I would like to clarify some statements made by Ing. De Benedetti yesterday at Bocconi, taken up by some newspapers including La Stampa of Turin. I have the following version in hand:
Radiocor, Tuesday 7 February 2012, 15.40.55 De Benedetti: Cuccia was self-sufficient, he didn't understand modern times – “The one who forced the sale of Olivetti's electronics division to General Electric was Enrico Cuccia. Cuccia told me "she is er mejo cool in the bigoncio, but I don't trust her". Mediobanca is certainly a great school of management, but Cuccia did not favor the birth of capitalism. The saying “actions are weighed and not counted” is the negation of capitalism”. Thus Carlo De Benedetti, honorary president of Cir and president of the L'Espresso publishing group, in a passage from his life as an entrepreneur illustrated to the students of the Bocconi University in Milan. “His limit – he added referring to the historic president of Mediobanca – was his passion for Mediobanca. He was an autarchist, a monarchist. He certainly had great merits but he certainly didn't take care of the country's development, he didn't understand the modern age. At one point he could even retire ”.
I start by saying that I consider engineer De Benedetti to be an entrepreneur with great experience and, while I don't find myself with the Roman dialect on Enrico Cuccia's lips, I can confirm the attitude reported. Engineer De Benedetti was at the helm of Olivetti from 1978 to 1996 (after a brief spell at Fiat in 1977). The Olivetti facts that he mentions date back to the establishment of the intervention group organized by Mediobanca together with IMI, Fiat, Pirelli and La Centrale in 1964.
That intervention group originated (as Paolo Bricco well documents in his book "Olivetti, before and after Adriano", ed. 2005) from the circumstance that that historic and glorious enterprise was in such a state of disarray as to fear its failure. It had reached this situation also because it had acquired the American Underwood (historic manufacturer of typewriters) at a reckless price, finding it totally obsolete and a source of great losses. Another big problem, but a financial one, was the Electronics Division, which manufactured large calculators in competition with IBM, which blocked the market by leasing the machines (very expensive at the time) instead of selling them. The Olivetti models were competitive until the early 60s, but lacked a large production scale and, as mentioned, the Ivrea company did not have adequate financial means, also because it was still family-controlled. The intervention group's problem was to redeem on the one hand the shares that ensured control (which ended up as a pledge to banks, mainly foreign), on the other hand to ensure the company a liquidity that could get it going again. The redemption-purchase of the shares was carried out by the Intervention Group, while the liquidity for the company was obtained by selling the Electronics Division to General Electric.
I myself described the operation in the following terms: “The sale was a condition set by Fiat in order to participate in the rescue. However, if it had insisted on that sector, the company would certainly have encountered new and serious difficulties since IBM - the world's largest operator whose technology in the 59-60s was comparable to that of Olivetti - introduced the 1964 series in 360, gaining a technological supremacy that would have rendered the Eleas of the Italian company obsolete in any case. In addition, Mario Tchou, the main manager of the electronics division, had died in a car accident in 1961. However, Olivetti maintained its activities in small machines where in 1965 it introduced the "Programma 101", the forerunner of the modern personal computer. In this regard, see Amodeo (2009), pp. 20-24 and Bricco (2005), pp. 36 et seq. “ (Freedom and well-being in Italy, edited by L. Paolazzi, Laterza p. 150).
Everyone is free to think what they want, but: i) the sale was not an "independent" decision by Mediobanca and without Fiat the Intervention Group would not have taken place and the company would have gone bankrupt; ii) following the action of the Intervention Group, Olivetti returned to a performing position, albeit for a short period; iii) the "electronic" culture remained in Olivetti also because the plans approved by the Intervention Group specifically involved the passage from electro-mechanical to electronic productions; iv) that same Electronics Division "remained in Italy" continuing to produce medium and small computers in the Caluso plant under the Olivetti brand first General Electric and Honeywell Information Systems Italia from 1970. The latter also held a research and design laboratory who in 1973 designed and developed a computer (Mod. 62) subsequently produced in Caluso and also exported to the United States.
In 1978 the Italian Honeywell employed 3.800 employees, exported 29% of its production and had gained 31% of the Italian market for general purpose computers. Engineer De Benedetti took over the leadership of Olivetti in 1978. In that year the Olivetti Group employed 61.500 employees and closed the public budget with a 2 billion euro profit (the internal accounts, as De Benedetti himself later revealed, were instead of a very different sign). The management results of engineer De Benedetti (initially very brilliant) are of no interest here.
However, he recalled the saying "actions are weighed and not counted" (which Cuccia adopted without however being its author). That motto derives from the state of entrepreneurship in a capital-poor country like Italy until the immediate post-war period. The availability of entrepreneurs suitable for conceiving and leading large enterprises was almost nil and, as Donato Menichella (former Director General of IRI and then governor of the Bank of Italy) said to Captain Kamarck put in charge of IRI by the Allies in 1944, an important part of the development was achieved by "encouraging" the "entrepreneurial talents", even if they lacked capital. Incidentally, this problem still exists today because we have very talented entrepreneurs who, however, show great limitations when their businesses exceed certain size thresholds.
Does this behavior represent the “denial of capitalism”? It all comes down to defining the word “capitalism”. China is adopting its own capitalism which has very particular characteristics, just as, moreover, specific attributes distinguish "Rhenish" capitalism from Anglo-Saxon capitalism (the results of the latter we carry on our shoulders today and we will carry them, I fear, for a long time yet ). What is the encouragement of what are hoped to be “entrepreneurial talents”? It means allowing them to lead relevant companies without being the main investors; that is, allow them to "leverage" the capital they have at their disposal. Today, engineer De Benedetti's Group is the one distinguished by the highest leverage among the most important Italian groups: at the end of 2010, the share transferred to his Cofide in equity accounted for less than 7% of the total invested capital, i.e. the share of the parent company it was 1 euro for every 13,8 euro conferred by minority shareholders and financial creditors.
For Exor we are at 13,6 euros, for Benetton (before the announced buyback) at 5,3, for Italmobiliare at 7,1, for Fininvest at 1,7. This same count, referring to 1991, when the engineer De Benedetti led a much more significant group, again through Cofide (Cir, Olivetti, Sasib, Sogefi, L'Espresso, Valeo), reported a leverage of 137 on a total capital of about 28 trillion lire. As regards the relationship via Filodrammatici-Ivrea, I would like to underline that Mediobanca has always supported Olivetti to which, among other things, it allocated the first loan in its history in 1946. Finally: Cuccia was not a monarchist, but a republican, while union pacts pre-existed him. How do you take care of the development of the country? The answer remains arbitrary.
