A bright end to the year

The atmosphere is bright and clear when spread over the latter part of the year [2006] in the environment of Italian tanning. The great fashion houses and the celebrated brand names are seemingly lengthening their forecasts for orders, granting themselves more consistent organisation and foreseeing an extended period of work. The market is showing itself to be more decisively interested in leather of quality, for a pronounced elegance, in particular for that which qualifies itself to be of Italian production, in order to maintain the number one position in the world. The entire tanning industry in Italy consists of 2,400 tanneries employing 28,000 people. These businesses are grouped in four main industrial areas, where 90% of Italian invoices are generated. Of these, 57% of the national total of tanneries are based in the Vicenza district, while the Veneto region as a whole, with contributions from the provinces of Udine and Verona, has a figure of 60%. In the Veneto, there are around 600 businesses in the tanning sector and the Vicenza tanneries are the third most important industry in the Veneto, after engineering and foodstuffs but before gold working. The second most important district is in Tuscany, in the Santa Croce sul'Arno region, with 950 tanneries, which contribute 24% of the national product. This is followed by Solofra in Campania, representing 6% with 460 companies and in Lombardia and Turbigo with 130 companies and 4%. World economic leadership has been gained and maintained over many years by Italian companies, remaining in that position due to new ideas, new products and new processes, giving rise to innovative production and providing the customer with what he needs as rapidly as possible. Next to this, there is the quality which appeals to the emotions and increases sales of products considered to be unique. Quick delivery times, excellent quality - also from raw material of an inferior quality, obsessive attention with respect to man's place in the environment, experimental divisions and high specialisations create a quick response time with a ready answer for customers' problems - all these create a picture of excellence. The Italian companies find themselves working in a globalised sector of absolute maturity with strong pressures from the latest fashions. The value generated by the entire Italian tanning industry in 2005 was e4.86 billion, a drop of 3% from 2004 which was already a heavy fall of 6.2% on 2003 and 13.6% on 2002, which gives a fall over four years of 22.8%! In 2005 the Vicenza district lost 14% of its exports but, in 2006, they achieved an increase of 6%. The reasons for the reduction were: * the unfavourable dollar/euro exchange rate * use of leather from 'external' tanneries * growing local and global competition with the consequent fluctuations in price National production overall consists of 73% bovine which is mainly imported from Brazil, USA, Australia, Russia and New Zealand with 20% ovine or caprine and 7% calf. Principle destinations for the finished leather are 46% to the footwear sector; 25% for furniture; 14% for leathergoods; 6% for the clothing sector; 5% for car upholstery; and 4% to varied sectors. Exports account for 66% of total sales by the sector with Europe as the principle market for Italian leather. The Vicenza tannery district accounts for 1,200 employees and mainly exports 60% to Europe and 20% each to Asia and China, and the Americas . Roughly 10% of the Vicentine companies (the biggest) are involved in the entire cycle of production, that is from soaking to finishing. They employ 30% of the people, of which 20% are in the wet-blue sector, 20% in finishing and 25% as mechanics or other operatives. Foreign workers number 40% of the total with 44% coming from Asia, 28% from Central Africa, 20% from Eastern Europe, 7% from North Africa and 1% from South America. Delocalisation Originally it was thought that dealing with problems at source was the way forward. Today, the companies have transferred the entire productive cycle and localised the activity to be nearer the consumer. This is essential for the tanneries to survive in these times of higher labour costs, the service costs, the unfavourable dollar/euro exchange rate, the lack of infrastructure and the fiscal 'wedge' or the cost of employment. In Italy it stands at 44%, while in China it amounts to less than 16%. These are the difficulties that Italian companies must confront, especially as China operates a three-year tax exemption for new companies, followed by another five years of negotiable company tax but no more than 17%. We must add at least another 20% to the basic cost of opening a tannery in Italy and the speed at which this work can be completed is at least 3-6 months whereas in China the cost is only 10% of that in Italy. The speed at which authorisation can be given regarding emissions and waste, respecting the legal norms which in turn show respect for the environment, accompanied by the working ability of Chinese operatives who are permanently available, are a third of the time of ours. The cost of work is, therefore, not the only parameter to justify delocalisation, as the tannery sector counts for a good 9-10% that is labour cost. Energy costs much less, as does transport, which is the biggest inconvenience. The investment imposed on the tanneries has been done for years in Italy, accompanied by the professionalism of the workers, giving overall a fashionable creation, bound to its roots, sharing its value - this is delocalisation. The voice of Italy will remain loud for a long time in its position as world leader in this sector, overall if it continues to push the essential collaboration between the tanneries and the chemical and engineering companies to sustain the constant development of product and process and to be of great added value to the sector.