Marco Tronchetti Provera (int'l edition)

Marco Tronchetti Provera scored one successful restructuring at Italy's Pirelli SPA shortly after becoming managing director in 1991. At that time, he sold off money-losing businesses, cut the workforce by a quarter, and moved into high-performance tires and cables. The result was soaring profits after five years of losses.

Now, Tronchetti is at it again. This time, however, the stakes go beyond the bottom line. The 52-year-old Milanese, who became chief executive in 1996, aims to turn the Old World industrial stalwart into a pioneering technology company. He's doing it by producing a range of ''intelligent'' tires and introducing highly efficient robot-driven factories. Even more important, he's launching a whole new business: supplying key components to networking companies, such as Cisco Systems Inc., that are wiring the Internet.

Pirelli's technology renaissance began in the early 1990s when its researchers began dabbling in a new area: fiber-optic networks. Believing fiber optics to be the telecommunications technology of the future, R&D engineers lobbied for more money to develop a product. Tronchetti ponied up. His bet paid off: Pirelli in 1994 was the first to develop technology that boosts the strength of signals traversing optical fibers--fibers that form the backbone of the Internet.

The breakthrough brought MCI Communications Corp. and a host of others knocking on Tronchetti's door. Last November, for example, Cisco gave Pirelli's technology a thumbs up by buying its fiber-cable business for $225 million, and taking a 10% stake--for $100 million--in two divisions developing high-speed network components. The two companies are now forming a research joint venture in California. ''This is just the beginning of the story,'' says Tronchetti. Over time, analysts predict Pirelli will become much more a telecom-equipment supplier than a manufacturer of tires and other car parts.

But Tronchetti isn't giving up on tires yet. To bolster its traditional business, Pirelli is designing so-called e-tires, which will use sensors to provide drivers with information about road conditions and tread wear. And to produce tires more efficiently, Tronchetti is investing heavily in new manufacturing technology. A new robot-driven factory to be launched in June, for example, will cut costs by 25%, and slash the lead time for production of a new tire from six days to 72 minutes.

While Tronchetti's attention is now riveted on new technologies, his entrepreneurial roots are tied to the family's energy business. Growing up in a home where the family business was a hot topic at the dinner table, he earned an MBA from Bocconi University, then spent 13 years at the family company. He became an insider at Pirelli in 1978 when he married Cecilia Pirelli, daughter of Pirelli Chairman Leopold. Though divorced from Cecilia, Tronchetti is today the company's largest shareholder, with a 25.6% stake.

These days, he's looking to the U.S. for inspiration in remaking the company. On his frequent trips across the Atlantic, he regularly finds time to rub shoulders with American technology hotshots and entrepreneurs. He also powwows with his business partner, Cisco CEO John Chambers, whom he first met 18 months ago. ''The first thing I do in the U.S. is meet people. You can only feel what's going on in technology by being there,'' says Tronchetti.

His drive to reshape $6.7 billion Pirelli for the 21st century is all the more impressive considering Italy is a country where development of the Internet and new industries has lagged. An impatient manager who expects his teams to move at Net speed, Tronchetti has been benchmarking his own companies' internal systems against Cisco's to make sure they're up to Silicon Valley snuff. ''We want to be the technology leader in every business we are in,'' he says.

Despite long workdays, Tronchetti manages to carve out time to indulge his passion for classical music and sports. He is a regular at Milan opera house La Scala and is friends with director Ricardo Muti. Tronchetti is also an avid sailor and keeps his yacht, Kaurus II, in Portofino, where he sponsors an annual Pirelli Cup competition. And he is a soccer fanatic, with a 13% stake in Inter Milan, one of the city's two soccer clubs. With competitive spirit to spare, Tronchetti's remake of Pirelli could very well lead the company down surprising new roads.

ONLINE ORIGINAL: "This Is the Beginning of a Growth Story"

Italy's Marco Tronchetti Provera is bent on making $6.7 billion Pirelli, a 128-year-old tire and cable maker, into a New Economy champion. Wielding the Internet as a tool for transforming products and business processes, Tronchetti is racing to build strength in new technologies such as optical components while squeezing more profits from traditional businesses. As vice-president of Confindustria, the Italian employers' association, Tronchetti, 47, is also a leading voice for much-needed economic and political reform in Italy. He debates economic policy in fluent English with the likes of Lester Thurow at business conferences and riles union leaders with warnings about Italy's sinking competitiveness. Tronchetti recently spoke in Milan with Rome Bureau Chief Gail Edmondson about the company's strategy. Here are edited excerpts of their conversation:

Q: You restructured Pirelli once in the early 1990s and now again in 2000. What's the difference between the two efforts.
A: The game is always to be more competitive. In the early 1990s, we introduced homogeneous information systems, reduced costs, and developed new products -- we had to relaunch the company after a crisis. Now, we have to reshape the company to keep up with the speed of change in the global economy and the Internet economy. That means introducing new businesses. Reshaping means introducing the Internet into all company processes -- inside and outside -- and creating a new relationship between the company, suppliers, and customers.

