Italy imposes ‘golden power’ limits on Pirelli’s Chinese shareholder

Milan, Italy – The Italian government has imposed a series of restrictions on Pirelli’s Chinese shareholder Sinochem and its subsidiary the China National Tire & Rubber Co. (CNRC), under its “golden power” ruling.

In an 11 April statement, Pirelli said the government intervention followed a review triggered by the breakdown of a shareholder agreement between CNRC and other Pirelli shareholders earlier in the year. (ERJ report)

The decree confirmed that Pirelli is considered a company of “strategic importance,” noting in particular its 'cyber tire’ technology, which the decree said “transforms the tire into a sensor capable of collecting sensitive information.”

According to the government, the technology can gather data including “the condition of the tire and its maintenance, the habits of users, driving conditions [and] the traceability of the state of road surfaces.”

The decree added that cyber tire has evolved into “an enabling technology for different cutting edge usages,” including “monitoring of critical infrastructure,” digital twin applications and autonomous driving.

Under the measures, Marco Polo – the investment vehicle linked to CNRC – will be limited in its influence over Pirelli’s governance ‘as long as it holds stake above 9.99% in Pirelli.’

At shareholder meetings, Marco Polo “can present a slate… with a maximum of three candidates, of whom two [should be] independent,” Pirelli said.

However, any directors appointed from that slate “cannot hold company offices such as… chairman, vice chairman, [or] chief executive officer, nor chair any board committees.”

They will also not be granted “management delegations, executive powers or attributions able to influence the strategic, industrial or financial decisions of Pirelli.”

In addition, should Marco Polo’s slate wins a majority vote, it “cannot contribute in any way” to appointing the remaining board members.

CNRC, meanwhile, is required to ensure “the full autonomy of Pirelli,” including independence in relationships with customers and suppliers and in the preparation of “strategic, industrial, financial and/or budget plans.”

The decree also stated that Pirelli must not be “subject to instructions from the Sinochem group.”

CNRC, it said, “must not take actions or decisions or issue communications that could lead one to believe that the decisions of Pirelli are the result of an intention imposed or demanded by CNRC.”

Further restrictions prevent CNRC from issuing directives on financial, R&D or strategic matters, or influencing “extraordinary operations” such as acquisitions or mergers.

A key focus of the measures relates to data and technology control, particularly around cyber tire.

Pirelli is required to refuse any requests outside normal shareholder rights, especially those involving “the sharing of… sensitive company information,” including R&D and proprietary technologies.

The decree also prohibited “the transfer or sharing… of any data collected or processed through cyber tire technology” with entities linked to the Chinese state.

Additional safeguards restrict access to IT systems, including ERP platforms, and prevent integration with systems linked to Sinochem.

The company must also ensure “the absence of organisational/functional links” between Pirelli and CNRC.

According to the decree, the Italian government will monitor compliance, with Pirelli required to submit an annual report outlining measures taken.

The intervention follows tensions between Pirelli’s Italian shareholders and its Chinese investor over governance and regulatory risks, particularly in the US market.

As previously reported by ERJ, US has tightened restrictions on connected vehicles’ technologies linked to China.

The regulatory actions particularly impacted Pirelli’s cyber tire, which enables real-time data exchange between tires, vehicles and infrastructure.

The decree concluded that CNRC must communicate to the Italian government "any transfer of shares," and will not be allowed to transfer shares to any entity controlled by or affiliated with the Chinese state.