Not only is Piaggio attempting to reign in and develop product for its newly acquired brands, but it also is attempting to understand markets, formulate sound strategies and plan logistics in the 50 countries in which it does business.
The Piaggio Group has been controlled by Immsi SpA since October 2003. Immsi is an industrial and services holding listed on the Milan Stock Exchange and headed by Roberto Colaninno, who serves as Piaggio Chairman.
Piaggio ended 2004 by completing its total acquisition of Aprilia SpA. Piaggio says the agreement, signed Dec. 28 with Aprilia shareholders Ivano Beggio and his family, Holdipar s.r.l., European Moto Holding s.a.r.l. and Scarabeo s.s., makes it the world's fourth largest producer of two-wheelers, posting annual sales of more than Euro 1.5 billion ($1.9 billion) and having the capacity to produce 600,000 units annually.
The Piaggio Group now boasts seven production facilities - four in Italy and three abroad (in India, Spain and China) - six research & design facilities and 6,000 employees. It includes the Piaggio, Vespa, Gilera, Derbi, Aprilia, Moto Guzzi and Laverda two-wheeler brands, as well as Ape, Porter and Quargo three- and four- wheeled light commercial vehicles.
A RETURN TO PROFIT
Piaggio recently announced a return to profit for the first time in five years, but the purchase of Aprilia certainly will affect the company's bottom line in 2005.
Piaggio posted a consolidated net profit of Euro 4.1 million ($5.4 million) for 2004, compared to a net loss of Euro 139.5 million ($182.8 million) for 2003; year-end net debt rose to Euro 336 million from Euro 282 million.
Piaggio's 2004 operating profit rose almost threefold to Euro 68 million ($88.1 million) from Euro 25 million ($32.4 million), while earnings before interest, taxes, depreciation and amortization, or EBITDA, rose 39% to Euro 130 million ($168.4 million).
Two-wheeler sales accounted for more than 65% of Piaggio's 2004 net sales, which the company says increased by 9.8% year-on-year to Euro 1.084 billion ($1.421 billion), due largely to a rebound of Derbi's small displacement sales in Europe, the sale of engines, and a 45% jump in light commercial vehicle sales in India.
Rocco Sabelli, Piaggio Group Chief Executive Officer, said the company hoped to close 2005 “close to breakeven”. He said Piaggio registered sales growth of 7% and 8% during the first two months of the year.
Sabelli said Piaggio is prepared to spend Euro 150 million ($195.2 million) on research and development in 2005, and says plans call for the release of 15 new models this year. Further expansion of the company's ATV line-up may take time, however he said immediate off-road projects include involvement in supermotard, enduro and cross-country disciplines.
“We want to be strong in every market segment,” he said, “and so those you will hear more about in the coming two to three months.”
APRILIA & GUZZI
One of the most important immediate tasks for Piaggio is the rearrangement and fiscal rebound of Aprilia and its associated brands.
A new board of directors was appointed to Aprilia in January. The board, which will serve until Dec. 31, 2006, includes Colaninno, Chairman; Sabelli, Chief Executive Officer; Gianclaudio Neri, Chief Operating Officer; Michele Colaninno; Luciano La Noce; Massimo Pirzio Biroli; and Amedeo Nodari. Ivano Beggio was named Honorary Chairman.
In March, Daniele Bandiera, former boss of Fiat SpA's (FIA) Alfa Romeo car unit, was named Chief Executive Officer of Moto Guzzi SpA. As part of the Piaggio-Aprilia management team led by Sabelli, Bandiera is to lead Moto Guzzi's financial recovery in the wake of its purchase by Piaggio.
“His is a large task, to be sure,” Colaninno said of Bandiera, “and he will not have a lot of free time in the coming year.”
Bandiera began his career at the Italian state-owned aerospace and engineering holding company Finmeccanica Group and went on to hold increasingly senior posts in Alfa Romeo and subsequently in the Fiat Group, where he was later appointed Fiat Auto worldwide production manager. In 2002, he was appointed President of the Alfa Romeo Business Unit. In this capacity, he headed the launch of the Alfa GT and the Crosswagon Q4, and coordinated the development of the Alfa Romeo Brera and the "159" family. He left Fiat in October 2004.
Sabelli says Piaggio plans to invest approximately Euro 5 million ($6.6 million) in Moto Guzzi in 2005, keep the 225 employees on the payroll at the Moto Guzzi factory near Milan, and double production from a current 5,600 bikes a year to a medium-term goal of 10,000.
The brand plans to launch two new models in 2005, the Breva 1100 and the Griso, and Piaggio's relaunch plan calls for bolstering the Moto Guzzi retail network and market share in the U.S. and India.
Piaggio's purchase of Aprilia also garnered it the Laverda brand. But, while Piaggio says it is in the process of creating a sound strategy for Moto Guzzi, CEO Sabelli sounded less enthused about the prospects of rekindling Laverda.
“If Guzzi is a niche brand - one responsible for very few units - then Laverda is a hyper-niche,” Sabelli said, waving off any indication of an immediate rebound for the brand.
“What we are doing with our entire operation is allocating investments based on possible returns,” said Colaninno. “We won't sell something like Guzzi if we don't think it will achieve good returns.”
In April 2004, Piaggio signed a strategic business and marketing agreement with China's Zongshen Group. The two companies formed a joint venture, Piaggio Foshan Motorcycle Co. Ltd. (PFM), to produce parts, engines, scooters and motorbikes in China based on Piaggio patents and technology.
PFM - Piaggio's largest industrial project outside of Italy, accounting for an investment of Euro 50 million ($64.8 million) - is 45% owned by Piaggio, 45% owned by Zongshen and 10% owned by a local authority of Foshan.
PFM's plans call for the yearly production of 300,000 vehicles within five years. Completed units will be marketed in China by PFM itself, while Piaggio will distribute them internationally co-branded in collaboration with Zongshen. Sabelli says Piaggio plans to retail between 200,000 and 300,000 vehicles in China during the next three years.
“The issue of China is simple,” he said. “Europe, where we have a 35% market share, is a mature market and so we have to look for other opportunities.”
A team of Piaggio technicians and specialists is already at work in China to cooperate in the transfer of technology, to agree on the changes needed to be made to the vehicles for the local market, and to seek out and evaluate Chinese suppliers.
Sabelli says profiting in the Chinese market without harming Piaggio or its brands “can be done by managing risks successfully.”
“For sure going to China entails specific risks, yet with common sense and due diligence, we can be successful there,” he said.
- Guido Ebert