by Linda Abu-Shalback Zid, Associate Editor/Newsletter Editor
The year 2002 marked the beginning of a journey for Europe's economy. The official inception of the Euro as the only currency used in 12 countries united the countries as a single market to be reckoned with.
Of the 15 countries in the European Union (EU), the UK, Denmark, and Sweden opted out of adoption of the Euro. At press time, Sweden had set a September 2003 date to vote on accepting the Euro, and Denmark and the UK were discussing potential acceptance.
"The future must revolve around a common currency and market place," said James Dyson, CEO of Dyson, a UK-based vacuum cleaner company. "Signing up to the Euro could well boost the chances of success for new businesses and therefore new technology in the UK."
The Euro zone could expand even farther in 2004. In November 2002, the EU voted to set May 1, 2004 as "E-day," the date for the EU's eastern expansion. Approximately 13 countries are being considered for EU acceptance.
According to a December 2002 Taiwan News report, the EU's exports already account for 20.1 percent of the world's total exports, higher than the 16.8 percent that the U.S. exports. And while the European Commission said the Euro zone economy could contract in the first quarter of 2003, it also said it expects growth of 1.8 percent for all of 2003.
Test in the West
The International Monetary Fund referred to Western Europe's recovery in 2002 as "tepid," adding that it seems to be lagging behind other regions, especially North America and emerging markets in Asia.
Europe's biggest economy, Germany, is expected to grow 1.75 percent, less than previously expected, due to declining stock prices worldwide and the risk of war with Iraq. The Organization for Economic Cooperation and Development (OECD) also lowered its 2003 growth forecasted for the whole Euro zone to 1.8 percent, attributed to the weak growth in Germany, as well as Italy.
One Italian appliance maker that is doing well despite the economic downturn is De'Longhi S.p.A. The company reported a "continuous growth trend" in its Cooking and Food Preparation segment, and said the segment had experienced 14.7-percent growth in the first 9 months of 2002, compared with the same period in 2001.
And the French are also continuing to buy household appliances, according to the Hong Kong Trade Development Council. In a May 2002 report, Alain Grimm Hecker, president of the French Association of Household Appliances (GIFAM) said, "The French market for electrical appliances remained solid and profitable. It has progressed 18 percent since 1996, while over the same period the German market has dropped 2 percent."
Other regions aren't faring as well, according to the Hong Kong Development Council. In a November 2002 report, the Council said that expected sluggish economic growth in Austria, and a likely continued inflation could hurt electronics sales. Sony Austria was predicting a 5-percent decline for Christmas 2002, and market researcher Fessel-GfK said only certain Austrian segments had room for growth, such as digital cameras and espresso coffee machines.
Turkey is considered an amalgamation of European, Middle Eastern, and Asian cultures. In fact, while it is being considered for EU accession, France's former president Valery Giscard d'Estaing told French newspaper Le Monde, "Its capital is not in Europe, 95 percent of its population live outside Europe, it is not a European country."
Still, Voice of America reported that EU's foreign policy chief, Javier Solana, "sounded an optimistic note" about Turkey's accession, and CNN quoted Recep Tayyip Erdogan, the leader of the Islamic-rooted party which swept into power in 2002 as saying, "We hope that the (European) Union understands the importance of Turkey as a bridge toward Asia, and that therefore they admit us, sending a positive signal to the whole world."
Appliance maker Arçelik is headquartered in Turkey. "It is an advantage for Arçelik to be located in the emerging market. With this advantage, Arçelik captures tremendous potential growth opportunites," Nedim Esgin, CEO of Arçelik told APPLIANCE.
Expansion to the East
Despite trying times in Western Europe, it is known for affluence, while Eastern Europe is known for its potential as an emerging market.
According to a December 2002 report in the Slovak Spectator, Whirlpool Corp. plans to move production of 150,000 washing machines annually from a site in Poland to Poprad, Slovakia. The company also moved production of high-standard washing machines from Amiens in France to its Poprad factory. The report stated that the moves will make the firm the largest home appliance maker in central and eastern Europe.
Sweden's Electrolux showed a 2-percent decline in core appliance shipments in Western Europe for the first 9 months of 2002, while Eastern Europe shipments grew 15 percent.
Italy's Merloni Elettrodomestici SPA reported similar variances for its first 9 months of 2002. In Western European markets the trend was negative in Germany (-9 percent) and Portugal (-4 percent), while in Eastern European markets and the CIS the trend was positive, with 11-percent growth on average.
The IMF predicts "further strengthening" of economies of the EU candidates, with a 4.1-percent average GDP growth prediction for 2003 for the 13 candidates. The eastern expansion, however, has met with much controversy, according to a November Reuters report. The report says skeptics are concerned that bringing in more governments and 75 million relatively poor people into the EU "will cost it dear and render it unworkable." Proponents of the move say healing Europe's Cold War divide will create "a world-beating economic bloc," according to the report.
"The consolidation in the automotive sector is also seen to be taking in the appliance sector," says Mr. Esgin of Arçelik, adding that Arçelik has recently acquired the Leisure and Flavel brands of the UK, Blomberg in Germany, Elektra Bregenz and its brand Tirolia in Austria, and Arctic in Romania. "We are closely analyzing future potential acquisitions that will strengthen our market position in Europe and enable our access to new markets," he said.
"As the revenue in this sector is low, we expect consolidation among companies to be expedited over the next 5 years. In the U.S., 97 percent of the market is captured by four major household appliances producers, whereas the same amount of producers have 47 percent of the market share in Europe," Mr. Esgin added.
While the OECD is predicting that a global economic recovery wouldn't take hold until possibly well into 2003, Europe's economic outcome also truly remains to be seen, and could depend on expansion, trade partners, the world economy, and potential war.