At a time when Europes big companies can hold their heads up high, with results comparable to those of Americas corporate giants, comes a crop of boardroom upheavals and struggles for controla surprising occurrence in the midst of a boom, and one that could mean tougher times ahead. It is not just Siemens. Other prominent European companies in turmoil include EADS (the parent of Airbus), Daimler, PSA Peugeot Citron and Renault. The travails of Europes banks and energy firms largely stem from the belated introduction of a single market, while in other industries, such as telecoms and aviation, long-awaited consolidation is stirring things up. What is worrying about Siemens, EADS and others is that their woes may have a deeper cause: being wrongfooted by global competition.
Pessimists worry that the turmoil among Europes finest could herald the end of their success in the past 10 years. Optimists hope that it will prompt a round of creative destruction that will enable European companies to raise their game and do better.
The fate of these giants is particularly important because of the structure of the European economy.
Europes labour productivity is nearly one-third lower than Americas, according to a new study published in the McKinsey Quarterly. The main reason, says Heino Fassbender, the studys author, is not Europes welfare state. It is that Europeans have chosen to work less than Americans. This hobbles productivity, stifles the emergence of strong new firms and makes Europe heavily dependent on its existing corporate champions, which operate far beyond Europe. Their global scope means they can adapt to labour conditions at homesuch as Frances 35-hour working week, or restrictions on their ability to sack redundant or unproductive workersby eking out higher productivity elsewhere. Since Europe particularly relies on its corporate giants for its vigour, signs of turmoil in their ranks are worrying.
Yet might a shake-up be exactly what the giants need The arrival at Siemens of Mr Lscher, a fresh-faced outsider, has led to renewed suggestions that the sprawling conglomerate ought to be broken up. A similar debate over GE in America was ignited last week by the sale of its plastics division. It may be that Siemenss supervisory board hopes Mr Lscher will be a more malleable figure than his predecessor, Klaus Kleinfeld, whose muscular leadership upset both the unions and Germanys business establishment. Intriguingly, however, Mr Lscher was a strategist at Hoechst, a chemical group, when it decided to break itself up, prompting speculation that he might reach the same conclusion about Siemens.
The firm is more willing than ever to think radically about its future, says Ben Uglow, an analyst at Morgan Stanley. He points out that five of its 10 management-board members will leave in the next year, opening the door to a change in strategy.
Another German company in disarray is Daimler, as it will be known upon completing its sale of Chrysler, its American arm. Daimler bought Chrysler to spread car-development costs over a wider revenue base. Its admission of defeat could be seen as a mature decision, as the company cuts its losses. But it leaves Daimler with no obvious strategy. With Chrysler out of the way, it may even look like a target, given its unusual make-up: the worlds leading luxury-car brand, the worlds biggest truckmaker and a big shareholding (15%, but with voting rights of 22.5%) in one of Europes most troubled groups, EADS.
The first thing Nicolas Sarkozy did as Frances new president was fly to Berlin to talk to Angela Merkel, inter alia, about the crisis at EADS. The next day he was in Toulouse, reassuring Airbus workers that the French state would help when Airbus wanted more capital, but also expressing his desire to see the government eventually replaced on the shareholders register by industrial and financial stakeholders. This confusing pragmatism suggests little more than a wish to end the clumsy Franco-German stalemate over the future development of EADS and Airbus.
The end of the traditional pause in corporate activity in France during presidential elections was emphasised
last week by the unveiling of plans by Christian Streiff to redress falling profits at Peugeot, where he moved after three disastrous months last year trying to run Airbus. At Peugeot he has called for nearly 5,000 job cuts in France, but would avoid compulsory redundancies.
Mr Streiff told shareholders last week that he would slash overheads by 30% and revive the companys product range by launching 41 models by the end of 2010.
Like Renault (a domestic rival that improbably hopes to avoid job cuts at home by moving upmarket, something it has never managed to do), Peugeot must contend with a car market where all the growth is far beyond Europes shores. In the good years, European giants could have been forgiven for thinking that, having put themselves right, they could thrive by just getting on with the job. The uncomfortable truth now dawning is that today, as business globalises, large firms have to put themselves right time and again.
The Economist Newspaper Limited 2007