Strategic tyre sensors – Italy confirms Chinese shareholder restrictions for Pirelli

Italy’s government has identified tyre sensor technology as a national strategic asset and, with the stated aim of preventing misuse of this technology, has confirmed it will use the Golden Power procedure to limit the influence that shareholder China National Tire & Rubber Corporation Ltd. (CNRC) has upon Pirelli & C. S.p.A. According to statements issued by the government on 16 June and Pirelli two days later, a range of measures will now curtail CNRC’s involvement in the tyre maker.

Tyre-mounted cyber sensors are, as Italy’s government notes, capable of collecting vehicle data such as road conditions, location, and information about infrastructure. The government is concerned that once this collected information is sent to the cloud, artificial intelligence could be employed to create advanced digital models that can be used in systems such as smart cities and digital twins.

“The relevance of this cyber technology can be identified in a variety of sectors: industrial automation, machine-to-machine communication, machine learning, advanced manufacturing, artificial intelligence, critical sensor and actuator technologies, big data and analytics. For these sectors, cyber emerges as a critical technology of national strategic importance,” states Italy’s government, adding that any misuse of this technology could “entail considerable risks not only for the confidentiality of user data, but also for the possible transfer of security-relevant information.”

Italy’s government says its requirements aim to protect the autonomy of Pirelli & C. S.p.A. and its management as well as company know-how and information deemed to be of strategic importance. In addition to limiting accessibility to certain information, decisions taken by Pirelli’s Board of Directors that are considered to be strategic will need to be approved by at least four-fifths of the directors. CNRC will also be prevented from selecting the company’s chief executive.

In a statement, Pirelli listed the limitations that will apply to CNRC:

(i) Respect the commitment to not exercise activities of direction or coordination as detailed below, intended only as examples and not exhaustive:

– Ensure the full autonomy of Pirelli with regard to the management of relationships with clients and suppliers;

– Guarantee that Pirelli autonomously prepares strategic, industrial, financial plans and/or the budget for the Company and the Group;

– Guarantee that Pirelli is not subject to instructions on the part of the Sinochem Group;

– Not adopt acts, decisions or communication that could make it seem that the decisions of Pirelli are the consequence of the impositions and imperatives of CNRC;

– Not centralize treasury services or other functions of financial assistance or coordination (eg. cash pooling) nor other technical functions of coordination (eg. integration of Pirelli’s information systems with those of Sinochem Holdings Corporation Ltd., including those of the Chinese subsidiaries of Pirelli);

– Not issue directives or instructions, and in any case not coordinate initiatives, concerning decisions in financial and credit matters and in matters of Pirelli’s research and development;

– Not issue directives with regard to the fulfillment of extraordinary operations by Pirelli, such as, for example, listings of financial instruments, acquisitions, disposals, concentrations, conferrals, mergers, spin-offs, etc.;

– Not adopt determining decisions with regard to the operational strategies of Pirelli nor formulate strategic directives for the group;

– Guarantee the absence of organizational-functional links between Pirelli on the one hand and CNRC on the other;

(ii) Commit in order that the Chief Executive of Pirelli, taken from the majority list, is indicated by Camfin and that, as a consequence, of the 12 Directors of Pirelli, taken from the majority list, 4 shall be designated by Camfin;

(iii) Commit to the introduction, similar to the Shareholder Agreement signed on 1 August 2019, of the role of General Manager, to whom shall be delegated the power to implement the business plan, budget and ordinary management of Pirelli;

(iv) Commit so that all the delegated Organs of Pirelli shall be identified exclusively from among the designated Administrators of Camfin;

(v) Commit so that the power of nomination and revocation of Directors and deputy directors of Pirelli shall be deferred, in accordance with article 11.9, of the Pirelli bylaws, to the Executive Vice Chairman or the Chief Executive;

(vi) Commit, together with Pirelli, so that the Bylaws shall be modified in such a manner that, in relation to the advisory resolutions related to assets of strategic importance as well as the nomination and revocation of the offices of managers with strategic responsibility (key managers of Pirelli), the proposal shall be reserved for the Chief Executive and any contrary decision to the same can only be adopted with the vote at least 4/5 of the Board of Directors.