Early in August, Fabrizio Pedroni wished his employees a happy summer holiday and told them to return to work in three weeks. That night, he began dismantling his electrical component factory in northern Italy and packing its machinery off to Poland. “Had I told them earlier about any plans to shift the production abroad, they would have occupied my factory and seized all my stuff,” says Pedroni, owner of his family company Firem. “The plain truth is that I wanted my business to survive, and there weren’t the right conditions for me to operate in Italy any longer.”
On Aug. 13, 11 days after Pedroni activated his plan, some of Firem’s 40 workers, suspicious of the movements around the plant, rushed to its gates just in time to stop the last of 20 trucks packed with machinery. Firem’s move has become a national controversy, and the fate of its employees is still unclear.
The loss of the factory, which was started by Pedroni’s grandfather shortly after World War II, highlights the challenges facing Italy, where industry is beset by stifling labor rules and antagonism between workers and management. By the World Economic Forum’s measure of competitiveness, Italy ranks 128th, one place behind Burkina Faso, compared with 39th for Poland.
Pedroni, 49, says he and his family now live in fear after receiving anonymous threats, but he won’t change his mind about what he did. Sneaking off “was certainly disputable and hopelessly harmed relations with his employees and community,” says Carlo Alberto Carnevale Maffè, professor of business strategy at Milan’s Bocconi University, “but like many entrepreneurs before him, he abandoned the ship called Italy because it was the only way to survive. In Italy most businesses like Firem have been posting losses for at least five years.” Much bigger Italian companies, from Fiat (FI:IM) to refrigerator maker Indesit (IND:IM), are moving production abroad to cut costs.
According to Pedroni, his decision was forced on him by low-cost rivals in Eastern Europe, uncompetitive labor in Italy, and high taxes. Firem had sales of about €3 million ($4 million) last year but hasn’t posted a profit since 2008, says Pedroni, who opened his Polish factory in late August. He didn’t attend an Aug. 20 meeting with unions and local institutions in the town hall of Formigine, where Firem was located, to discuss the crisis triggered by the loss of his factory. One proposal under discussion by local and national officials is to pay Firem’s Italian workers for up to 12 months using funds from the government’s temporary layoff program.
Firem “implemented a move that I would call clandestine to say the least,” lawmaker Matteo Richetti, a member of Prime Minister Enrico Letta’s Democratic Party, told Parliament on Aug. 19. “I am in favor of market freedom, and that means that you can move your company wherever you want, but this must happen after notifying the staff and the local community.”
The Italian General Confederation of Labour, Italy’s biggest union, has said it wants Firem to “find a solution to ensure production” stays in Italy. “The way to emerge from a crisis cannot be to impoverish our industrial production, competing only in terms of cost reductions, particularly labor costs,” it said. Pedroni says other solutions would likely have doomed his company. “I don’t want to make more profit; I just want to start making profit again,” he says. To show his goodwill, he brought five Italian workers he trusted to Poland, asking them not to tell others of the plan.
From 2001 to 2011, about 27,000 Italian companies, each with annual sales of more than €2.5 million, moved production abroad, Italy’s main small business association says. In 2011, the last year for which data is available, Italians controlled 737 companies in Poland employing more than 67,000, according to the Italian Foreign Trade Institute.
Poland’s economy, the only one in the European Union to avoid recession since 2009, will expand 1.1 percent this year, according to the Polish central bank. Italy’s economy is projected to shrink 1.8 percent, says a Bloomberg survey of economists. “Many of my colleagues called me to say I was right and brave to do it,” Pedroni says of his move. “I’m not the first to go and won’t be the last.”