China in Italy: Kick Start

On a recent afternoon in this east-coast Italian city, you could hear the first snippets of dialogue from the next act of the global economy's evolving plotline. "Wo jiao Francesco," says a young Italian man, at the start of a Mandarin lesson in an office conference room. With a quick "Bravo," for Francesco, Alessandra Brezzi, a moonlighting professor of Chinese from the nearby University of Urbino, begins drilling her seven students on useful workplace vocabulary (ziliao/raw material; caiwuchu/accounting department) and proper Chinese etiquette (introduce yourself with a business card ready; never open a gift right away). Of course, these lessons are by now standard for anyone in the West looking to drum up business prospects in Beijing or Xiamen. But the group in Pesaro are not M.B.A. students or venture capitalists. They are clock-punching engineers, mechanics and secretaries — and they're learning Chinese because that's what the boss speaks.

For this Mandarin lesson is taking place at the headquarters of Benelli motorcycles. Once one of Europe's most revered bikemakers, it was also the first Italian firm to be bought outright by a Chinese company when, in October 2005, the Qianjiang Group, China's third-largest scootermaker, purchased Benelli for $24 million. At the time of the bid, Qianjiang's purchase of the storied brand from its last Italian owner was seen as another sign of the country's industrial decline, with local newspapers deriding the sale as a "disaster" and an "ugly story." Indeed Italy's manufacturing model — built largely on small and midsize companies that turn out easily replicable products from light fixtures and heavy tools to sofas and office chairs — has proved particularly vulnerable to Chinese competition, though Italians hope that their luxury consumer brands, valued for their European cachet and design, can attract China's burgeoning shopping class, and help stave off a looming trade-imbalance crisis.

But the fate of Benelli doesn't fit neatly into conventional accounts of Italy vs. China. For starters, the motomaker had already suffered the consequences of a very different era of Asian competition. In the 1970s, it took a hit from top-performing Japanese bikes. What was once a company of 1,000 employees largely responsible for Pesaro's post-1945 growth had halted new production twice in the past two decades. By 1995, it had laid off all but the shell of a staff; those who were left merely produced replacement parts for existing bikes. Mauro Righi, who has worked 33 years at his hometown company, has survived repeated rounds of layoffs. Currently responsible for emission systems, Righi is the only employee left who worked when the Benelli family (which sold out in the early 1970s) was still in charge, and he recalls the days when, "We were once considered the avant garde."

The company's most recent owner, Italian appliance giant Merloni, invested heavily but never managed to turn a profit, and announced in early 2005 that a buyer had to be found if the 94-year-old company was to survive. With no Italian bidders, offers came from Russia and Britain, though they were focused merely on acquiring the brand. Qianjiang, instead, which turns out 1.2 million scooters a year in China, saw value in buying — and relaunching — Benelli's design and production. That would give them a foothold in the European market, and the move had an industrial logic: unlike Japan three decades earlier, China still lags well behind the Western motor industry in know-how and design, which means the Chinese saw the small Italian firm as a vehicle for the improvement of Qianjiang's own products back in China. Dai Wei, Benelli's export manager, and one of just two Chinese employees on-site in Pesaro, spends time chaperoning colleagues from China. "Here they know how to make motorcycles better and faster," says Dai. "We consider this our European research and development center."

One of Qianjiang's first moves was to give Benelli's technical director, Pierluigi Marconi, the same title for the Chinese company, too. Though he confesses that he'd "never even eaten an egg roll" before meeting his new employers, Marconi is now in constant contact with his Chinese counterparts, and often visits headquarters in the southeast China city of Wenling. "They understand that we have the history in this sector," he says, "which is not something you can just buy or invent from scratch."