Piaggio & C. S.p.A.
Piaggio & C. S.p.A.
Viale R. Piaggio 25
1-56025 Pontedera, Pisa
Sales: L2.1 trillion (1995)
SICs: 3751 Motorcycles, Bicycles & Parts; 3711 Motor Vehicles and Passenger Car Bodies
Piaggio & C. S.p.A. is the holding company for a group of companies manufacturing light vehicles, principally two-wheeled motor scooters, motorcycles, and bicycles. The company’s most important product is the “Vespa” motor scooter, a model that became extremely popular in Europe after World War II. Piaggio is the European leader for motor scooters, with a market share just over 50 percent. The company is ranked third worldwide, with growing sales in India, China, Indonesia, Vietnam, and Latin America. Annual production of Piaggio motor scooters exceeds 850,000 vehicles. Piaggio is also Italy’s largest bicycle manufacturer, and makes bikes under the well-known trademarks Raleigh, Puch, and Bianchi. Annual output of bicycles is approximately 500,000. The company also manufactures a minivan, the Piaggio Porter, under a joint operating agreement with the Japanese manufacturer Daihatsu. Piaggio makes electric two- and three-wheeled vehicles, which are able to meet stringent anti-pollution regulations. The company operates subsidiaries in France, Spain, Argentina, Singapore, The Netherlands, Germany, Greece, Britain, and elsewhere, and markets its products through distributors in more than 60 other countries.
Piaggio & C. dates back to 1884, when Rinaldo Piaggio, son of a Genoa joiner, expanded his family’s old woodshop in the town of Sestri Ponente into a steam-driven sawmill. Rinaldo was only 20 years old, but he demonstrated precocious business acumen. He set his new factory to produce fittings and furniture for ships, and courted the accounts of the local shipyards. Within 15 years, Piaggio’s naval fittings shop had won a virtual monopoly over the northwest coast of Italy. All the shipyards turned to Piaggio for furnishings. The business continued to expand as contracts came in from other parts of Italy, and then from international shipbuilders. When the century turned, Piaggio was a well-known name abroad as well as in Italy. The cabins and saloons of more than 70 shipping lines were outfitted with Piaggio furnishings.
Rinaldo Piaggio, on the lookout to expand his factory in a new direction, began to solicit business from railways to build and outfit railway cars. The work was not too different from the complex woodworking required for naval fittings, but the factory had to be altered to accommodate sheet steel work. Within a few years, Piaggio had more jobs for railway cars than for ship fittings, and the company opened a new factory in the town of Finale Ligure. With the opening of the new factory in 1906, Piaggio was able to take on even more railway car business, and began to make other wheeled vehicles as well. Piaggio made trucks, trams, freight cars, and even luxury automobiles.
During World War I, the two Piaggio factories were refitted to manufacture weapons. The factories also began to make motor boats and airplanes. The new factory at Finale Ligure manufactured boats, including an anti-submarine boat known as the MAS, which was instrumental in destroying the Austro-Hungarian submarine fleet. The older factory at Sestri Ponente principally repaired and maintained war planes. But both factories were soon converted to mass-produce airplanes. In 1917 Rinaldo Piaggio bought a new factory in Pisa, and transferred the production of railway cars and wheeled vehicles there. Piaggio bought another factory, a car works in Pontedera, and began to build airplane engines there. Piaggio produced engines under license to more established manufacturers, and then began designing its own. Piaggio made the “P2,” a single-engine fighter plane, beginning in 1923. Five years later, Piaggio equipped the Finale Ligure factory with a complete wind tunnel and hydrodynamic testing tank. Piaggio had turned from motorboats to “flying boats”—high-speed planes that could take off from and land in water. In the 1920s and into World War II, the various Piaggio factories were turning out some of the most advanced flying boats in the world, as well as airplane engines, small planes, bombers, passenger and cargo planes capable of transoceanic flights, as well as railway cars and stainless steel locomotives. All these products contributed greatly to Italy’s war effort. And so the factories were bomb targets. The Pontedera factory was completely destroyed in World War II, having been not only bombed by the Allies but mined by the Germans as they retreated. When the war ended, Piaggio had virtually nothing left.
