Bicocca Training Lab Formazione e Management delle Risorse Umane nei processi di ristrutturazione

1. VEI Electronic Industries REORGANIZATIONS AND RELATED HR STRATEGIES AFTER MERGERS & ACQUISITIONSCASE HISTORIES PRESENTED BY FRANCESCO PICCONI Bicocca Training Lab Formazione e Management delle Risorse Umane nei processi di ristrutturazione MILAN, MAY 28th, 2009

2. CASE HISTORIES OBJECTIVES • Introduce some selected case histories of reorganizations and related HR strategies after Mergers & Acquisitions • Highlight and discuss the role of HR and the lessons learned • Each case history is presented in terms of: • Case Description and Reorganization challenges • Related HR strategies • The role of HR • Lessons learned

3. GE ACQUIRES AND REORGANIZES NUOVO PIGNONE (1) WWW.GEOILANDGAS.COM CASE DESCRIPTION AND REORGANIZATION CHALLENGES In 1993 GE Power Systems acquires from ENI the company Nuovo Pignone, the global leader in turbines, compressors and services for oil&gas and power generation applications. At that time, Nuovo Pignone had about 5,000 employees basedically in Italy and 2,2 BN $ sales. Later, GE built a stronger organization around Nuovo Pignone, after an impressive round of global acquisitions in machinery and services for oil&gas applications. Today, renamed GE Oil&Gas, it has 10,500 employees and 5,9 BN $ Sales. In1999, the company gets access to restructuring procedure (Cassa Integrazione Guadagni Straordinaria - CIGS) for 10% of the workforce of the main Florence site – 221 workers, increased to 283 in 2000.

4. GE ACQUIRES AND REORGANIZES NUOVO PIGNONE (2) MANAGING SIMULTANEOUSLY KEY TALENTS AND REORGANIZATION How a major “giant” U.S. Corporation with a leadership driven culture which is integrating an excellent Italian company with a strong technological leadership and a technology driven culture can continue to develop Key People and continue to attract the best existing Managers and Professionals in times of crisis HR STRATEGY • Consistently communicate the message: “GE Oil&Gas is the best place to start/ develop your career as a Manager or as a Professional: we are now repositioning in terms of permanent workforce, but we will come out of the process stronger than ever. In the meantime, join us.” • Continue to identify young Italian second-line managers and middle managers to be “converted”, trained and prepared to replace Senior Management in max 1-2 years in the core functions. • Continue to identify “pioneers” even during the reorganization phase, ready to move out of GE Oil&Gas when the company acquires other companies in the oil&gas business • Communicate the message that for 25% of the CIGS impacted employees (70 employees) the unemployment period can be a re-training opportunity paid by the company, in view of a come-back

5. GE ACQUIRES AND REORGANIZES NUOVO PIGNONE (3) THE ROLE OF HR • Technical advisor, throughout the CIGS process (authorization, TU negotiation, defense from criticisms on the media and claims in court) • Guardian of the temple, ensuring the communication consistency between the two messages: “if we do not reorganize today, we will not be able to maintain our competitive position tomorrow” (target: TU’s, local and national authorities, media) and “join us/stay with us today to enjoy a bright career tomorrow” (target: key internal players and actual/ potential candidates) LESSON LEARNED • In the Reorganization process, throughout the CIGS process, know your audience and keep the messages consistent, yet separated • Do not stop hiring and developing talents, strenghtening focus on succession plans, identifying and preparing the new leaders for the future • During the Reorganization period, send some of the future leaders abroad for a period to let them interiorize the new culture • Use the CIGS period to retrain part of the impacted employees, and use this as part of an internal and external communication strategy