The Internet gives us the opportunity to add value to our products and services, and eliminates the traditional way of doing business, which is comfortable but not stimulating. It's a big leap. We have 21 internal Internet projects, from car tires to optical components. We're profiting from the Internet to speed up the evolution of our businesses. We're also working with Cisco, meeting with their top management to benefit from the way they run their business and analyze how they've integrated 50 acquisitions.

Q: Are you interested in making more acquisitions?
A: We have made many acquisitions. And we're still looking around.

Q: How did Pirelli get involved in optical components -- the business which many analysts believe is your hottest ticket to the e-economy?
A: It started with a group of researchers, physicists, and engineers who were working in the area of fiber cables eight years ago. They foresaw the future. They showed me in 1992 a [futuristic] telecom network where fiber had replaced all the electronics. They were convincing, so I authorized the investment for $35 million in R&D. What they predicted actually happened.

Q: How does one transform the culture of a 100-year-old company?
A: Cultural change is an endless process. We have to capitalize on our brand, traditions, and pride to transform what would traditionally be a burden into a stimulus. There are people who are age 60 or more at Pirelli who have been here 40 years and are really enthusiastic about facing the new era. The chief of technology in tires has been here since 1950, and he's surfing the Net and churning out new patents constantly.


Q: Can Pirelli beat the best U.S. companies in optical electronics?
A: We can beat them in some areas. We will continually invest in our R&D capacity. And we need a strong presence in the U.S. That's the real lab of new technologies. The game is based on technology. We think we have the right technology and the right partner with Cisco. This is the beginning of a growth story.

Q: Are you spending a lot of time in the U.S. personally?
A: Yes. The first thing I do is meet people and check out what's new on the market. You can only get updated by being there. I met some very interesting young telecom entrepreneurs in New York the last time I was there.

Q: You've made some big acquisitions in the energy sector, but that's a pretty mature industry. What's the attraction?
A: In energy we are now No. 1 worldwide. In the future there will be superconductivity, supertension, and underground energy cables. There's a continuous improvement in technology in all sectors, so there's room to grow in profitability and to advance the technology. We want to be the leader in technology in all areas of business we operate in. Even tires is becoming more and more a technology business.

There is no mature business. There are good businesses run well and good businesses run poorly. Managing tires and cables well is a way to create cash and fuel investment in new technologies.

Q: Will Italy be able to keep pace with the change in the New Economy?
A: The speed of change in Italy is still not sufficient. One major problem is the fragmentation of the political parties. If we don't change the electoral law to reduce the number of parties and improve the stability of government...major reforms which we need will be difficult to introduce at the right speed. To get change, we need a more efficient political system. Spain is moving fast because there's a clear political will.

The risk for Italy is a decrease of the competitiveness of the country. The rate of growth is still lower than elsewhere in Europe. Italians are very dynamic and have been able to overcome the problems of efficiency here. But it's more and more difficult because of the speed of change now. The dynamism of the individual is no longer enough to overcome the institutional problems.

Marjorie Scardino (int'l edition)

In the fall of 1996, Pearson PLC was a struggling company with some great assets but little focus. Its stock had been pounded by City of London investors impatient with Pearson's frequent earnings surprises and grab bag of holdings. Looking for a break from the past, the board offered the top job to Marjorie Scardino, a little-known American who was then running the Economist Group, which is 50% owned but not managed by Pearson. Although concerned about the glare of publicity that comes from running a big media company, she accepted the challenge.

It has been a good move for her and for Pearson. Scardino, 53, has presided over a remarkable turnaround: She has shed such superfluous assets as Tussaud's and Pearson's stake in the Lazard investment banks. At the same time, she has built on the company's strengths in financial information and newspapers. She has invested in the Financial Times in the U.S., started a German edition with Bertelsmann, and solidified Pearson's control of Spain's Recoletos newspaper group.

Her maneuvering has made Pearson a strong global contender in financial news, on a par with Dow Jones & Co. Pearson has also become a major player in educational publishing, thanks to its purchase of Simon & Schuster's educational publishing business from Viacom in May 1998 for $4.6 billion--one of Scardino's biggest moves.

