The.Economist.2007-02-10 (966424), страница 31
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The pairfell out in the late 1940s and Rudolf set up his own firm, Puma, to rival his brother's business, which tookthe name Adidas in 1948. Adidas nearly went bust in the 1980s and went through two rescue operations,sending production offshore to Asia and converting to a design and marketing company. In 1997 itbought the Salomon ski and sportswear brand, only to sell it last year as it bought Reebok to become theworld's number two to Nike.Puma was floated in 1986 but racked up losses for eight years. In 1993 it hired a new chief executive,Jochen Zeitz, a cosmopolitan brand-marketing executive from Colgate who had been educated in Italyand America. He thought Puma needed much the same treatment as Adidas.
Production would have togo offshore because Germany could not possibly compete with low wages in South-East Asia. But design,product development and marketing carried on at the company's German base. For a while, after he tookPuma into North America, he even moved his office to Boston to keep hands-on control of the mostimportant expansion the company had made. Puma quickly got back into profit.These days the company is expanding through joint ventures in Japan, China and Taiwan, as well asthrough subsidiaries in India and Dubai to serve the booming South Asian and Middle Eastern markets.
In2005 profit before interest and tax was around €398m on sales of €2.4 billion, with a gross tradingmargin of more than 50%, about the highest in the business.Success stories such as Adidas and Puma are an inspiration to Europe's smaller companies as the windsof globalisation sweep around them. Many realise that they will have to go global, transformingthemselves from manufacturing to marketing companies and keeping only 10-15% of their totalworkforce in their country of origin.An hour's drive south-west of Herzogenaurach lies Göppingen, in the Neckar valley outside Stuttgart, theheartland of Germany's famous Mittelstand.
These are the formidable medium-sized firms that helped toproduce Germany's post-war economic miracle. They were financed by their local and regional banks,whose mission was to foster local enterprise. There are reckoned to be about 500 such companies thatare world leaders in the tiny market niche they have chosen for themselves. Some of them, such as theSchuler metal press company in the centre of Göppingen, are suppliers to the German car and car-partsindustry, down the valley where Mercedes, Porsche and Bosch have their factories.A model to aspire toMichel Perraudin, who was an executive director of Adidas, is now chairman of Maerklin, a companybased in Göppingen that makes model railways.
It is one of the best-known brand names in the Germanspeaking world, beating even Coca-Cola for recognition. German men over the age of 30 get misty-eyedremembering Christmases playing with their new Maerklin train set. In the late 1990s Maerklin passedinto the joint ownership of 25 family members. They were divided into three warring camps, each with anexecutive director, which meant there was no effective leadership and the company lost sight of itschanging market. It suffered from underinvestment and its remaining 1,350 employees feared for theirjobs after successive rounds of cutbacks. Revenues fell, losses rose and debts piled up.In May last year Maerklin's banks lost patience and sold the company to a private-equity firm,Kingsbridge Capital, part of the Austrian Hardt Group but based in London's West End, the Europeancapital of private equity.
The new owners called in Mr Perraudin and Jan Kantowsky of Alix Partners, arestructuring firm, who quickly drew up plans to widen the product range and to start selling online. AsMr Kantowsky says, “We are now opening the brand to a younger customer base to kickstart growthagain.” The challenge will be to keep the brand exclusive at the top end while coming up with toy trainsthat will appeal to today's children who are used to the speed and excitement of online computer games.Some components and simpler products will be made offshore, but many jobs will stay in Germany.In 2005, when Franz Müntefering, then the party leader of the Social Democrats, described privateequity firms as “locusts”, Maerklin employees staged a demonstration to support the boss of Kingsbridge,Mathias Hink.
A German tabloid newspaper put his picture on the front page and called him “the friendlylocust”.Agony in ItalyOn the other side of the Alps decline is evident in industries such as textiles and machine tools. Italy'smain tool for controlling costs, devaluation, was removed by the introduction of the euro in 1999. For theItalian textile and clothing industry things have been going from bad to worse since China joined theWorld Trade Organisation in 2001. Foreign direct investment poured into China to build up productioncapacity for both fabrics and clothes once the country was free to export at will. Italy, which had beenEurope's leading textile and clothing producer for about 25 years, felt the effect almost immediately.
EUimports from China increased by nearly half in 2004 alone. In some products imports have grown sixfoldand prices have fallen by a third. An emergency deal in 2005 on trade restraint between the EU andChina will offer only temporary relief.Places such as Busto Arsizio and Gallarate, north of Milan, are turning into ghost towns as firm after firmgoes under, leaving empty factories boarded up.
