Indesit chairman Vittorio Merloni bought Hotpoint to make his company a top contender. Next he wants to overtake Bosch and Electrolux
FOR a billionaire with a sizeable chunk of European business under his belt, Vittorio Merloni is a surprisingly hesitant figure. Short, lean, bespectacled and courteous in manner, the 71- year-old chairman of Indesit, the Italian white-goods manufacturer, likes to apologise.
“I am sorry my English is not so good,” he frowns, struggling to find an expression when I ask about profits at the €3.2 billion (£2.2 billion) turnover firm. They went down in the last quarter reported, but for Merloni, a man who famously builds for the long term, that dip gets little more than a shrug.
“Every competitor has the same problems “” raw materials increase very high. But we have the best performance in profitability and growth.”
Indesit, previously Merloni Elettrodomestici until it changed its name to its best-known brand in January, has been one of Italy’s biggest success stories in recent years. Coming from 8% of the European domestic-appliance market four years ago to nearly 16% now, it’s breathing down the neck of sector leaders Electrolux and Bosch, and could soon overtake both.
That leap was fuelled by the acquisition of Peterborough-based General Domestic Appliances in 2001, giving Merloni control of the Hotpoint, Creda and Cannon brands, and a 28% share of the UK white-goods market. It was another step in a remarkable journey for Merloni, a boss with a Bransonesque profile in his home country. His family now has interests in manufacturing, factory construction and energy in an empire that turns over €7 billion, and appears to be replacing Fiat as Italy’s iconic industrial powerhouse. But it’s the integration of Indesit with its new UK hub “” which generates a third of group turnover “” that has preoccupied Merloni since 2002. It is the base he felt his group needed to keep on top of developing trends, and it has provided the key brands to dominate sales in this country, where the Indesit chairman is an increasingly visible figure. The night before we met, he had been at a Buckingham Palace banquet with “your Prince Carlo”. He has even bought himself a house in Mayfair, to add to the ones he already has in Milan, Rome, Sardinia, New York, and Fabriano (west of Ancona, in Italy’s Marche region, where the family firm was founded). He is, by nature, a collector. He also has a lot of cars, including three Ferraris. “But I am selling the Ferraris,” he smiles. “They are too dangerous for someone my age. I have a black Bentley now. That is better, I think.”
With his awkward English and rumpled Mr Punch face, Merloni is easy to underestimate, but he’s not shy of acquiring what he likes “” cars, homes and companies. That sense of ambitious pragmatism is a key trait. His father started a firm that made weighing scales and gas bottles. From gas bottles to kitchen hobs, explains Merloni, was but a short step. Since then, Vittorio, the youngest of three sons, has built the family firm into a white-goods giant selling 14m appliances a year with Ariston (named after his father Aristide), Indesit (bought in 1985), France’s Scholtes (bought in 1989) and Russia’s Stinol (bought in 1999) among its vanguard of brands. Further expansion, through the usual Merloni mix of growth and acquisition, is expected across eastern Europe and in China, where it uses the Little Swan brand in a joint venture. Just as impressively, Merloni seems to have managed the transition from family firm to professionally managed group without the usual heartache and fallout. His elder brothers run their own businesses outside Indesit “” one makes white goods for other brands. His own children keep their interests separate.
Merloni holds 42% of the shares in Indesit, which was listed on the Milan stock market in 1987; other family members have 18%. But Vittorio aside, none holds an executive position. “You cannot put the family in control day by day,” says Merloni. “How could I change a CEO if he was my son? Impossible.”
Instead, the Merloni empire has proved a useful training ground for some of Italy’s top multinational executives, including Francesco Caio (Merloni’s chief executive from 1996 to 1999). Those inside the business describe it as enterpreneurial, innovative and blessed with a surprisingly flat hierarchy, mirroring the chairman’s focus on both the product and, as you’d expect in appearance-obsessed Italy, the brands. “He cares about the brands and has a real feel for what they are,” says Neil Tunstall, Indesit’s UK marketing director. “He’s always asking us, are we making sure the product strategy matches the brand strategy?”