That doesn't mean Scardino is ignoring new media. The Financial Times recently rolled out a new Web site, FT.com, and Pearson has invested in various new media ventures, many of them in California. Scardino recently agreed to combine Pearson Television, which produces The Price Is Right and the popular serial Baywatch, with the broadcasting interests of Bertelsmann and Belgium's Albert Frere. The venture would be Europe's largest broadcasting operation, with $3.6 billion in revenues.

Although Scardino still has a trace of Texarkana in her voice, she has adapted well to her adopted European home. She once said that when she first walked into a British boardroom, she felt like a ''Dallas Cowboys cheerleader.'' But now she's a big hit in the City. Since she took over in late 1996, Pearson's stock price is up 136%. Sales have risen 175% to $4.85 billion and profits have more than doubled to $864 million over the same period. The big challenge now will be keeping up the pace.

Alfonso Cortina (int'l edition)

It was a risky wager. Oil was around $15 a barrel in June 1999 when Alfonso Cortina, chief executive of Spanish oil company Repsol, shelled out $15 billion for control of Argentina's YPF. The price tag for the 85% stake, to add to the 15% it already owned, matched Repsol's total market capitalization.

Now, with oil at $25 a barrel, the 56-year-old Cortina looks more like a visionary than a gambler. The new Repsol-YPF is the world's seventh-largest oil company. That's a far cry from the government-controlled, mainly domestic operation that Repsol was when Prime Minister Jose Maria Aznar made Cortina CEO in 1996. ''It was an exceptional opportunity,'' says Cortina of the YPF acquisition.

Before the purchase, Repsol was mainly a refining and marketing outfit. The deal bolstered its exploration and production side, bringing total reserves to 4.5 billion barrels from a mere 978 million. It has also juiced profits: They jumped 16% last year to $1.1 billion. Cortina is forecasting a 50% hike for 2000. Yet Cortina isn't sitting still. Talks on a merger with Italy's ENI broke off earlier this year, but another oil deal is likely. He's also investing in fiber optics--one more new dimension for the Spanish company.

Edward Krubasik (int'l edition)

Edward G. Krubasik was an unusual addition to the Siemens management board when he joined in 1997. In a company where a top post typically comes only after decades of loyal service, the Vienna native came in as an outsider at a time when Siemens CEO Heinrich von Pierer was looking for new ideas. Trained as a nuclear physicist at the University of Karlsruhe, he had spent more than 20 years at McKinsey & Co., eventually heading the consulting firm's European electronics, telecom, and aerospace activities.

That meant Krubasik also came from a more demanding corporate culture than at Siemens, where management lapses rarely had severe consequences. More rigor was just what Siemens needed. Since Krubasik's arrival, the company has set clear benchmarks for managers and linked their pay to performance. It has eased out laggards. Krubasik, 56, was one of the key executives behind the effort to raise the bar and restore profit growth at the German electronics and engineering giant.

The next challenge is to inject some New Economy dynamic into Siemens' four Old Economy industrial divisions. Krubasik is taking charge. For example, at the automation and drives group, Siemens has developed software to link automated factory equipment into networks that allow manufacturers such as auto makers better control of the flow of production. Using the Internet, those factory systems can then be linked to suppliers and customers.

The effort is paying off. Siemens' industrial units saw profit before taxes and interest rise 51% in the quarter ended Mar. 30--double the increase for fiscal 1999 ended last Sept. 30. ''E-business will be the largest engineering wave we've ever seen,'' Krubasik insists. If he delivers, he'll likely be among contenders to succeed von Pierer when he retires.

Wendelin Wiedeking (int'l edition)

Few gave Wendelin Wiedeking much of a chance when the little-known engineer took over the reins of Germany's venerable Porsche in 1992. After all, the previous 15 years had seen a succession of CEOs who tried and failed to manage both the Porsche business and the fickle Porsche family that owns it. By the time Wiedeking came on the scene, years of poor decision-making had left Porsche adrift. Sales and profits had flagged. In 1992 alone, the group lost $130 million.

Enter Wiedeking, a tall, mustachioed redhead from Westphalia in northern Germany. Wiedeking, 47, had worked at Porsche for many years before leaving to head up a components maker. Despite his affection for the carmaker, he showed no mercy. He cut production, slashed the workforce by a quarter, to 6,850, and streamlined management. But his boldest move was to ship in a team of Japanese engineering consultants--a slap in the face for the company's proud German engineers.

