MASSIMO SIRAGUSA / CONTRASTO FOR TIME

LAST LOOK: Checking chairs on the line at an Italian factory

Twilight In Italy
	What happens when old-world craftsmanship collides with harsh new commercial realities? Welcome to Manzano, Italy's chair-production capital, as it is battered by cheaper Chinese rivals
	By Peter Gumbel

Posted Monday, November 28, 2005; 20:00 HKT
The biggest chair in the world stands seven stories tall, weighs almost 23 tons and is found just to the left of the second traffic light in the tiny town of Manzano (population: 7,000) in the north-eastern corner of Italy near the Slovenian border. The red pine monument is not some avant-garde artistic statement. It's an oversized acknowledgement by the local business community of the industry that brought immense prosperity to Manzano and 10 small communities around it over the past half-century. Known as the "chair triangle," this district every year produces up to 40 million chairs of all shapes and sizes—especially but not exclusively out of beech and oak wood—for offices, homes, hotels, cruise ships, hospitals and restaurants around the world. Locals like to boast that the district in its heyday made one in every three chairs sold worldwide. The demand provided ample work for a tight-knit network of 1,100 highly specialized artisans and small firms. And it transformed this once modest rural area into one of Italy's richest and most dynamic commercial zones, a district with virtually full employment and a chronic shortage of skilled labor. "We were the China of Europe," boasts Giulio Fanin, an entrepreneur who makes machine tools for chair manufacturers.

But these days, the real China is making Manzano's prosperity as precarious as a two-legged stool. In a perfect example of globalization at work, ferocious competition from Chinese manufacturers is snatching away Manzano's customers. Over the past three years, about 200 Manzano companies have closed and a worrying number of the remaining 900 are struggling. Sawmills have moved to Croatia, Poland and Romania, where an increasing amount of initial pre-fabrication is being carried out. Manzano's once dominant share of the market for no-frills office swivel chairs has almost entirely collapsed because Chinese producers can churn them out at almost the same quality for a fraction of the cost. Now the Chinese are starting to attack the market for residential and other chairs, not just basic models in metal and plastic but more sophisticated ones in wood and leather, too. Talk about "the crisis" is ubiquitous in Manzano—even the executives of thriving companies say they worry that the unique industrial fabric of the area is fraying. "We see people with tears in their eyes not knowing what to do next," says Simone Focacci, manager of one of Manzano's three principal banks.

Valerio and Lucio Minin are two of those shedding tears. During the 1990s, the company their father founded half a century ago, Mininsedie, produced up to 500,000 chairs annually. But this year Mininsedie will make just 130,000—many of those stacked and waiting for buyers in a cavernous warehouse that serves as the firm's headquarters. The French distributor who was their biggest customer is out of business. Revenues have declined by 50% in two years and, with losses mounting, the Minin brothers recently laid off five of their 15 employees. "The situation here is tragic," says Valerio, 51. "I just don't know how we're going to continue. You keep banging your head against the wall and either the wall falls—or you do."

Italy is the sick man of Europe these days—its economy has shrunk by 4% since 1999 after adjusting for inflation—and the predicament of the chair triangle helps to explain why. Along with Germany and France, the nation has been struggling with weak consumer spending, waning productivity and rising government deficits. But unlike its neighbors, Italy lacks robust large corporations that can export their way out of trouble. Many of the thousands of small and medium-sized companies that once gave the Italian economy its flexibility and dynamism are poorly equipped to deal with the challenges of a fast-changing world. Most don't have the scale, the funding or the commercial know-how to become global players. What they produce is beautiful, but it's neither particularly sophisticated nor difficult to replicate. In other words, Italy's economic structure is almost perfectly shaped for an attack by China, which excels in moderately sophisticated manufacturing—and can turn out products far cheaper than is possible in western Europe. In sector after sector—from textiles to shoes to furniture—companies have been losing ground.

Continued...

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