Merloni, sitting in the offices of his London PR firm, says his organisation’s investment in research and development is the key to its success.
“The family control is a big advantage as we don’t have to think of dividends year by year but can look at it from the point of view of competitiveness tomorrow,” he says. “So we invest 85% of our cashflow back into the company. Others don’t.”
That, he adds, will become increasingly important as new technologies change the products beyond recognition.
“Washing machines of 10 years ago and today are more or less the same. In the next five years, in my view, they will be substantially different: new technologies, new design, new materials, new performance. Innovation will be the most important thing.”
So will production. Merloni shrugs off worries that, as the market expands eastwards, the major manufacturers will move production to cheaper countries outside western Europe. “It’s not just about labour but also transport costs,” he points out. Shipping cookers and dishwashers across big distances is not economical. It’s an issue to which he is sensitive because the Merlonis have long claimed to be champions of community responsibility. His father set up his firm in the Marche, outside the industrial north of Italy, partly to stem the exodus of families from the region. “He had seen people leave houses and never come back. He wanted to stop that.”
Merloni says he gets much of his drive from his father, who was a founder of the Italian Christian Democrat party, and also from the times he grew up in. “My parents were very severe, but I grew up in the worst period. I saw the war directly from my window. So much was destroyed.”
His elder brother Francesco wanted to follow their father into business and politics. “It was a disaster,” says Merloni. Business and politics are bad mixers, he says, before adding that the only man who has managed it recently in Italy is Silvio Berlusconi, who used to be Merloni’s advertising agent.
“I consider him a very good entrepreneur,” he says, weighing the words carefully.
And a good politician? Merloni laughs, but avoids giving an answer.
Others say that beneath the unassuming exterior, Merloni, who studied economics at university, is not averse to calculated risk-taking. The biggest gamble of all was the acquisition of Indesit, which in 1985 was a far bigger operation than Merloni Elettrodomestici. Crucially, it gave Merloni the springboard to push abroad before competition made expansion too difficult. “We arrived just in time,” he says, “before the gate was closed.” Another company, Merloni Progetti, which builds factories around the world, gave him valuable experience of working abroad.
Other gambles have been less successful. Scholtes cookers in France has proved tougher to integrate. “We stopped producing in France because it is one of the most difficult countries to produce in,” says Merloni. His plant at Thionville, near Metz, now assembles rather than manufactures. “It’s not so easy if you buy French companies,” he adds. “They like being leaders, they are not so good at being subsidiaries.”
He predicts that now the market outside America has consolidated to four main rivals “” Bosch, Electrolux, Indesit and the US manufacturer Whirlpool “” competing to acquire may no longer be cost-effective.
“Look at the car industry. They don’t buy companies now, they do joint ventures, linking together for one product or one country. If we continue as before we will disappear. If we innovate and do joint ventures, then we will get new markets.”
That could include joint ventures in mature markets such as America, where Indesit has a subsidiary “just to understand the market”. But it has no plans to compete seriously there. And his own future? He is 72 this month “” will he remain chairman for ever?
Till he dies, he says, then smiles. “You’re thinking that if Mr Agnelli was dead before the difficulty at Fiat, for him it would have been much better, eh? But I never try to discover the future. My father died in a car crash. Perhaps I have a plane crash . . .”
Anyway, he adds, he hopes one of his own children will become chairman after him, maintaining the family interest. But he knows the bigger the group gets, the more difficult it becomes to negotiate family involvement. “That’s why we changed the name from Merloni to Indesit,” he says, “because the company is surviving the family.”
Finally, the interview over, he is apologising for his English again, walking me out. And he holds the door for me at each doorway, waving me through first. Quite the politest billionaire you could meet.
From The Sunday Times