6. Magneti Marelli and Robert Bosch create JV AUTOMOTIVE LIGHTING (1) WWW.AL-LIGHTING.DE CASE DESCRIPTION AND REORGANIZATION CHALLENGES In 1999 a 50%-50% JV was created by managing together the car lighting business of the Italian multinational Magneti Marelli (mainly Carello), the automotive component business of FIAT Group, and the lighting division of the German component maker Robert Bosch, to create the global n.2 player in the automotive lighting business. The aim was to put together two complementary market strenghts in the high-tech, high price segment (R. Bosch) and in the mid-tech, price sensitive segment (Magneti Marelli). In 2001 Magneti Marelli acquires the Italian rearlamps maker Seima and merges it with Automotive Lighting, thus reaching 75% and 100% in 2003. At the time, the new company had about 8,500 employees worldwide and 1 BN Euro Sales turnover. From a people standpoint, the main emergency in the first 2 years has been the risk that the key ex-Bosch people could go back to the “big mother” Bosch, as all Bosch sites are normally co-located. In the due diligence phase, a clause to prevent all employees from going back to the mother companies, had not been stipulated.

7. Magneti Marelli and Robert Bosch create JV AUTOMOTIVE LIGHTING (2) RETAINING THE KEY PEOPLE How an Italian global multinational (part of FIAT group) retains the Key People coming from a German technology-driven multinational and avoids the “cherry-picking” of the New Company key People by ex mother company . HR STRATEGY • In the first year, while a 50%-50% JV, Magneti Marelli launched a global campaign to identify the 100 ex-Bosch key people at any level in the organization and to assess who could be culturally “converted” to the new organization. • For these people, an individual channel of communication was opened and a retention plan (future promotions and salary increases) could be communicated • “Lobbying” activity with Robert Bosch to prevent “cherry-picking” from Automotive Lighting of these Key People, while convincing them to stay with the new JV. • Launch of a large scale communication campaign (house organs, specific initiatives) to create a sense of common culture among all employees.

8. Magneti Marelli and Robert Bosch create JV AUTOMOTIVE LIGHTING (3) THE ROLE OF HR • Talent Scout, ensuring early identification of the Key People • Credibility Builder, building relations globally with the Key People and committing individually to their career development • Cultural Stereotypes Manager, bringing individual fears from “belly” to “head” • Lobbyst, persuading R. Bosch HR to have their managers refrain from “poaching” LESSONS LEARNED • Spend time and money in the due diligence process • In the due diligence, include an interview with senior managers, to early assess their motivations and their criticality to business success • Put safeguard clauses on employees, banning the seller form hiring them for a minimum of 2-3 years without prior agreement, even if they, in that period, join a third company • Keep cultural stereotypes in mind in order to find ways to overcome them… • Identify early the new leaders and open a direct channel of communication with them, sharing career and (why not) salary perspectives • Communicate the new culture heavily. It is often a matter of bringing our fears from “the belly” to “the head” and rationalize

9. INDESIT COMPANY REORGANIZESGE HOTPOINT (1) WWW.INDESITCOMPANY.COM CASE DESCRIPTION AND REORGANIZATION CHALLENGES In 2003 the Italian multinational INDESIT COMPANY (at that time named Merloni Elettrodomestici) acquired from GE Appliances the UK-based division GDA-HOTPOINT, national leader in household appliances. GDA-Hotpoint had 6,000 employees, almost 1 BN Euros sales turnover and a strong local brand. In 2005, Hotpoint was disassembled and its 5 plants largely reaggregated to the Indesit Company division. Several of them have later been closed or are currently under closure. Today Hotpoint has been developed in terms of sales force and service, and as centre of excellence for the top-load washing machines. Today Indesit Company employees about 17,000 people with sales turnover of 3,1 BN Euros.

10. INDESIT COMPANY REORGANIZESGE HOTPOINT (2) ORGANIZATION DIS-INTEGRATION How a UK national leader, after being sold by GE, is “unpacked” and absorbed by an Italian aggressive Multinational which in turn valorizes its brand. HR STRATEGY • Indesit initially moved to the UK a small team, including the new MD, the Finance Director, the Operations and R&D leaders, plus some “antennas” in Operations, Purchasing and R&D, to get a better understanding of the industrial footprint. • Later, Indesit reorganized the activity, downsizing heavily and moving production largely to the East Europe, strenghtening the sales and the service organization. • The future…Will Indesit Company be re-named “Hotpoint”?

