are still to be reported.

Pirelli considers business looks so good that he has to "stamp down" his optimism. "In cable production, our group leads the world." Among Europe's tire and rubber goods producers, Pirelli is "about equal with Michelin." Worldwide, Pirelli acknowledged, his group is far behind such giants as Goodyear and Firestone, but that didn't seem to bother him. He does not intend to in vade their home markets in the U.S.; and therefore, "in the main, it will be a battle between our subsidiaries and their subsidiaries in specific markets, and in many cases our branches will be bigger than theirs."

Spikes & Volts. Leopoldo Pirelli is a deeply tanned sailing enthusiast and an imaginative businessman, the third in the family line since Giovanni Battista Pirelli established the company in 1872 because his patriotism was hurt when Italy had to import rubber tubing to raise a sunken ship. He set up a factory on the site of the present Milan skyscraper headquarters, and from there Pirelli grew to be Italy's fourth largest company. Giovanni's son Alberto helped sponsor the Peking-to-Paris auto expedition in 1907 as a promotion for Pirelli tires. Alberto also took a ride in Orville Wright's plane in Paris in 1908 and thus became the first Italian to fly. In 1917, when a Pirelli engineer patented an oil-insulated cable that could safely handle far more than the then limit of 33,000 volts, the company established a big name in high-tension cables. Pirelli cables now carry up to 420,000 volts. Recently, Pirelli put out its "BS" tire with replaceable tread bands, including a spiked winter band.

A year ago Alberto retired at 82 and turned the chairmanship over to his son Leopoldo, who had been sharing his office for the previous nine years. Leopoldo does not emulate the quainter cus toms of his forebears, such as trying to open all the mail and sign all the payrolls personally, but he is just as confidently in command. He is expanding Pirelli's international operations eastward by helping the Russians build two plants. He is shifting emphasis toward products that require advanced technology and heavy investment, such as cables and tires, and away from smaller products that require a bigger labor input. He also hopes to achieve "vertical" expansion in the cable business by developing his own sources of scarce copper.

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