Locals Unfazed by Parmalat Ills

PARMA, Italy —  Maybe bankers and investors should have asked the Bertozzi family for advice before lending money to Parmalat and its jailed founder, Calisto Tanzi.

When Tanzi rented the Bertozzis’ 1818 Palladian-style villa to host a wedding reception for his son five years ago, they asked to be paid upfront. They were tired of getting paid late for the milk they sold to Parmalat’s factory less than a mile away. For the last four years, milk from their 700 cows has gone to make Parmesan cheese, not Parmalat goods.

Nearby, in the village of Collecchio, two families built a plant to provide tomato puree for Parmalat’s Pomi brand 20 years ago. Two years later, the company’s tardy payments pushed them to start selling to Kraft Foods Inc., Unilever and Nestle instead. The factory, now owned by a cooperative of local farmers, grew to be the largest tomato processor in Europe.

“They’ve kept trying to get us to supply them again, but I always refuse,” said Agostino Maroadi, the cooperative’s general manager. “Their payment record hasn’t improved.”

Parmalat has continued operating since filing for bankruptcy protection in December, when it admitted that it had falsified its accounts. Prosecutors investigating the fraud estimate the company may owe banks and bondholders as much as $16.1 billion.

Today, prosecutors are scheduled to bring Parmalat’s former chief financial officer, Fausto Tonna, and his associate, Gianfranco Bocchi, out of jail to their offices in Collecchio to help reconstruct the company’s accounts. A few miles north in downtown Parma, other prosecutors probably will question Lorenzo Penca, the former Italy president of auditors Grant Thornton, and his partner Maurizio Bianchi.

Yet the downfall of Parmalat, which along with Ferrari and Barilla Group once represented the entrepreneurial spirit that made northern Italy one of the richest regions in Europe, has barely caused a ripple in the farms around Parma because so many refused to supply Parmalat for so long.

Less than 1% of the 1 billion pounds of milk produced last year in Parma province went to Parmalat, said Achille Coelli, director of the Union of Parma Farmers. None of the 900 milk farms in his group supplies Parmalat.

“Farmers here won’t work with Parmalat,” Coelli said in an interview. “Tanzi never had a good reputation.”

Farmers elsewhere are hurting. About half the 20 million pounds of milk that Parmalat’s Collecchio factory turns each week into long-lasting milk, flavored drinks and bechamel sauce comes from Italy, mostly Lombardy. The rest is from France, Germany and Austria. Parmalat also has a milk plant near Rome that buys milk from farms in southern Italy.

About 6,000 Italian farmers are owed about $148.6 million by Parmalat, says national farmer’s lobbying group Confagricoltura. Parma’s Union of Industrial Companies estimates that its members are owed about $11.1 million, mostly to transportation and maintenance companies. Work has stopped on a corporate headquarters Parmalat was building on the edge of Collecchio.

After meeting with Industry Minister Gianni Alemanno on Jan. 12, Parmalat’s administrator, Enrico Bondi, said the company would now pay for its milk weekly. Past payments due will be treated with the company’s other debts.

The government Friday announced tax cuts and credits to help farmers in the meantime.

Farmers and businesspeople in Collecchio, which has a population of 12,000, say they had no idea that Parmalat’s collapse was coming. What they did know was that the company often paid its bills well beyond the 90 days most Italian suppliers accept.

“Parmalat financed itself through its suppliers,” said Guido Umberto Chiari, secretary-general of Parma’s Artisan Companies Assn.

“We always knew it was an indebted group that ran things close to the edge, but no one had any idea of the dimension,” he added.

In the 1980s, as many as 200 local farms sold their milk to Parmalat. But by 1989 the company was paying as much as a year late, and in 1990 a Parma judged ruled on behalf of 53 farmers who had sued Parmalat for $2 million of unpaid bills. “They got their money, but the confidence was gone,” Coelli said.

Gian Guido Oliva, a Parmalat spokesman, said those late payments were due to a liquidity crisis that was overcome by the company’s stock market listing in 1990. During the next decade, Parmalat went on an acquisition spree that implanted its products in more than 30 countries.

“We were always a bit amused that [Tanzi] couldn’t pay for his milk, but could buy companies around the world,” Coelli said.

Late payments aren’t the only reason local milk farmers don’t work with Parmalat. Milk processors such as Parmalat pay about $1.63 a gallon to farmers. Parmesan cheese makers pay about $2.35 a gallon for their milk, which is produced under stricter rules. To be approved by the Parmesan consortium, cows can only be milked twice a day and they must eat mostly hay.

In addition, farmers in the Parma region have been making Parmesan since at least the 12th century.

“Who then would make Parmigiano?” retorted Pietro Gennari when asked why he didn’t sell his milk to Parmalat next door rather than go through the two-year salting and aging process required to make the cheese, which is called Parmigiano-Reggiano in Italian.

Gennari, 46, his three siblings and their 68-year-old mother have 1,000 cows that live across a wheat field from Parmalat’s plant. Their milk has always gone entirely to producing 40 drums of Parmesan a day. The Italian soccer team took seven drums of their cheese to the 2002 World Cup in Japan and South Korea.

One of his brothers, Paolo, says he admires Tanzi for never having tried to steamroll local farmers into switching from Parmesan cheese, which he could have done by paying more for milk.

“He respected our traditions,” Paolo Gennari said.

Collecchio is more than just milk and cheese. The local farmers’ cooperative processes 300,000 tons of tomatoes a year, more than the entire output of France. During the summer, it employs 650 people.

Four blocks away from Parmalat’s worldwide headquarters in the center of Collecchio, Dante Larini shows off a storage room stacked with 40,000 aging hams. The pigs used to make the region’s prized hams eat the whey left over from making Parmesan cheese.

An inspector from the Prosciutto di Parma consortium is randomly sampling them, and then authorizing workers to burn a seal on each approved ham to show it’s an authentic product of the region.

The owner of Ugo Annoni, the town’s largest ham maker with 450,000 hams a year, Larini said he knew Tanzi only by face and had never met him.

“This disaster is going to be felt more in Milan and the city of London than here,” said Vittorio Guasti, a senator who represents Parma for the Forza Italia party. “It’s a much bigger crisis for investors than for our farmers.”