11. INDESIT COMPANY REORGANIZES GE HOTPOINT (3) THE ROLE OF HR • Business Partner, supporting Line Managers in identifying the right Indesit Key People (particularly the “antennas”) to be sent to the UK in the various sites • Technical support, traditional “local” TU negotiation role LESSON LEARNED • Have clear in mind what you want to achieve from an acquisition (a market, access to technology, a service organization…) • Take the time to understand the new organization before reorganizing it • Once you get a good grasp of the acquired company, act swiftly and consistently • When you have to change the organization, “unfreeze” the status quo, then “cut” and then quickly “freeze” again. Don’t let organization change drag on and on for months.

12. AREVA T&D REORGANIZES PASSONI&VILLA SPA and VEI SPA (1) WWW.AREVA.COM T&D VEI Electronic Industries CASE DESCRIPTION AND REORGANIZATION CHALLENGES In 2007 AREVA T&D, the Transmission&Distribution Business of the French multinational AREVA, acquired Passoni&Villa SPA and VEI SPA, two mid-sized Italian companies, from the founders or their families. In both cases, the acquired companies have a global leadership position (N.3 worldwide) in high voltage insulators (Passoni&Villa) and some medium voltage products (VEI). The aim of AREVA T&D is to make of both companies a Centre of Excellence for the Group, and to expand significantly the capacity, particularly with Joint Ventures and start-ups in China & India. Today, while Passoni & Villa is basically not hit by the crisis, VEI is more involved, f.i. being active in the residential business in Spain. In November 2008, 80 interim contracts (25% of total workforce) have not been renewed and the business evolution is constantly monitored.

13. AREVA T&D REORGANIZES PASSONI&VILLA SPA and VEI SPA (2) THE TECHNOLOGICAL NUGGETS How a French multinational integrates and develops two Italian mid-sized family owned companies with a strong technological potential. HR STRATEGY • As in these family-owned companies the managerial and talent pipeline is often dry, AREVA T&D started by securing and “converting” the GM, one of which later retired to be replaced by a reputed Swiss external new GM. • In one year the Management Team of both companies has been rebuilt with external managers, or Italian Areva T&D managers previously based in France. • A “not without you” approach has been chosen, at least for Managers and Professionals, persuading the former senior managers, to stay with AREVA T&D, by accepting to report to external new managers with multinational culture. • In VEI, the acquisition more exposed to the crisis, an individual communication channel has been opened with all the Key People, in order to secure their future commitment under any business scenarios • In VEI, lobby with the main local TU’s and local authorities, in order to reassure the main stakeholders on the long-term commitment of Areva T&D in the acquired company. Highlight the capital/R&D investments made since the acquisition. Simultaneously, present a “what if scenario”: what would have happened to the Company in the middle of this crisis if Areva T&D wouldn’t have acquired it and injected the capital needed

14. AREVA T&D REORGANIZES PASSONI&VILLA SPA and VEI SPA (3) THE HR ROLE • First Aid: inject in the exhausted pipelines a first line of brand new managers from leading multinationals or from within Areva T&D • Seeds Sower: hire from the international market the technological/R&D leaders who can ensure the future growth of the acquired companies (f.i. Resins Impregnated Papers experts) • Safety Nets: reassuring the Key People, both identified internally and hired from the market, that they have a bright career with Areva T&D (not necessarily with the acquired company) even if this crisis lasts longer than expected LESSON LEARNED • At strategic level, work hard to identify the “technological nuggets”: companies not necessarily big who own a unique product or technology. Then develop them into a bigger context. • Trying to keep the existing senior managers on board can be the best option. If necessary, persuade them to accept a different role in which they can bring their technical competence and market knowledge. • Communicate constantly with the Key Players about their career perspectives • Don’t be afraid to use the full range of rewards: significant recurrent and non-recurrent Salary Increases/ Dirigente status/ Company cars/ Retention Bonuses • Keep in mind that family-owned entrepreneurial companies have often a more practical and less burocratic management: this is frequently a strenght point.