Wiedeking accepted the Japanese recommendations and introduced more efficient production methods. The results were dramatic. It used to take more than 120 man-hours to build a Porsche. Now it can be done in 40. Wiedeking also abandoned unprofitable model lines and concentrated production on the top-of-the-line 911, which sells for $70,000 and the $40,000 Boxster. Since 1992, sales have tripled, to about $3 billion, and profits have surged to $186 million.

Not bad for a company many thought would end up as just another badge in a big carmaker's stable--like Jaguar, which Ford bought in 1989. Wiedeking has shown that small can still be beautiful when it comes to carmaking. Porsche now enjoys the highest margins in an industry obsessed with ''critical mass,'' and its share price has outperformed all comers. The next challenge: Getting Porsche's new sports-utility vehicle up and running. Set to debut in 2002, the SUV marks the Porsche's first foray outside of sports-car making.

It could be Wiedeking's lasting legacy--on top of the turnaround, of course. ''We returned this company from a valley of tears, and that's not an experience I would like to repeat,'' he says. Thanks to him, Porsche may never have to.

Janusz Szlanta (int'l edition)

Janusz Szlanta stands out among Polish execs. At 47, he has proven successful enough at home to begin looking for opportunities abroad. He became a managing director and co-owner of the Gdynia shipyard, located on the Baltic coast, in 1997. Then, together with two friends and new bank financing, he spent $29 million to buy the declining Gdansk shipyard, where the Solidarity movement was born in 1980.

Szlanta now presides over Europe's eighth-largest shipyard operation, and he plans to invest in Finland's Masa-Yards, a Baltic Sea cruise-ship builder. That would make him Poland's first major foreign investor--just as Poland is negotiating its membership in the European Union.

Buying Gdansk, where Lech Walesa emerged as a national leader, was no sentimental journey. The yard's decline began even before the communist era had ended; its workforce had dropped from 12,000 to 2,700. But Roman Kuzminski, deputy Solidarity leader at the yard, thinks the page has turned under Szlanta. Gdansk now employs 3,100 and has orders stretching to 2002. Kuzminski calls Szlanta's international ambitions ''an investment in the future.''

The Gdynia yard was also in rough shape when Szlanta arrived, having lost $28 million the previous year. Banks refused to lend to it. Szlanta shifted bulk-carrier construction to Gdansk, so Gdynia could concentrate on more profitable container ships. It proved a wise move: Sales hit $400 million last year. Even after heavy capital spending, Gdynia declared a profit of $9.5 million.

Now, Szlanta wants a 20% to 25% stake in Masa-Yards, noted for its advanced technological capabilities. His intent is partly to diversify production and gain expertise, but Szlanta is also eager to expand outward from his home base. ''The shareholding in Masa-Yards will lend credibility both to Gdynia and the Polish shipbuilding industry,'' he says.

Szlanta's early pursuits were far from shipbuilding. After studying electronics in Krakow, he worked as a researcher for 11 years before being appointed governor of Poland's Radom province in 1993. He went into banking two years later, when he was named director of Bank Rozowju in Warsaw. The bank managed the shares of the Gdynia shipyard, and Szlanta was elected chairman of the yard's supervisory board in 1997.

Szlanta, a married father of four, is still going full steam ahead. In an industry ripe for consolidation, he wants to make Gdynia No. 1 in Europe. Not bad for a scholar-turned-governor-turned-banker who has only lately turned to the sea.

Michael Frenzel (int'l edition)

Plenty of executives could learn from Michael Frenzel: In just two years, the soft-spoken CEO of Germany's Preussag has transformed his steel and engineering company into Europe's biggest travel group. Preussag's fiscal 1999 profit rose 14.6%, to a record $314 million on sales of $15 billion, with tourism accounting for more than half the total and most of the growth.

Frenzel, 53, saw an opportunity in 1997. State-owned Westdeutsche Landesbank, which holds 33% of Preussag, had decided it wanted to unload its stakes in the travel business. Frenzel suggested creating a company that would book everything from transportation to hotels--something that didn't exist in Germany's fragmented market.

So in 1998, he sold Preussag's steel unit to Norddeutsche Landesbank and the state of Lower Saxony, which floated it on the stock market. Then he bought WestLB's package-tour operator TUI and Hapag-Lloyd, owner of cruise ships. From there, he kept on buying rivals: In his latest coup, Frenzel offered $2.6 billion to win a bidding war for Thomson Travel.

Next year, Frenzel aims to spin off Preussag's logistics and industrial divisions so he can focus on travel, thus completing one of Germany's most radical corporate makeovers ever.