Founder Rinaldo Piaggio had died in 1938, and the job of postwar renewal fell to his two sons, Armando and Enrico. They split responsibility for the company’s four factories. Armando took over the two older ones, Sestri Ponente and Finale Ligure, and Enrico took Pontedera and Pisa. It was Enrico who came up with the idea of making motor scooters.
The scooter was not a new idea. Several manufacturers had made small, light motorcycles before, but they had not caught on. Enrico Piaggio decided that scooters would sell if they could be made right. A small, light, cheap vehicle might be all that many families could afford, so he envisioned a wide market for the scooter. He imagined it as something that women would ride, as well as men. He thought further that it needed room for a spare wheel, which should be easy to change. And if it was not to be just for sunny days, it should have some sort of mudguard to protect the rider’s clothes from puddle splashes. With these general specifications, Enrico contacted one of the chief designers from Piaggio’s prewar days, Corradino D’Ascanio. D’Ascanio was a brilliant engineer who had created the first fully functional helicopter. D’Ascanio drew up plans for a scooter that had a pressed steel body with a shield-shaped front and a wide back housing for the engine and spare wheel. There was no chain linking the front and back wheels, as the rear wheel was powered by a direct drive. The platform seat was built to be comfortable for women in skirts. It took only five months to move from plans to development. Piaggio rebuilt the demolished Pontedera factory to mass-produce the scooter, and in 1946 the first model was offered for sale. This was the Vespa, Italian for wasp, so named because of the thin-waisted shape of the vehicle.
The Vespa was an immediate success, and quickly became a symbol of postwar Italy. Enrico Piaggio had been correct in assuming that small, cheap transport would sell well, but he could not have guessed the chic appeal of the little machine. In 10 years, Piaggio had sold over one million Vespas. Audrey Hepburn and Gregory Peck rode one in the 1953 film Roman Holiday, and the Vespa was clearly the thing to have. Though celebrities rode them, so did workers using them to get to their jobs, and families piled on them for weekend vacations. By 1956, there were 4,000 Vespa sales outlets in Italy, 8,000 in the rest of Europe, and another 2,000 in other parts of the world.
The company also produced the Ape (“bee”), a three-wheeled version of the Vespa, and made Vespa models in a variety of engine sizes. Piaggio also briefly marketed a small car, but when Fiat came out with a similar one, Piaggio withdrew its model. The two factories under the control of brother Armando Piaggio were making airplanes and engines, as they had through the war. The airplane division eventually split off from the scooter division, and still exists today as a separate company, Rinaldo Piaggio. The scooter business continued to thrive into the 1960s. It was the bestselling scooter in over a hundred countries, and was being built under license in several European countries and in Brazil and India. The Vespa still had its movie star cachet, especially as seen in La Dolce Vita, ridden by Marcello Mastroianni.
A Changing Industry—1970s and 80s
Enrico Piaggio died suddenly in 1965, at the age of 60. His successor was his son-in-law, Umberto Agnelli. Agnelli’s family ran Fiat, the Italian car manufacturer and conglomerate, and Umberto later became managing director of that company. The scooter industry had dipped somewhat in the late 1950s, as wages rose and many consumers spent their money on cars instead of two-wheelers. But the Vespa was still popular through the 1970s, especially among young people. Production remained high, though by the end of the 1970s the company was hampered by labor disputes. Strikes held down production to about three-quarters capacity in 1979, though sales were nevertheless close to $500 million, and Piaggio turned a profit. Costs increased, as the company spent more on developing new models, and also spent money on acquisitions such as Gilera, a leading Italian motorcycle manufacturer. Foreign sales still made up more than 40 percent of Piaggio’s business.
To satisfy the world’s demands in meeting light urban transportation requirements with top-quality products and services. To contribute to improvement of life, dedicating every effort to innovation and the continuous improvement of the products and services we offer our customers.
