The.Economist.2007-02-10 (966424), страница 33
Текст из файла (страница 33)
Nokia, Sony Ericsson,Vodafone and Telefonica are global forces in mobile telephony. Europe's airlines make money whereasAmerica's stagger in and out of bankruptcy. At least two failing European flag-carriers, Sabena andSwissair, were allowed to go irrevocably bust, and Air France and KLM have successfully merged. BritishAirways, one of the world's most profitable airlines, has a market capitalisation one and a half times thatof American Airlines, the world's biggest carrier by number of passengers.
EasyJet and Ryanair, two lowcost airlines, took an American business model and made it fly, and about 50 start-ups are trying to dothe same. European logistics and freight giants such as DHL, TNT and Kuehne + Nagel are challengingAmerica's Fedex and UPS.At the same time Europe is becoming ever more integrated into the global economy, with emergingcountries such as Brazil and India adding to the inward investment into the continent that hastraditionally come from America and Japan. Next it will be the Chinese investing in Europe as they set updistribution and marketing networks for their own products.European manufacturing companies too have begun to overhaul themselves.
In addition to the radicalreshaping at companies such as Philips and Siemens, the car industry has recast itself from a regionalinto a global mould, led by BMW, Mercedes and Audi. Renault became global through its partnership withNissan and might yet be the saviour of Ford. Volkswagen is a leader in the Chinese market. Japanese andSouth Korean investment in Europe is forcing local firms to match the incomers' productivity and quality.Katsuaki Watanabe, chief executive of Toyota, the world's best car company, has acknowledged thateven his firm has to try harder to keep up with these new rivals. It is globalisation in action.It's all coming togetherBut the renaissance of European business also owes much to a change of climate in Germany, wheremany firms are now striking local deals with trade unions to get round inflexible labour practices.Workers at Volkswagen, fearful of losing their jobs, have in effect accepted pay cuts by agreeing to worklonger hours for the same money.
German firms are investing again after a long pause, profits as a shareof national income are rising and business confidence is higher than it has been for years. Some of thereasons behind Germany's recent revival have implications for the whole continent.The resilience of German business has allowed it to survive a dismal period for the German economywhen the bills for unification came in. Germany has always had a rigorous tradition of technicaleducation, which has suited companies concentrating on capital-intensive advanced engineeringindustries.
The country also has a long tradition of exporting advanced products, and not just luxury carsand power stations. The world's biggest industrial-gases company is Germany's Linde; its biggestchemical company is BASF, which has defied the trend for such firms to fragment, as Britain's ICI did.There are other examples in specialist areas, such as Munich's Knorr-Bremse, the world's leading makerof railway brakes.The struggle in the 1990s to overcome the disadvantages of a strong D-mark sharpened the competitiveedge of many German exporters, whereas the Italians relied on devaluation. Since the arrival of the euroGerman companies have been much more disciplined than British or Italian firms about holding downwages, so they have sustained their advantage.
For instance, at Opel, the German arm of GeneralMotors, German workers have sacrificed pay and increased their productivity to hold on to their jobs,whereas the company's British factory on Merseyside has shrunk and may face closure in a couple ofyears. Ordinary Germans may have found the going tough in recent years, but German business hasmanaged to retain its global competitiveness.One reason for that may be changes in the financial sector as the country has started to move from aconservative, bank-based capitalism to a more entrepreneurial capital-markets system. The old modelserved German business well until the 1990s because it meant that companies had stable shareholderswilling to stick around for the long term.
Companies could plan and invest for the future without worryingtoo much about short-term ups and downs, which helped many leading German companies to developand grow. But it has outlived its usefulness.The new openness in the financial sector has three main causes. First, the introduction of the euro madeit easier to compare the performance of different banks, exposing the German ones' low margins.Second, the Basel II accord on banks' reserve assets, due to come into effect next year, is alreadyforcing German banks to pay more attention to the quality of their loan books.
And third, the scrappingof the state guarantees enjoyed by Germany's state-owned Landesbanken and Sparkassen, at theinsistence of the European Union, has acted as an incentive to banks to improve their profitability.According to Paul Achleitner, chief financial officer in charge of investment at Allianz, German unificationmeant that for the first time in decades Germany needed to import capital rather than having enough tospare to export it. “Local banks stopped lending money at subsidised rates and companies needed toraise funds on the international markets.
