Dethroning National Champions
EUROPE MUST ALLOW MORE CROSS-BORDER INTEGRATION.
November 2 2004 by Chief Executive
Rome was not built in a day€¦; and neither was Europe. We have come a long way since the Treaty of Rome was signed in 1957 to start unifying Europe. Nevertheless, when we speak of Europe, we still refer to individual countries far more often than to a united continent. Our European identity isn’t one we wear comfortably. We introduce ourselves by saying, “I’m Hungarian or French or Polish.” Rarely will you hear, “I’m European.”
Even the European Commission’s Lisbon Agenda, introduced in 2000 with the goal of making Europe “the most competitive and dynamic economy in the world” by 2010, analyzes national economies one by one rather than as a cohesive whole.
Now that Europe encompasses 25 nations, we should accept the fact that one large, continental industrial landscape must be allowed to eclipse the heritage of 25 small and medium-sized restricted economies. But that notion of unity faces intense resistance from union leaders, from country government and European Union officials, and even from corporate leaders.
Setbacks to cross-border consolidation this year have been widely reported. When the Swiss pharmaceuticals giant Novartis sought to acquire its French competitor Aventis earlier this year, the French government engineered a sale of Aventis to Sanofi-Synthelabo of Paris, saying it wanted to protect “a national champion.”
Subsequently, Siemens of Germany sought to buy parts of the French engineering group Alstom. This was blocked, and instead an EU-approved taxpayer bailout was arranged to keep Alstom in one piece.
Siemens later sought to acquire parts of VA Technologie, one of Austria’s biggest technology companies and largest employers, with a work force of 15,000. Siemens planned to team with the Austrian industrial group Mirko Kovats, which already owns part of VA Tech and would have kept the parts that Siemens didn’t want. But Siemens had to drop its plans after the Austrian government moved to increase its stake in VA Tech by issuing new shares.
More recently, managers at NestlÃ¦#169; Waters Group, part of the Swiss foods giant NestlÃ¦#169;, were persuaded by the French government to reopen talks with unions over industrial conflict at the company’s Perrier business. NestlÃ¦#169;, which had signaled a willingness to sell Perrier, says its 4,800 French employees produce 1 billion liters of water per year€¦quot;about the same amount as its 1,800 employees do in Italy.
Sueddeutsche Zeitung, one of the largest newspapers in my native Germany, perhaps said it best: “As long as there are all these nationalistic reflexes, Europe doesn’t stand a chance of becoming a modern economy.”
Enough is enough. To achieve the goals of Lisbon, we must escape the thousand-year-old nationality paradigm. From now on, our perspective must be European and only European. Industries, not nations, must be the focus. If German machine tool manufacturers are successful in their markets, this translates into an improvement of European manufacturing as a whole; if Swedish steel products pull in a profit, this improves European steel performance; and if French carmakers sell more than before, this sparks the development of the European automotive industry.
Only by taking this broad economic perspective will the inevitable supranational consolidation of industries lose the negative perception these developments now evoke on a national level. Seen through the lens of one country, the merger of two large metal manufacturers signals decline and unleashes feelings of concern. But if companies of the same importance merge across former European borders, this can be seen as more positive. A European metalworking industry of just a few strong players is more likely to be globally competitive than the remaining isolated German, Hungarian, Italian or Swedish companies.
As Europeans, we cross national borders effortlessly as we travel. But it appears some management, labor and government leaders remain challenged to cross the intellectual and political frontiers necessary for industrial consolidation to proceed. No one said it would be easy to become the world’s most competitive and dynamic economy. To do so, we must think and act€¦quot;starting now€¦quot;as a unified Europe.
H.L. Henner Klein is CEO of A.T. Kearney, the global management consulting firm based in Chicago