Some 30 miles to the west, in the foothills of the Alps,the same thing is happening to the cluster of woollen mills around Biella. Window grilles are rusting onthe Manifattura di Valduggia, where woollen undergarments were made until the early 1990s. TheGrignasco group is still turning out knitting wools, but its output halved to 2,500 tonnes in the decade to2004 and its workforce has fallen steeply.“We are suffering, that's for sure,” says Michele Tronconi, a mill owner who is deputy chairman of a localtrade association and of Euratex, the industry's lobbying body in Brussels. “But we are still struggling,still fighting.” He has studied what has happened to the textile industry across Europe and vows not to letthe Italian industry go the same way as Britain's, which more or less imploded in the 1980s and 1990s.As he sees it, the British firms grew too complacent, producing middle-of-the-road garments at middlingprices for Marks & Spencer, a giant retailer.
When their customer went farther afield for better quality atlower cost, much of the industry fell apart, with a few upmarket exceptions such as Pringle, a Scottishmaker of woollen goods.Mr Tronconi thinks private equity will play a role in rescuing the industry, but he is not content to leave itto outsiders. He is trying to put together a private-equity fund from among the surviving firms so thatthey can help each other consolidate at the top end of the market. But most mid-market clothing brandsin Italy have already shifted their production to lower-cost countries such as Romania, Bulgaria andTurkey.
Romania is a favourite outsourcing destination for Italians because it is relatively close andwages are around one-tenth those at home. Italians own some 1,500 textile and clothing firms there.Italy's trade minister called it “an Italian industrial province”.The next destination is China. In the 1970s Benetton, based in Treviso in the hinterland of Venice, usedto outsource garment-making to home workers near its base. In 1990 about 90% of its clothes were stillproduced in Italy. Now the proportion is 30%, and set to drop to 10% in a few years.
The company hasopened an office in Hong Kong to supervise its growing supply chain in mainland China.Another part of Italy's survival strategy is to seek out niches in which to sell fashion items. One exampleis Ermenegildo Zegna, near Biella, whose brand stands for classy men's suiting. Zegna has taken toselling rather than producing in China, opening its own shops in 24 cities. It now sells 7% of its outputthere, about the same as in Germany. Zegna considered taking its production to China a decade ago, butdecided that the advantages of Italian skills and its closely integrated production system outweighedsavings in wages.Luigi Galdabini has also considered and rejected outsourcing. He is managing director of an oldestablished Italian machine-tool company, Cesar Galdabini, in Varese, on the outskirts of Milan.
Galdabiniis famous for making small specialised metal presses. It is the world leader in the highly specialisedmarket for pressing tools to straighten shafts used, for instance, in car transmissions. China is a newmarket for these specialist tools, which cannot be bought anywhere else. But at the more humdrum endof the business, smaller presses for simple metal shapes, Chinese competition is hurting Galdabini. Thefirm has a sales office in China and is opening a service organisation. But Mr Galdabini is reluctant tomanufacture in China because he fears the Chinese will copy or steal his designs. He fumes about the CEstamp many Chinese exporters put on products to give the impression they are made to approvedEuropean standards.
All it stands for, he says, is Chinese export.He recalls that five years ago he did not see the Chinese as a threat at all. Now he worries that inanother five years they will be challenging him even in the more sophisticated versions of his complexmachines. The only hope, he says, is for the Italian machine-tool industry to consolidate, invest andmove steadily upmarket. Like his colleagues in textiles and clothing, he and other machine-toolmanufacturers are looking at setting up their own private-equity firm to help them restructure.Germany and Italy both have strongly export-oriented manufacturing sectors with many small andmedium-sized companies, often family-owned.
Both are turning to private equity to help their firms dealwith Chinese competition. France's exports, by contrast, are either highly specialised—eg, wine, wherethe competition comes from the New World rather than from China—or they are in the hands of largecompanies. The country's small and medium-sized companies export almost nothing. That brings its ownproblems.Copyright © 2007 The Economist Newspaper and The Economist Group. All rights reserved.About sponsorshipThe chic and the cheerlessFeb 8th 2007From The Economist print editionBelow a shiny crust of top companies, business in France is in a sorry stateHoward ReadTHE number of millionaires in South Korea, India, Russia and SouthAfrica is rising at 15-21% a year. According to calculations by MerrillLynch, an investment bank, the Asia Pacific area already has 2.4mmillionaires, compared with 2.8m in Europe and 2.9m in America.
SoonChina will be producing its own contingent, in addition to those in HongKong. That is of considerable interest to France. Consultants atMcKinsey calculate that with the number of super-rich worldwidegrowing by 8% a year, annual sales of French luxury goods coulddouble to €42 billion over the next ten years.France dominates the world market for luxury goods, with a share of36%. Wherever the rich or super-rich pop up, they seem to wantFrench luxury brands such as Cartier, Chanel, Hermès, Hennessy, LouisVuitton and Moët et Chandon.
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