This meant they had to adapt to international norms ineverything from accounting to managing for value and concentrating capital in core businesses. Slowlybut surely we are seeing the dismantling of Fortress Germany; German companies are now among themost competitive in the world.”The era of the stolid, traditional Deutschland AG (Germany Inc) isdrawing to a close.
According to Dirk Schumacher of Goldman Sachs,the collapse of the tech bubble and Germany's tax reform in 2000 werecontributory factors. The bubble showed up the weakness in the corelending business of German banks, and the tax reform at last enabledbanks to sell their long-standing shareholdings in German companieswithout incurring huge capital-gains tax bills.But some observers think Germany has got it only half-right; it stillHoward Readneeds to reform its labour market and its welfare system.
According toHans-Werner Sinn, head of the Ifo Institute, an economic-researchcentre in Munich, Germany needs “more wage negotiation on the levelof the firm. The majority of workers in a firm must have the right tooverride union decisions if they do not like them.” He also thinkswelfare should concentrate on topping up low wages rather thanproviding a substitute income for those not prepared to work at lowerrates.A new way of doing businessAnother financial factor that has made a difference is private equity, which from tiny beginnings only afew years ago has grown into an important force. In 2005 about €72 billion was raised in new capital inEurope, well over double the amount in 2004, according to PricewaterhouseCoopers and ThomsonFinancial.
Most of that, €57 billion, was for buy-outs of existing firms. Of the rest, €10.9 billion was fornew ventures and €3.6 billion for high-tech investment.Different countries had different preferences: in Sweden and Britain 93% of the funds went into buyouts, whereas in Germany only 43% was used for such transactions and 26% went to high-tech firms.
InSwitzerland the share of high-tech investment was as much as 87%. Most of this money comes fromBritain (29%) and America (24%). Pension funds are now overtaking banks as the main source of financebecause they are under pressure to invest some of their funds in something other than bonds and quotedequities.The total invested by these funds was also a record, at €47 billion, spread over more than 7,000 separatecompanies. About two-thirds of the money was spent on buy-outs.
Venture capital aimed at businessstart-ups accounted for just over a quarter of total investment, but accounted for three-quarters of thedeals.Critics think that private equity can be dangerous, burdening firms with debt and stripping out cash topay the new owners a disproportionate return. Private-equity firms are inclined to move uneconomicproduction offshore, breeding strong resentment about job losses.
And although they will probably havea great year in 2007, those critics argue, they may not be able to maintain that performance.Others are more sanguine, pointing to the improvements in governance and management private equityusually brings with it. It is not afraid to take difficult decisions that family-owned and listed companiesoften shy away from.
For Dominique Senequier, the boss of AXA Private Equity in Paris, it has animportant role to play in making European business more competitive. For example, this might be doneby “several companies in private-equity ownership getting together and then returning to thestockmarket”, she says.Europe's politicians may still be talking of fostering champions, but European companies are streetsahead of them.
They were already beginning to reform themselves to meet global competition; now thenew financial-market capitalism is giving them a further boost. That new financial underpinning willdispense with the need for the old protectionism.Some analysts think that changes in Europe have not gone far enough and that America will always leadbecause its open economy provides the best example of what the (European) economist JosephSchumpeter famously called “creative destruction”.
Last year's Nobel prize-winner for economics,Edmund Phelps of Columbia University, thinks that Europe will continue to lag in productivity andinnovation because it has stuck to a corporate model of capitalism that takes the wishes of governmentand workers into consideration. But much of European business already operates outside its homecountry, far from the constraints of the old corporatism—which is anyway beginning to wane.
Thechanges may not be as dramatic as in America, but they are reforming European industry and producingreturns for shareholders to rival America's.Although Europe will continue to lose old jobs in basic manufacturing, it will gain new ones in highadded-value industries and in services. Germany and France need labour-market reforms to introducemore flexibility, not to save old manufacturing industries but to foster new service ones.
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