One place the Vespa did not catch on was the United States. Piaggio sold its scooters there beginning in the 1950s under its own name and also through a Sears, Roebuck brand, the Allstate Crusaire. But sales were never high, and in 1982 Piaggio stopped its U.S. exports because it was unable to comply with strict pollution control standards. Meanwhile, Piaggio was shipping roughly 17,000 scooters a year to Japan in the early 1980s. By the mid-1980s, Japanese manufacturers were exporting their own scooters. Kawasaki, Yamaha, Honda, and Suzuki all made significant inroads into European motorcycle and scooter markets in the 1980s, with serious repercussions for some of the older brands. The Japanese models were in many cases cheaper, lighter, and better made than the European vehicles they had copied, and many European makers suffered. But the Italian government kept down the number of light motorcycles imported to Italy to protect its own industry, and the Japanese threat if anything solidified Piaggio. About half its sales were of its Vespa models, and half were mopeds. The company continiued to invest heavily in its plants, and began to cooperate with other European companies to fight back against the Japanese imports. In 1981 Piaggio signed a deal with the French bicycle and moped maker Peugeot to develop a motorcycle, hoping to find a mid-range niche between the cheap Japanese models and the German luxury models.
Nevertheless, the shrinking European market for two-wheeled vehicles stalled Piaggio in the mid-1980s. The number of units sold in 1980 was 937,000 vehicles, while in 1984 it was only 553,000. Piaggio had a new managing director in 1984, Giorgio Brazzelli. Brazzelli took the view that the slump in sales was more or less permanent, and the company had to reduce its costs in order to make a profit. After barely breaking even for three years in a row, Piaggio finally had a decent profit of L17 billion ($11.05 million) on sales of L663 billion in 1986. Much of the jump was attributable to greatly increased sales of components and parts.
Reorganization in the Late 1980s
The company diversified further in the late 1980s, increasing its investments in automobile components and other industries related to vehicle manufacture. Piaggio also reorganized its corporate structure in 1988, forming a sub-holding company under the main umbrella of Piaggio & C. S.p.A., called Piaggio Veicoli Europei S.p.A. Piaggio Veicoli held all the core businesses related to the manufacture and sale of vehicles, including scooters, motorcycles, three-wheelers, and the light trucks the company was beginning to develop. Another division handled the manufacture of Piaggio’s bicycle brands. A third major division was responsible for car and motorcycle components and the other miscellaneous ventures, such as industrial robots, that Piaggio had bought into.
Along with diversification and reorganization, Piaggio aimed to make its business more international in the late 1980s, increasing its joint ventures with foreign companies. In 1989, Piaggio joined a West German engine component manufacturer, Kolbenschmid, in a joint venture to produce water pumps and oil pumps at plants in Italy and France. Then in 1991, Piaggio entered a joint venture with the Japanese firm Daihatsu to develop light transport vehicles. Piaggio also attempted to expand its presence in mainland China by taking on a joint venture with a Hong Kong firm in 1993.
Despite all these changes, Piaggio had difficulty extricating itself from the troubles of its shrinking market. In the early 1990s, Piaggio’s share of the European market for two-wheeled vehicles had fallen to about 28 percent, largely due to the success of Japanese imports. Piaggio still had almost half the market share where only low-priced scooters were concerned, but profits were low, and in 1993 the company lost L91 billion ($60 million). In that year Piaggio got a new chairman, 29-year-old Giovanni Agnelli, son of former chairman Umberto Agnelli. Agnelli was both the Piaggio heir and perhaps in line for a position at his father’s company, Fiat. He had been raised and educated in the U.S., and had worked for I.B.M. and in a Fiat subsidiary before taking over Piaggio. He found the company in disarray. Diversification into components had taken away the focus on Piaggio’s core product, motor scooters, and the company was not only limping along but losing money. Agnelli quickly sold off unprofitable component businesses, and spent huge sums on the development of new scooter models. Agnelli guessed that the scooter might have a comeback in Europe, because auto traffic was getting more and more congested. Piaggio came out with plastic-body models, which the Japanese companies had long favored, gave them stronger engines, and tried to recapture the star appeal the Vespa had had in the 1950s and 60s. Whether due to transportation strikes, traffic jams, rising car and gas prices, or clever marketing, the scooter market indeed picked up. Between 1991 and 1996 sales of scooters in Europe more than doubled, and sales in Italy alone quadrupled. Piaggio’s share of that growing market rose from about 25 percent to almost 50 percent.
Aware that the boom in Europe might soon peak, Piaggio also built up its presence in overseas markets, particularly in India and China. These countries were in a similar position to Italy’s just after the war, with a large population in need of basic transportation, and not quite ready to afford a car. Piaggio’s Indian subsidiary had sales of about $200 million annually in the mid-1990s, and a respectable market share of around 15 percent. In China, sales were about $36 million in 1995, and all Piaggio’s Asian subsidiaries were accounting for more than 30 percent of the company’s total sales. Chairman Agnelli aimed to increase the amount of Piaggio’s business in Asia over the next five years, hoping to have half the company’s sales come from there by the end of the century.
Piaggio’s turnaround in the late 1990s demonstrated the strength of its basic product, the scooter. The company had lost considerable ground from the late 1970s on, when Japanese imports eroded its core European markets. Yet the Vespa had very strong brand recognition because of its past. It managed to be classic without being outmoded, due in large part to the improvements carried out after 1993. Piaggio’s management was able to foresee a renewed need for the scooter in Europe, and to move on to growing markets abroad. Piaggio’s Chairman Agnelli sees the future of the company in its overseas markets, where there is still room for considerable expansion. He has also speculated about bringing the company public. This would presumably spur the company to increase the amount of profit on its substantial sales.
Piaggio International Holding B. V. (Netherlands); Piaggio Veicoli Europei S.p.A.; Piaggio Pro-Ind S.p.A.; Piaggio Italia S.p.A.; Altea S.r.l.; Piaggio France S.A.; Piaggio España S.A. (Spain); FIV E. Bianchi S.p.A. (75%); Piaggio Argentina S.p.A. (62%); Piaggio Lyman China Co., Ltd. (Hong Kong; 51%); Piaggio Asia Pacific PTE Ltd. (Singapore); Piaggio Indochina PTE Ltd. (Singapore); Almec S.p.A.; Sidca Sri; Intent S.p.A. (75%); Free Time Sri (75%); Reparto Cose Bianchi S.r.l. (75%); Bianchi U.S.A. Inc. (75%); Eudicycles S.A. (France); Piaggio Vespa B.V. (Netherlands); Piaggio Deutschland GmbH (Germany); Piaggio Ltd. (U.K.); Piaggio Portugal Ltda. (92.8%); Piaggio Hellas Epe (Greece); Findutch Service N.V. (Netherlands Antilles); Pro-Ind Brasil Ltda. (Brazil); Piaggio V.E. Poland sp. Zo.o (97.5%); Errebi S.r.l.
Blum, Patrick, “Steyr Sells Moped Division to Piaggio,” Financial Times, February 25, 1987, p. 27.
“The Bottom-Pinchers’ Chariot,” The Economist, September 21,1996, p. 64.
Buxton, James, “Piaggio Profits Trebled,” Financial Times, May 22, 1981, p. 29.
Cornwell, Rupert, “Entering a Year of Promise,” Financial Times, January 31, 1980, p. 23.
Dodsworth, Terry, “Peugeot and Piaggio to Co-operate on Motorcycles,” Financial Times, September 13, 1980, p. 19.
Pollack, John, “Vespa Scooters Collide With Anti-Japan Charge,” Advertising Age, June 22, 1992, p. 14.
“Significant Advance at Piaggio,” Financial Times, June 23, 1986,p. 30.
Tagliabue, John, “Sometimes Two Wheels Are Better Than Four,” New York Times, August 17, 1996, pp. 33-34.
Wallace, Charles P., “The Next Mr. Fiat?” Fortune, October 14, 1996, pp. 182-186.
Wyles, John, “Piaggio and Kolbenschmid in Venture,” Financial Times, June 21, 1989, p. 33.